<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
T&W FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
WASHINGTON 6159 91-1844249
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
6416 PACIFIC HIGHWAY EAST, TACOMA, WASHINGTON, 98424, (253) 922-5164
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL A. PRICE, CHIEF EXECUTIVE OFFICER
6416 PACIFIC HIGHWAY EAST, TACOMA, WASHINGTON, 98424, (253) 922-5164
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
<TABLE>
<S> <C>
JAMES E. TOPINKA, ESQ. TODD H. BAKER, ESQ.
GRAHAM & JAMES LLP GIBSON, DUNN & CRUTCHER LLP
ONE MARITIME PLAZA, SUITE 300 ONE MONTGOMERY STREET, SUITE 3100
SAN FRANCISCO, CALIFORNIA SAN FRANCISCO, CALIFORNIA
94111-3492 94104-4505
TELEPHONE: (415) 954-0200 TELEPHONE: (415) 393-8200
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------
Common Stock, par
value $0.01....... 2,944,000 shares $16.00 $47,104,000 $14,274
================================================================================================
</TABLE>
(1) Includes 384,000 shares that may be purchased by the Underwriters to cover
over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 20, 1997
2,560,000 SHARES
LOGO - T&W FINANCIAL CORPORATION
COMMON STOCK
------------------------
Of the 2,560,000 shares of common stock (the "Common Stock") offered hereby
(the "Offering"), 2,200,000 shares are being sold by T&W Financial Corporation
("T&W" or the "Company") and 360,000 shares are being sold by selling
shareholders (the "Selling Shareholders"). The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Shareholders.
Prior to this Offering, there has been no public trading market for the
Common Stock, and there can be no assurance that any active trading market will
develop. It is currently anticipated that the initial public offering price will
be between $14.00 and $16.00 per share. See "Underwriting" for information
relating to the determination of the initial public offering price.
Application will be made to list the Common Stock for quotation on the
Nasdaq National Market ("Nasdaq") under the symbol "TWFC."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8 HEREOF FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SHARES OF COMMON STOCK.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
======================================================================================================
PROCEEDS
PRICE TO UNDERWRITING PROCEEDS TO TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
Per Share..................... $ $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3)...................... $ $ $ $
======================================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.
(2) Before deducting expenses of the Offering payable by the Company estimated
at $700,000.
(3) The Company has granted the Underwriters an option, exercisable from time to
time within 30 days from the date hereof, to purchase up to 384,000
additional shares of Common Stock at the Price to Public per share, less the
Underwriting Discount, solely for the purpose of covering over-allotments,
if any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
The shares of Common Stock are offered by the Underwriters when, as and if
delivered to and accepted by them, subject to their right to withdraw, cancel or
reject orders in whole or in part and subject to certain other conditions. It is
expected that delivery of certificates representing the shares of Common Stock
will be made against payment on or about , 1997 at the office
of Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center, New York,
New York 10281.
------------------------
OPPENHEIMER & CO., INC.
The date of this Prospectus is , 1997
<PAGE> 3
ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended. The Company has filed with
the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form S-1 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the offer and sale of Common Stock pursuant to
this Prospectus. This Prospectus, filed as a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
or the exhibits and schedules thereto in accordance with the rules and
regulations of the Commission and reference is hereby made to such omitted
information. Statements made in this Prospectus concerning the contents of any
contract, agreement or other document filed as an exhibit to the Registration
Statement are summaries of the terms of such contracts, agreements or documents
and are not necessarily complete. Reference is made to each such exhibit for a
more complete description of the matters involved and such statements shall be
deemed qualified in their entirety by such reference. The Registration Statement
and the exhibits and schedules thereto filed with the Commission may be
inspected, without charge, and copies may be obtained at prescribed rates, at
the public reference facility maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission located at 7 World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. The Registration Statement and other information filed by
the Company with the Commission are also available at the web site maintained by
the Commission on the World Wide Web at http://www.sec.gov. For further
information pertaining to the Company and the Common Stock offered by this
Prospectus, reference is made to the Registration Statement.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by its independent accountants and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial statements.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Prospective
purchasers of shares of Common Stock offered hereby should carefully consider
the factors set forth under "Risk Factors." Unless otherwise specified, the
information in this Prospectus assumes that the Underwriters do not exercise the
overallotment option described herein under "Underwriting." Unless the context
otherwise requires, (i) the information set forth in this Prospectus gives
effect to the proposed transactions described herein under "The Restructuring"
(the "Restructuring"), and (ii) the terms "Company" and "T&W" mean T&W Financial
Corporation, its predecessors and its affiliates after giving effect to such
transactions.
THE COMPANY
T&W Financial Corporation is a specialized commercial finance company that
provides equipment financing, principally in the form of leases, to small and
medium-sized businesses. The Company originates leases through direct
relationships with selected leading equipment manufacturers, distributors and
industry cooperatives ("Equipment Providers") that generally offer the Company's
leasing services as a preferred method of financing equipment sales. The Company
also originates leases through referrals from financial institutions and other
lessors. The Company is a "credit lender" and, as such, its underwriting
policies and procedures focus on the creditworthiness of the lessee rather than
the value of the equipment financed. The Company concentrates on "prime
credits," which it defines as lessees that have been under the same ownership
for at least 10 years and have a record of meeting their financial obligations.
T&W has been continuously engaged in the leasing business since 1976, and as of
June 30, 1997, the Company's portfolio of leases serviced totaled $174.7 million
and included over 7,200 leases.
The Company focuses on financing equipment with a purchase price of less
than $250,000 ("small ticket" equipment leases) in various industries, including
fast food franchises, independent grocery stores, funeral homes, hospitality,
liquid waste disposal and horticulture. As of June 30, 1997, these six
industries accounted for approximately 46.2% of the Company's portfolio of
leases serviced. The Company finds these industries attractive because lessees
in these industries generally have credit characteristics favored by the Company
and the equipment financed is generally not subject to obsolescence within the
lease term. By utilizing dedicated marketing teams to service and expand its
penetration within a particular industry, the Company is able to develop
long-term relationships with Equipment Providers, which generates a continuing
source of new lease originations. The Company maintains a diversified portfolio
in order to minimize its credit exposure to any single industry or individual
lessee. As of June 30, 1997, no single industry accounted for more than 12.2% of
the Company's portfolio of leases serviced and no single lessee accounted for
more than 3% of its portfolio of leases serviced. The average annualized yield
on the Company's portfolio of leases serviced for the six months ended June 30,
1997 was 12.7%. For leases originated in the first six months of 1997, the
average contractual yield was 12.4%, the average term was 44 months and the
average equipment cost was $39,200.
In recent years, the Company has achieved strong growth in lease
originations and net income. The Company's lease originations increased from
$9.8 million for 1992 to $80.6 million for 1996; lease originations increased
from $31.4 million for the six months ended June 30, 1996, to $49.2 million for
the comparable period for 1997. The Company's net income increased from $1.2
million for 1992 to $5.8 million for 1996; net income increased from $2.4
million for the six months ended June 30, 1996, to $3.2 million for the
comparable period for 1997. The Company's pro forma net income (after giving
effect to the Restructuring) was $3.2 million for 1996 and $1.7 million for the
six months ended June 30, 1997. A key element of the Company's growth has been
its access to funding, principally through securitizations. Through June 30,
1997, the Company has raised $196.9 million through securitizations. Prior to
1997, the Company structured such securitizations as financings for financial
reporting purposes. Beginning in 1997, the Company has structured such
securitizations as sales for financial reporting purposes, in accordance with
the new accounting standard for the transfer of financial assets (Statement of
Financial Accounting Standard ("SFAS") No. 125).
3
<PAGE> 5
Leasing represents a large and growing source of financing for businesses.
According to the Equipment Leasing Association of America (the "ELA"), the
financing of capital equipment by businesses through leasing increased from
approximately $122 billion in 1992 to approximately $169 billion in 1996. The
Company believes that "small ticket" equipment leasing is one of the most
rapidly growing segments of the industry primarily due to: (i) the increasing
acceptance of leasing by small and medium-sized businesses as a means of
financing the acquisition of capital equipment; (ii) the consolidation of the
banking industry, which has led to diminished service to small and medium-sized
businesses; and (iii) the recognition by small and medium-sized businesses that
specialized commercial finance companies such as T&W can provide faster and more
direct service than traditional financial institutions.
The Company attributes its strong financial performance to adherence to a
consistent operating strategy. The Company's operating strategy is to: i)
provide on-going, high quality service and support to Equipment Providers and
lessees; ii) maintain strong credit quality; iii) access low-cost funding
through securitizations; and iv) maintain efficient operations and relatively
low overhead costs. The Company believes that its operating strategy provides
multiple opportunities for continued growth. The Company's growth strategy is
to: i) finance additional types of equipment in industries it currently serves;
ii) develop strategic alliances with leading Equipment Providers to finance a
higher share of their equipment sales; iii) continue expansion within its
existing industries throughout the United States and Canada; iv) generate
additional equipment and non-equipment financing from its existing lessees and
from referral sources; v) pursue selected acquisitions of other companies to
expand in existing and enter into new industries; and vi) develop relationships
in new industries. As part of its expansion strategy, in June 1997, the Company
acquired the assets of Commercial Capital Corporation ("Commercial Capital"), a
specialized commercial lease finance company located near Kansas City, Missouri.
After the Restructuring, T&W Financial Corporation will become the manager
of, and will own an 85% membership interest in, T&W Financial Services Company
L.L.C., a recently formed Washington limited liability company (the "LLC"). The
remaining 15% membership interest in the LLC will be owned by a limited
liability company owned by the senior management of the Company. The LLC will
conduct all of the Company's leasing business. As a result of the Restructuring,
the Company will become subject to income taxes. See "Summary Combined Financial
and Operating Data," "The Restructuring" and "Certain Transactions -- T&W
Funding Company VI, LLC."
The principal executive office of the Company is located at 6416 Pacific
Highway East, Tacoma, Washington, 98424, and its telephone number is (253)
922-5164.
4
<PAGE> 6
THE OFFERING
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Common Stock offered by the Company......... 2,200,000 shares
Common Stock offered by the Selling
Shareholders.............................. 360,000 shares(1)
Common Stock outstanding after the
Offering.................................. 8,000,000 shares(2)
Use of proceeds............................. For the repayment of certain bank and
affiliate lines of credit and for general
corporate purposes, including working
capital to fund expansion of its leasing
business. See "Use of Proceeds."
Proposed Nasdaq symbol...................... "TWFC"
</TABLE>
- ---------------
(1) The Selling Shareholders intend to use substantially all of their proceeds
to repay certain obligations to the Company. See "Certain
Transactions -- Certain Relationships Terminating at Closing."
(2) Excludes 1,000,000 shares of Common Stock reserved for issuance upon
exercise of options under the Company's 1997 Stock Option Plan; 100,000
shares of Common Stock reserved for issuance under the Company's 1997
Employee Stock Purchase Plan; 10,000 shares of Common Stock reserved for
issuance pursuant to the Company's 1997 Director Stock Grant Plan; and
13,700 shares of Common Stock to be awarded to employees of the Company
following the Offering. No options or shares of Common Stock are currently
outstanding under such plans but the Company has the obligation to grant
options at the initial public offering price for 22,000 shares of Common
Stock to each of James R. Neese and Larry E. Rice as a result of the
Commercial Capital acquisition. See "Business -- Recent Acquisition" and
"Management -- Benefit Plans."
5
<PAGE> 7
SUMMARY COMBINED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997(1)
------ ------ ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Lease contract revenue........... $3,162 $4,286 $7,132 $10,621 $16,834 $6,944 $7,298
Gain on sale of leases........... -- -- -- -- -- -- 3,448(2)
Fee income....................... 976 567 607 1,364 2,067 1,099 134
Servicing and other income....... 344 256 292 555 595 517 738
------ ------ ------ ------ ------ ------ ------
Total revenues........... 4,482 5,109 8,031 12,540 19,496 8,560 11,618
------ ------ ------ ------ ------ ------ ------
Expenses:
Interest expense................. 1,490 1,577 2,589 4,513 6,434 2,911 3,726
Compensation and related
expenses...................... 814 948 1,484 1,796 2,859 1,305 1,986
Amortization of initial direct
costs......................... 337 640 848 1,302 1,893 854 1,222
Provision for credit losses...... 107 172 223 621 1,137 345 402
Other general and administrative
expenses...................... 507 627 601 807 1,345 757 1,073
------ ------ ------ ------ ------ ------ ------
Total expenses........... 3,255 3,964 5,745 9,039 13,668 6,172 8,409
------ ------ ------ ------ ------ ------ ------
Net income......................... $1,227 $1,145 $2,286 $3,501 $5,828 $2,388 $3,209
====== ====== ====== ====== ====== ====== ======
PRO FORMA AMOUNTS(3):
Income before minority interest
and income taxes.............. $5,828 $3,209
Minority interest................ (874) (481)
------ ------
Income before income taxes....... 4,954 2,728
Provision for income taxes....... (1,783) (982)
------ ------
Net income....................... $3,171 $1,746
====== ======
Net income per share............. $0.55 $0.30
Weighted average number of shares
of Common Stock and Common
Stock equivalent shares
outstanding................... 5,800 5,800
</TABLE>
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(1) Includes operating results relating to Commercial Capital for the period
since its acquisition on June 2, 1997. See "Business -- Recent Acquisition."
(2) Beginning in 1997, the Company has structured its securitizations as sales
for financial reporting purposes. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview."
(3) Pro forma operating results reflect adjustments to historical results as of
the beginning of the periods presented for (a) the inclusion of a 15%
minority interest in the LLC in connection with the Restructuring and (b)
income taxes as if the Company had been treated as a taxable entity rather
than an affiliated group of pass-through entities. See "The Restructuring"
and Notes to the T&W Financial Corporation and Affiliates Financial
Statements.
6
<PAGE> 8
SUMMARY COMBINED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997(1)
------------------------------- -------------------------
1994 1995 1996 ACTUAL PRO FORMA(2)
------- ------- ------- -------- ------------
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BALANCE SHEET DATA:
Cash and cash equivalents..................... $4,145 $4,323 $8,064 $8,861 $8,861
Net investment in leases...................... 56,060 90,359 135,087 103,890 103,890
Total assets.................................. 61,242 96,051 144,437 124,180 124,180
Notes payable -- recourse..................... 11,481 8,833 32,272 17,659 17,659
Notes payable -- non-recourse................. 36,014 67,686 89,975 80,804 80,804
Total liabilities............................. 53,775 86,501 134,140 112,016 115,516
Shareholders' equity.......................... 7,467 9,550 10,297 12,164
Pro forma deferred income tax liability....... 3,500
Pro forma minority interest................... 1,825
Pro forma shareholders' equity................ 6,839
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE SIX
AT OR FOR THE YEAR MONTHS
ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Lease financing
receivables originated:
Number of contracts.... 711 993 1,488 1,370 3,630 2,609 1,257
Lease
originations(3)...... $9,833 $21,703 $34,290 $55,348 $80,638 $31,370 $49,245
Leases serviced:
Number of contracts.... 1,610 2,554 3,517 4,086 6,983 6,349 7,255
Portfolio of leases
serviced(4).......... $21,649 $38,436 $61,797 $97,772 $148,086 $119,156 $174,729
Average portfolio
yield(5)............. 19.8% 16.3% 16.1% 14.7% 15.2% 14.2% 12.7%(6)
Credit quality
statistics:
Delinquencies as a
percentage of
portfolio of leases
serviced
31-60 days........... 4.40% 2.50% 2.52% 1.50% 2.89% 2.48% 1.19%
61-90 days........... 1.40% 0.31% 0.42% 0.86% 1.38% 0.71% 1.24%
91-120 days.......... 0.47% 0.10% 0.15% 0.78% 0.32% 0.63% 0.98%
Over 120 days........ -- 0.99% 0.90% -- 1.04% 0.60% 0.96%
------- ------- ------- ------- -------- -------- --------
Total........... 6.27% 3.90% 3.99% 3.14% 5.63% 4.42% 4.37%
Net charge-offs(7)..... 0.36% 0.09% 0.02% 0.39% 0.64% 0.09% 0.27%
</TABLE>
- ---------------
(1) Includes assets and liabilities of Commercial Capital.
(2) Pro forma balance sheet data reflects adjustments to historical amounts for
(a) the inclusion of a 15% minority interest in the LLC in connection with
the Restructuring, and (b) estimated deferred income tax liabilities as if
the Company had been treated as a taxable entity rather than an affiliated
group of pass-through entities. See "The Restructuring" and Notes to the T&W
Financial Corporation and Affiliates Financial Statements.
(3) Represents the equipment cost (or the acquisition cost in the case of
Commercial Capital) for leases originated during the period.
(4) Represents the aggregate of minimum lease payments, excluding residual
values, under all leases serviced by the Company and either held as direct
financing leases or sold.
(5) Represents the average yield recognized during the period for the portfolio
of leases serviced.
(6) Represents the average yield recognized during the period for the portfolio
of leases serviced, determined on a basis as if all securitizations in 1997
had been structured as financing transactions. Yield does not give effect to
revenues or leases attributable to Commercial Capital. During the six months
ended June 30, 1997, the Company's average estimated residual income
inherent in lease contracts has decreased from prior years, causing a
decrease in total yield.
(7) Represents charge-offs (reduced by recoveries), divided by the respective
period's average minimum lease payments, including residuals, under all
leases serviced in the Company and either held as direct financing leases or
sold. Interim data is provided on an annualized basis.
7
<PAGE> 9
RISK FACTORS
Investment in the Common Stock offered hereby involves a high degree of
risk, including the risks described below. Prospective investors should
carefully consider the risk factors set forth below, as well as other
information included in this Prospectus before making an investment decision
concerning the Common Stock.
This Prospectus contains certain "forward-looking statements" which
represent the Company's expectations or beliefs, including, but not limited to,
statements concerning industry performance and the Company's operations,
performance, financial condition, prospects, growth and strategies. For this
purpose, any statements contained in this Prospectus except for historical
information may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "estimate," or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond the Company's control, and
actual results may differ materially depending on a variety of important
factors, including those described below in this "Risk Factors" section and
elsewhere in this Prospectus.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires a substantial amount of cash to implement its business
strategy, including, without limitation, cash to: (i) finance the purchase of
equipment that it leases; (ii) pay the fees and expenses incurred in the
securitization of leases; (iii) pay the fees and interest expense under its bank
lines of credit; (iv) pay operating expenses; and (v) satisfy working capital
requirements. These cash requirements will increase as the Company's lease
originations increase. No assurance can be given that the Company will have
access to the capital markets in the future for equity or debt issuances or for
securitizations or that financing through bank lines of credit or other means
will be available on acceptable terms to satisfy the Company's cash
requirements. The Company's inability to access the capital markets or obtain
acceptable financing could have a material adverse effect on the Company's
results of operations, financial condition and prospects. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DEPENDENCE ON SECURITIZATIONS
GENERAL. The Company finances a majority of its lease originations
utilizing securitizations. The Company has utilized several structures in its
securitizations. The Company's current lease securitization structure is a
commercial paper based conduit facility in which the Company contributes its
leases (including related residuals) to a special purpose limited liability
entity. Such entity sells the leases to an owner trust and the owner trust then
sells certificates backed by the leases to an unaffiliated special purpose
corporate entity which administers a multi-seller commercial paper conduit
facility. Beginning in 1997, the gain on the sale of such leases represented a
significant portion of the Company's revenues. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview" and
"-- Liquidity and Capital Resources."
RELIANCE ON SECURITIZATION MARKET. The Company is dependent on
securitizations to generate cash proceeds for repayment of advances under its
bank lines of credit and for working capital. Several factors affect the
Company's ability to complete securitizations of its leases, including
conditions in the securities markets generally, conditions in the asset-backed
securities markets specifically, the credit quality and performance of the
Company's portfolio of leases serviced, compliance of the Company's leases with
the eligibility requirements established by the securitization documents and
rating agencies, the Company's ability to adequately service its portfolio of
leases and the absence of any material downgrading or withdrawal of ratings
given to certificates. A reduction in the demand for the Company's leases in the
securitization market or an adverse change in the terms of the Company's
securitizations could limit or eliminate the Company's ability to securitize
leases profitably and could have a material adverse effect on the Company's
financial condition, results of operations and prospects.
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POTENTIAL CHANGE IN SECURITIZATION RECEIVABLE. The Company sells each pool
of leases for a price equal to the present value of future cash flows, including
guaranteed residuals. Upon sale, the Company receives in cash a substantial
portion of the present value of future cash flows, with the remaining balance
held by the owner trust. Any such amount is included on the Company's balance
sheet as the securitization receivable. Recourse to the Company in such sales is
limited to the extent of the securitization receivable with respect to the
leases sold. The Company retains the servicing rights and responsibilities for
each pool of leases sold and receives as compensation normal servicing fees over
the life of such leases.
The securitization receivable is reduced by an allowance, which is
estimated by the Company to be adequate to cover future credit losses. No
allowance is made for estimated prepayments, which historically have been
insignificant due to the non-cancelable nature of the leases. The Company
evaluates the carrying value of the securitization receivable for each sale
transaction at the end of each reporting period in light of actual credit loss
experience of the underlying leases sold. The actual rate of credit losses is
influenced by a variety of economic and other factors, including, without
limitation, general economic conditions and business competition. See
" -- Dependence on Creditworthiness of Lessees and Portfolio Performance."
Consequently, there can be no assurance that the actual rate of credit losses on
the leases sold in the Company's securitizations will not exceed the Company's
estimates or historical experience. If the actual rate of credit losses is
higher than the Company's estimates, the Company will recognize an expense to
reduce the carrying value of the securitization receivable. The Company believes
that there is no active market for the sale of its securitization receivable.
There can be no assurance that future changes in the Company's
securitization structure or future actual credit loss levels will not have a
material adverse effect on the Company's financial condition, results of
operations and prospects. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
RELIANCE ON CREDIT ENHANCEMENTS. In order to gain access to the
securitization market, the Company has relied on credit enhancements provided by
monoline insurance carriers to guarantee the certificates issued by the owner
trust to enable it to obtain an investment grade rating for such certificates.
The cost of such credit enhancement results in a reduction in the gain on sale
of leases sold in a securitization. Any substantial reduction in the size or
availability of the securitization market for the Company's leases or the
unwillingness of insurance companies to guarantee the certificates issued by the
owner trust could have a material adverse effect on the Company's financial
condition, results of operations and prospects.
The documents governing some of the Company's securitizations require the
Company to build over-collateralization levels through retention of a portion of
the future cash flows and the application thereof to reduce the principal
balances of the certificates issued by the owner trust or to create reserve
funds. Such over-collateralization levels are pre-determined by the insurance
company issuing the guarantee of the certificates and are a condition to
obtaining an investment grade rating thereon. The application of a portion of
future cash flows to collateral causes the aggregate principal amount of the
leases and cash in the related lease pool to exceed the aggregate principal
balance of the certificates. Such excess amounts serve as a credit enhancement
for the owner trust and fund losses realized on leases held by such owner trust.
Accordingly, the Company continues to be subject to risks of delinquencies and
charge-offs following the sale of leases through securitizations to the extent
that cash flows are required to be retained or applied by the owner trust. In
addition, such retention slows and in some circumstances reduces over the life
of the related securitization, the flow of cash to the Company.
NO RECOURSE TO LEASES SECURITIZED. The Company is the originator and
servicer of the leases that it securitizes. However, legal and beneficial
ownership of securitized leases is held by the special purpose limited liability
entity and owner trust and such leases serve as collateral for the certificates
issued by the owner trust to the commercial paper conduit entity. The assets of
the special purpose limited liability entity and owner trust are not available
to pay creditors of the Company. The Company's interest in such assets is
limited to the amount of the securitization receivable and servicing fees.
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DEPENDENCE ON BANK FINANCING
The Company uses bank lines of credit to fund leases pending inclusion in
the Company's securitizations and to fund leases for retention in the Company's
owned portfolio. Borrowings under the lines of credit are repaid with the
proceeds received by the Company from securitizations and revenue received by
the Company from leases. The Company will seek to obtain replacement or
additional sources of financing as its current lines of credit expire or become
fully utilized. However, there can be no assurance that such replacement or
additional financing will be available to the Company on favorable terms. The
inability of the Company to replace its existing credit facilities or to arrange
new credit facilities could have a material adverse effect on the Company's
financial condition, results of operations and prospects. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."
INTEREST RATE RISK
The Company's profitability is largely determined by the difference or
spread between the effective interest charged by the Company under its leases
and the interest paid by the Company under its lines of credit and
securitizations. The leases underwritten by the Company typically require
payments to be made by the lessee over a one to seven-year term at a fixed rate
of interest that is determined by rates prevailing in the market at the time of
lease approval. The Company finances the purchase of equipment that it leases
primarily through lines of credit and the securitization of pooled leases. All
of such lines of credit and certain of such securitizations require payments by
the Company at variable rates of interest that are subject to frequent
adjustment to reflect rates prevailing in the market for short-term borrowings.
Accordingly, an increase in interest rates due to inflation or other causes
could have a material adverse effect on the Company's financial condition,
results of operations and prospects by reducing or eliminating the spread
between the interest charged by the Company under its leases and the interest
paid by the Company under its credit facilities and variable rate
securitizations. Moreover, an increase in interest rates may cause the Company
to raise the rate of interest that it charges to lessees, thereby reducing the
demand for the Company's lease products. In addition, until the Company
securitizes its leases, it may fund the purchase of equipment and other costs of
such leases from lines of credit and working capital. An increase in interest
rates could have a material adverse effect on the Company's financial condition,
results of operations and prospects by reducing the gain on sale recognized by
the Company in future securitizations. The Company has entered into interest
rate collar agreements to hedge against the risk of significant increases in
interest rates. However, such hedging activities limit the Company's ability to
participate in the benefits of lower interest rates. In addition, there can be
no assurance that such hedging activities will adequately insulate the Company
from interest rate risks. See "-- Dependence on Securitizations" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The Company discounts the estimated future cash flows related to the
securitization receivable at a discount rate that it believes is consistent with
the required risk-adjusted rate of return to an independent third-party
purchaser of the securitization receivable. If prevailing interest rates rise,
the required discount rate might also rise, thus potentially reducing the gain
on sale in future securitizations.
REDUCTION IN YIELD
As the Company grows, it is increasingly competing for somewhat larger
leases and leases with larger customers or groups of customers. The market for
such leases is more rate competitive than the Company's traditional leasing
business. Such factors have reduced and may in the future reduce the yield
obtained by the Company under its portfolio of leases serviced. See
"-- Competition" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations."
MANAGEMENT OF GROWTH
In recent years, the Company has expanded its business and experienced
significant growth in lease originations and in its portfolio of leases
serviced. In light of this growth, the historical performance of the Company's
earnings may be of limited relevance in predicting future performance. Any
credit or other
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problems associated with the larger volume of leases originated in recent
periods will not become apparent until sometime in the future. Moreover, the
Company's ability to sustain continued growth is largely dependent on its
capacity to market, underwrite and service increasing volumes of leases with
acceptable yields and strong credit quality, and to maintain access to low-cost
funding through securitizations. Accomplishing this on a cost-efficient basis
will require the Company to increase its management, financial and
administrative resources, to make significant investments in technology to
support higher volumes of leases, to maintain high quality service in response
to competitive conditions, and to hire, train, supervise and manage new
employees. There can be no assurance that the Company will manage recent or
future growth effectively or that it will be successful in implementing
technological improvements or identifying, attracting and retaining qualified
personnel. The Company's failure to market its lease products effectively, to
maintain a portfolio with strong credit quality, to provide a high quality of
service and support or to maintain access to low-cost funding through
securitizations could have a material adverse effect on the Company's financial
condition, results of operations and prospects.
The Company's recent growth is not necessarily indicative of future results
and the Company may not maintain its historical rate of growth. The Company's
growth strategy is to: i) finance additional types of equipment in existing
industries; ii) develop strategic alliances with leading Equipment Providers to
finance a higher share of their equipment sales; iii) continue expansion within
its existing industries throughout the United States and Canada; iv) generate
additional equipment and non-equipment financing from its existing lessees and
from referral sources; v) pursue selected acquisitions of other companies to
expand in existing and enter into new industries; and vi) develop relationships
in new industries. See "Business -- Growth Strategy." The Company's failure to
achieve any or all of these goals could impair the Company's ability to grow and
have a material adverse effect on its financial condition, results of operations
and prospects.
DEPENDENCE ON CREDITWORTHINESS OF LESSEES AND PORTFOLIO PERFORMANCE
The Company focuses on financing "small ticket" equipment leases to small
and medium-sized businesses. Leases to small and medium-sized businesses may
entail a greater risk of non-performance and higher delinquencies and losses
than leases with larger lessees with greater financial resources. Although the
Company utilizes a credit grading model and conducts an independent credit
investigation of each lease applicant, no assurance can be given that its
underwriting guidelines will afford adequate protection against payment
delinquencies and charge-offs. In addition, despite careful underwriting the
Company may be subject to fraudulent acts by lessees. See "Business -- Legal
Proceedings." An increase in payment delinquencies and charge-offs would
negatively impact the Company's revenues. The failure by lessees to comply with
the terms of their leases would also result in the inability of such leases to
qualify to serve as collateral under the Company's bank lines of credit or as
part of the lease pool under the Company's securitizations, which could have a
material adverse effect on the Company's liquidity. In addition, an increase in
payment delinquencies and chargeoffs in excess of the levels estimated by
management in determining the Company's allowance for credit losses could cause
losses resulting from a write-down of the carrying value of the Company's
securitization receivable and limit or eliminate the Company's ability to obtain
institutional financing and effect securitizations, any of which would have a
material adverse effect on the Company's financial condition, results of
operations and prospects. See "-- Dependence on Securitizations" and
"Business -- Collection Procedures and Policies."
POTENTIAL CONFLICTS OF INTEREST BETWEEN THE COMPANY AND CERTAIN AFFILIATES
Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy,
Jr. own all of the membership interests of P.L.M. Consulting Group, L.L.C.
("PLM"). PLM provides consulting services to, and holds certain investments in,
other companies, including companies in the specialized commercial finance
industry. Michael A. Price, Thomas W. Price and PLM also own all of the
membership interests of T&W Funding Company VI, LLC ("Funding Company VI").
The Company has had, and subsequent to the Offering will continue to have,
certain relationships with Funding Company VI, PLM and their principals. For
example, the Company and Michael A. Price are parties to a lease agreement
pursuant to which the Company leases its current headquarters and related real
property
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from Mr. Price. Although such lease expires in December 1997, the Company
intends to enter into new lease agreements with Mr. Price pursuant to which the
Company would lease its new headquarters on the same premises, as well as its
existing facilities from Mr. Price. See "Business -- Properties" and "Certain
Transactions -- Officers and Directors." The Company and PLM are parties to a
management services arrangement pursuant to which PLM provides management,
accounting, financial and other advisory services to the Company. Although such
arrangement will be terminated upon the closing of the Offering, the Company has
entered into another agreement with PLM, effective upon the closing of the
Offering, pursuant to which PLM would provide the Company with the services of
Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy, Jr. to
act as executive officers of the Company. See "Management -- Executive
Compensation" and "Certain Transactions -- P.L.M. Consulting Group, L.L.C."
PLM and its principals also hold investments in certain businesses which
have had, and subsequent to the Offering will continue to have, certain
relationships with the Company. For example, PLM owns a significant part of
Universal Metering L.L.C. ("Universal Metering") which is in the business of
selling water meter installation, reading and maintenance services to
residential and commercial properties. The Company and Universal Metering are
parties to a letter of intent pursuant to which the Company and Universal
Metering would enter into an agreement under which the Company would lease
certain water meter equipment to the owners or operators of such properties. In
addition, PLM owns substantially all of a business that owns and operates an
independent grocery store located in the Seattle area which leases certain
equipment from the Company. Michael A. Price and Thomas W. Price also own a
significant part of a consulting and financial services business which leases
certain computer equipment from the Company. See "Certain Transactions -- P.L.M.
Consulting Group L.L.C." and "-- Officers and Directors."
As a result of the Restructuring, T&W Financial Corporation will own 85% of
the membership interests of T&W Financial Services L.L.C. (the "LLC") and
Funding Company VI will own the remaining 15% of the membership interests of the
LLC. Profits and losses of the LLC will be allocated to T&W Financial
Corporation and Funding Company VI in accordance with their respective ownership
of the LLC; however, 99% of the deductions or losses associated with secured
lines of credit or other recourse liabilities of the LLC will be allocated to
Funding Company VI, whose principals will guarantee such liabilities. See "The
Restructuring" and "Certain Transactions -- T&W Funding Company VI, LLC."
Such arrangements and agreements have not been negotiated on an arm's
length basis and may not represent the terms that would have been negotiated
with unaffiliated third parties. In addition, such relationships may give rise
to potential conflicts of interest between the Company and certain of its
directors and officers. Pursuant to policies adopted by the Company's Board of
Directors, any contract or other transaction entered into by the Company with
respect to which one or more of its directors or officers has a material
financial interest, or between the Company and any business in which one or more
of its directors or officers has a material financial interest, must be approved
by a majority of the disinterested directors of the Company with respect to such
transaction. In addition, if a business opportunity arises through one of the
Company's affiliates, such as Funding Company VI or PLM, which the Company could
reasonably have an interest in pursuing, such opportunity will be offered first
to the Company. There can be no assurance that such policies will always be
successful in eliminating or reducing the influence of potential conflicts of
interest. Notwithstanding such policies, decisions could be made that fail to
reflect fully the interests of all shareholders of the Company.
RESIDUAL VALUE RISK
The Company retains a residual interest in the equipment covered by
substantially all of its leases. The residual interest is equal to the estimated
fair market value of the equipment at the end of the contract term of the lease
and is reflected as an asset on the Company's balance sheet. The Company's
results of operations depend, to some degree, upon its ability to realize these
residual values. Realization of residual values depends on many factors that are
outside the Company's control, including general market conditions at the time
of expiration of the lease, any unusual wear and tear on, or use of, the
equipment, the cost of comparable new equipment, the extent, if any, to which
the equipment has become technologically or economically obsolete during the
contract term and the effects of any additional or amended government
regulations. Generally, the
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Company requires the lessee and its owners to guarantee that the Company will
receive a specified amount of proceeds upon sale of the underlying equipment at
the end of the lease term. If, upon the expiration of a lease, the Company sells
or refinances the underlying equipment and the amount realized is less than the
recorded residual value of such equipment, a loss reflecting the difference will
be recognized unless the deficiency is recovered from the lessee. However, no
assurance can be given that the Company will be able to recover any deficiency
under such guarantees. Any failure by the Company to realize aggregate recorded
residual values could have a material adverse effect on its financial condition,
results of operations and prospects. See "Business -- Terms of Equipment
Leases."
ACQUISITION RISKS
One of the components of the Company's growth strategy is the selected
acquisition of other equipment leasing companies. The inability of the Company
to identify suitable acquisition candidates or to complete acquisitions on
reasonable terms could adversely affect the Company's ability to grow its
business. In addition, any acquisition made by the Company may result in
potentially dilutive issuances of equity securities, the incurrence of
additional debt and the amortization of expenses related to goodwill and other
intangible assets. The Company also may experience difficulties in the
assimilation of the operations, services, products and personnel of acquired
companies, an inability to sustain or improve the historical revenue levels of
acquired companies, the diversion of management's attention from ongoing
business operations and the potential loss of key employees of such acquired
companies. Any of the foregoing could have a material adverse effect on the
Company's financial condition, results of operations and prospects. The Company
currently has no agreements with regard to potential acquisitions and there can
be no assurance that future acquisitions will be consummated. See
"Business -- Recent Acquisition."
GENERAL ECONOMIC RISKS
The Company's business could be affected by general economic conditions in
the United States, and any sustained period of economic slowdown or recession
could materially adversely affect the Company's financial condition, results of
operations and prospects. The risks to which the Company's business is subject
may become more acute during an economic slowdown or recession because the
ability of lessees to make lease payments or honor guarantees may be impaired,
resulting in increased credit losses. In addition to reducing or eliminating
spreads and potentially requiring a writedown of the Company's securitization
receivable, increased credit losses may impair the Company's access to the
securitization and bank financing markets. Reduced levels of demand for
equipment in a slowdown or recession may also result in reduced lease
originations by the Company.
VARIABLE QUARTERLY RESULTS
The Company's quarterly operating results have fluctuated in the past, and
are expected to continue to fluctuate in the future, principally as a result of
the timing and size of its securitizations, the interest rate on the securities
issued in its securitizations, seasonal or other variations in the size or
volume of leases originated by the Company, the spread between the effective
interest charged by the Company under its leases and the interest paid by the
Company under its bank lines of credit and securitizations, the effectiveness of
the Company's hedging strategies, the degree of competition in the "small
ticket" equipment leasing market and general economic conditions. Accordingly,
the Company's operating results for any one quarter or combination of quarters
should not be relied upon as being indicative of the Company's operating results
for future periods.
COMPETITION
The "small ticket" equipment leasing market is highly competitive. The
Company competes with a number of national, regional and local finance
companies, Equipment Providers that provide financing for the sale or lease of
equipment themselves and traditional financial services companies, such as
commercial banks and savings and loan associations, many of which possess
substantially greater financial, marketing and operational resources than the
Company. In addition, the Company's competitors and potential competitors
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include many larger, more established companies that may have a lower cost of
funds than the Company and access to capital markets and to other funding
sources that may be unavailable to the Company.
RELATIONSHIPS WITH EQUIPMENT PROVIDERS
The Company relies to a significant degree upon its established business
relationships with Equipment Providers as a source of new lease originations.
The Company does not have formal agreements with any Equipment Providers and no
assurance can be given that such relationships will continue. The discontinuance
of the relationship with one or more Equipment Providers could reduce the volume
of new leases that the Company is able to originate, which could have a material
adverse effect on the Company's financial condition, results of operations and
prospects. See "Business -- Marketing."
The Company is also subject to certain inherent business risks. For
example, although the Company does not warrant the condition or performance of
equipment that it leases and is not responsible for the servicing or repair of
such equipment, the bankruptcy or other failure of one or more Equipment
Providers to replace, service or repair leased equipment could adversely impact
the ability of the Company to collect payments from lessees. In addition,
because the Company retains title to equipment that it leases, the Company could
be subject to product defect, environmental or other claims for injuries or
violations of law arising out of a lessee's use of such equipment. Although the
terms of the Company's lease contracts require the lessee to indemnify the
Company for any claims arising out of the lessee's use of leased equipment,
there can be no assurance that the Company would be able to recover such amounts
from the lessee.
GEOGRAPHIC AND INDUSTRY CONCENTRATION RISKS
Although the Company originates leases throughout the United States, at
June 30, 1997, approximately 52% of its portfolio of leases serviced was located
in the states of Washington, California, Texas and New York. Accordingly,
adverse economic conditions or other factors particularly affecting these states
could have a material adverse effect on the Company's financial condition,
results of operations and prospects. In addition, a significant portion of the
Company's portfolio of leases serviced is concentrated in specific industries,
including fast food franchises, independent grocery stores, funeral homes,
hospitality, liquid waste disposal and horticulture. Adverse changes in
economics, regulatory or competitive conditions prevalent in such industries
could have a material adverse effect on the Company's financial condition,
results of operations and prospects. See "Business -- Growth Strategy" and
"-- Marketing."
RISKS ASSOCIATED WITH NEW PRODUCT OFFERINGS
The Company may in the future provide products not previously offered by it
to lessees, or offered only on a limited basis, such as financing in the form of
construction or commercial loans secured by real property or joint ventures
between the Company and Equipment Providers to purchase and lease equipment. The
Company has either very limited or no experience with these new products and
programs, and there can be no assurance that the Company will be able to market
such products and programs successfully or that the return on such products and
programs will be consistent with the Company's historical financial results.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a large extent upon the experience and
continuing contributions of Michael A. Price, Chairman of the Board and Chief
Executive Officer; Thomas W. Price, President; Paul B. Luke, Senior Vice
President, Chief Financial Officer, Secretary and Treasurer; and Kenneth W.
McCarthy, Jr., Senior Vice President and General Counsel. See
"Management -- Directors and Executive Officers." The loss of the services of
any one of these individuals could have a material adverse effect on the
Company's financial condition, results of operations and prospects. The
Company's future success also depends on its ability to identify, attract and
retain additional qualified personnel. There can be no assurance that the
Company will be successful in identifying, attracting and retaining such
personnel.
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CONTROL OF THE COMPANY BY EXISTING SHAREHOLDERS
Following the closing of the Offering, Michael A. Price will be the
beneficial owner of an aggregate of approximately 59.36% of the outstanding
shares of Common Stock. This concentration of ownership will effectively give
Michael A. Price voting control with respect to all material matters requiring
approval by the shareholders of the Company, including, among other things, the
election or removal of the entire Board of Directors, any increase of the
authorized capital stock of the Company and the dissolution, merger or sale of
all or substantially all of the assets of the Company. Neither the Company's
Articles of Incorporation (the "Articles") nor applicable Washington corporate
law requires cumulative voting for directors. See "Principal and Selling
Shareholders" and "Description of Capital Stock."
ANTITAKEOVER PROVISIONS
Certain provisions of Washington law and the Articles and Bylaws (the
"Bylaws") of the Company may make it more difficult or expensive for a third
party to acquire, or discourage a third party from attempting to acquire,
control of the Company. In particular, the Board of Directors of the Company has
the power to issue "blank check" preferred stock (the "Preferred Stock") with
rights senior to the Common Stock without approval by the shareholders of the
Company. The Preferred Stock may be issued from time to time with such
designations, rights, preferences and privileges as the Board of Directors may
determine and may adversely affect the rights of the Common Stock. In addition,
the Board of Directors, at the direction of the principal shareholders, may at
any time adopt a shareholders rights plan or "poison pill" that may make it more
difficult or expensive for the Company to be acquired by a third party. See
"Description of Capital Stock -- Antitakeover Restrictions."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 8,000,000 shares of
Common Stock outstanding. The 2,560,000 shares of Common Stock offered hereby
will be freely tradable without restriction or further registration under the
Securities Act, except for shares purchased by persons deemed to be "affiliates"
of the Company or acting as "underwriters," as these terms are defined in the
Securities Act. The remaining 5,440,000 shares of Common Stock will be
"restricted securities" as the term is defined in Rule 144 under the Securities
Act (the "Restricted Securities"). The Company, its executive officers and
directors, and certain shareholders of the Company have agreed not to sell,
offer to sell, contract to sell, pledge or otherwise dispose of or transfer,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for, or any rights to purchase or acquire,
shares of Common Stock for a period of 180 days commencing on the date of this
Prospectus without the prior written consent of Oppenheimer & Co., Inc., other
than the sale of the shares of Common Stock in the Offering and the issuance by
the Company of: (i) options to purchase shares of Common Stock (and shares of
Common Stock issuable upon the exercise of such options) in connection with the
1997 Stock Option Plan; (ii) shares of Common Stock in connection with the 1997
Employee Stock Purchase Plan; (iii) shares of Common Stock in connection with
the 1997 Director Stock Grant Plan; and (iv) 13,700 shares of Common Stock to be
awarded to certain employees of the Company. See "Shares Eligible for Future
Sale."
ABSENCE OF PUBLIC TRADING MARKET; POSSIBLE FLUCTUATIONS IN STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock. There can be no assurance that any active public trading market for the
Common Stock will develop, or that if developed, it will be sustained after the
Offering, or that the purchasers of shares of the Common Stock will be able to
resell their shares at prices equal to or greater than the initial public
offering price. The initial public offering price will be determined by
negotiations between the Company and the representatives of the Underwriters,
and may not be indicative of the market price for the Common Stock in the
future. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price.
The market price of the Common Stock may experience fluctuations that are
unrelated to the operating performance of the Company. In particular, the price
of the Common Stock may be affected by general
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market price movements as well as developments specifically related to the
equipment leasing industry including, but not limited to, interest rate changes
and delinquency trends. Numerous factors including, but not limited to,
announcements of new leasing products, services or programs by the Company or
its competitors, economic or other external factors and fluctuations in
financial or operating results or prospects of the Company or its competitors
may have a significant impact on the market price and marketability of the
Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price is substantially higher than the book
value per outstanding share of the Common Stock. Accordingly, purchasers in this
Offering will experience immediate and substantial dilution in net tangible book
value of $10.52 per share ($10.09 per share if the Underwriters' over-allotment
option is exercised in full). See "Dilution."
ABSENCE OF DIVIDENDS
Following the completion of the Offering, the Company intends to retain
earnings to finance the growth and development of its business. Accordingly, the
Company does not anticipate paying cash dividends on the Common Stock in the
foreseeable future. In addition, provisions in certain of the Company's lines of
credit may require that the Company maintain certain financial ratios and net
worth, which may restrict the Company's ability to pay dividends. See "Dividend
Policy."
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THE RESTRUCTURING
The Company operates through corporations that are treated for federal and
state income tax purposes as small business corporations under Subchapter S of
the Internal Revenue Code of 1986, as amended, and limited liability companies.
See Note 1 to T&W Financial Corporation and Affiliates Financial Statements.
Such entities were formed primarily to serve as special purpose entities for the
completion of securitizations, bank financings and related transactions, and are
pass-through entities for income tax purposes, with each shareholder or member
taxed individually on their proportionate share of the relevant entity's income.
The beneficial owners of such entities are Michael A. Price, Thomas W. Price,
Paul B. Luke and Kenneth W. McCarthy, Jr.
T&W Financial Corporation, a Washington corporation incorporated in August
1997, and T&W Financial Services Company L.L.C., a Washington limited liability
company formed in August 1997 (the "LLC"), have been organized for the purpose
of succeeding to the business of the Company. In connection with the Offering,
substantially all of the assets and liabilities of the pass-through entities
will be effectively transferred to and assumed by the LLC, and all of the
employees of such entities (excluding the executive officers of the Company)
will become employees of the LLC (the "Restructuring"). As a result of the
Restructuring, T&W Financial Corporation will become the manager of, and will
own an 85% membership interest in, the LLC. T&W Funding Company VI, LLC
("Funding Company VI"), which is owned 50% by Michael A. Price and Thomas W.
Price and 50% by P.L.M. Consulting Group, L.L.C. ("PLM"), will own the remaining
15% membership interest in the LLC. The members of PLM are Michael A. Price,
Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy, Jr. See "Certain
Transactions -- T&W Funding Company VI, LLC" and "-- P.L.M. Consulting Group,
L.L.C."
Following the Restructuring, the LLC will conduct all of the Company's
leasing operations and business. Profits and losses of the LLC will be allocated
to T&W Financial Corporation and Funding Company VI in accordance with their
respective ownership of the LLC; however 99% of the deductions or losses
associated with secured lines of credit or other recourse liabilities of the LLC
will be allocated to Funding Company VI, whose principals will guarantee such
liabilities. See "Certain Transactions -- T&W Funding Company VI, LLC."
References to the "Company" in this Prospectus reflect the combined assets and
operations of the T&W Financial Corporation as a result of its 85% membership
interest in the LLC. See "Risk Factors -- Potential Conflicts of Interest
Between the Company and Certain Affiliates."
The following illustrates the Company's organization after the
Restructuring:
17
<PAGE> 19
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,200,000 shares of
Common Stock offered by the Company hereby are estimated to be $29,990,000
($35,346,800 if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $15.00 per share (the mid-point of
the price range set forth on the cover page of this Prospectus), after deducting
the underwriting discount and estimated offering expenses.
The Company intends to use the net proceeds for the repayment of certain
lines of credit and for general corporate purposes, including working capital to
fund the expansion of its leasing business. Approximately $11.4 million of the
net proceeds will be used to repay a portion of the outstanding balance under
the Company's bank lines of credit. The Company's existing lines of credit bear
interest at variable rates varying from 30-day LIBOR plus 1.75%, LIBOR plus 2%
and the annual Eurodollar rate. Approximately $1.6 million of the net proceeds
will be used to repay the balance under the Company's credit arrangement with
PLM, which bears interest at 2.0% above the 30-day LIBOR. See "Certain
Transactions -- P.L.M. Consulting Group, L.L.C." Amounts borrowed under the
lines of credit and the credit arrangement are used to fund the acquisition and
origination of leases. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- Bank
Lines of Credit."
In the ordinary course of business, the Company expects to evaluate
potential acquisitions of other equipment leasing businesses. The Company may,
if the opportunity arises, use an unspecified portion of the net proceeds to
acquire or invest in complementary businesses. However, the Company has no
present understandings, commitments or agreements with respect to any material
acquisition or investment. Pending use of the net proceeds for the above
purposes, the Company intends to invest such funds in short-term,
interest-bearing, investment-grade securities.
The Selling Shareholders intend to use substantially all of their proceeds
to repay certain obligations to the Company, including the balance of certain
remaining lease payments and all of the unpaid interest and principal under
certain promissory notes. See "Certain Transactions -- Certain Relationships
Terminating at Closing."
DIVIDEND POLICY
The Company currently intends to retain earnings to finance the growth and
development of its business and does not anticipate paying any cash dividends on
the Common Stock in the foreseeable future. In addition, provisions in certain
of the Company's bank lines of credit may require that the Company maintain
certain financial ratios and net worth, which may restrict the Company's ability
to pay dividends. Any future change in the Company's dividend policy will be
made at the discretion of the Company's Board of Directors in light of the
financial condition, capital requirements, earnings and prospects of the Company
and any restrictions under the Company's credit agreements, as well as other
factors the Board of Directors may determine to be relevant. Except for S
corporation and limited liability company distributions, the Company has not
declared or paid any dividends since its inception. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Bank Lines of Credit."
18
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997, (i) on an actual basis, (ii) on a pro forma basis to give effect to
the Restructuring and (iii) on a pro forma as adjusted basis to give further
effect to the Offering and the application of the estimated net proceeds
therefrom and the payment of notes in connection with the exercise of the
options held by Kenneth W. McCarthy, Jr. and Paul B. Luke. The table should be
read in conjunction with "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the T&W
Financial Corporation and Affiliates Financial Statements and related notes
thereto.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Notes payable:
Recourse.............................................. $17,659 $17,659 $4,659
Non-recourse.......................................... 80,804 80,804 80,804
-------- -------- --------
Total notes payable........................... 98,463 98,463 85,463
-------- -------- --------
Minority interest....................................... -- 1,825 1,825
-------- -------- --------
Shareholders' equity:
Preferred Stock, par value $0.01 per share, 10,000,000
shares authorized; no shares issued and
outstanding........................................ -- -- --
Common Stock and paid in capital, par value $0.01 per
share, 40,000,000 shares authorized; 5,800,000
shares issued and outstanding on a pro forma basis;
8,000,000 shares issued and outstanding on a pro
forma as adjusted basis(1)(2)...................... 3,438 3,438 34,590(3)
Retained earnings..................................... 8,726 3,401 3,401
-------- -------- --------
Total shareholders' equity.................... 12,164 6,839 37,991
-------- -------- --------
Total capitalization.......................... $110,627 $ 107,127 $125,279
======== ======== ========
</TABLE>
- ---------------
(1) Excludes 1,000,000 shares of Common Stock reserved for issuance upon
exercise of options under the Company's 1997 Stock Option Plan; 100,000
shares of Common Stock reserved for issuance under the Company's 1997
Employee Stock Purchase Plan; 10,000 shares of Common Stock reserved for
issuance pursuant to the Company's 1997 Director Stock Grant Plan; and
13,700 shares of Common Stock to be awarded to employees of the Company
following the Offering. No options or shares of Common Stock are currently
outstanding under such plans but the Company has the obligation to grant
options at the initial public offering price for 22,000 shares of Common
Stock to each of James R. Neese and Larry E. Rice as a result of the
Commercial Capital acquisition. See "Business -- Recent Acquisition" and
"Management -- Benefit Plans."
(2) Includes the exercise of outstanding and fully vested stock options in July
1997 by certain members of the Company's senior management in exchange for
promissory notes. See "Management -- Executive Compensation."
(3) Includes repayment by members of the Company's senior management of an
aggregate of $1,162,158 under promissory notes issued in exchange for the
stock options exercised in July 1997. See "Certain Transactions -- Certain
Relationships Terminating at Closing."
19
<PAGE> 21
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1997
(after giving effect to the Restructuring) was approximately $4.6 million or
$0.80 per share of Common Stock. Pro forma net tangible book value per share
represents the amount of the Company's pro forma shareholders' equity of
approximately $6.8 million, less intangible assets of $2.2 million, divided by
the 5,800,000 pro forma shares of Common Stock outstanding after the
Restructuring.
Dilution per share to new investors represents the difference between the
amount per share paid by purchasers of shares of Common Stock in the Offering
and the pro forma net tangible book value per share of Common Stock offered
hereby immediately after completion of the Offering. After giving effect to the
sale of the Common Stock at an estimated initial public offering price of $15.00
per share (the mid-point of the price range set forth on the cover page of this
Prospectus) and after deduction of the underwriting discount and estimated
expenses of the Offering, the as adjusted pro forma net tangible book value, as
of June 30, 1997, would have been approximately $35.8 million or $4.48 per share
of Common Stock. This represents an immediate increase in pro forma net tangible
book value of $3.68 per share to existing shareholders and an immediate dilution
of $10.52 per share to new investors purchasing the Common Stock, as illustrated
in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock............. $15.00
Pro forma net tangible book value per share as of June 30, 1997 (1)....... $0.80
Increase per share in pro forma net tangible book value attributable to
new investors.......................................................... 3.68
-----
Pro forma net tangible book value per share after the Offering (1)(2)....... 4.48
------
Pro forma net tangible book value dilution per share to new investors(2).... $10.52
======
</TABLE>
- ---------------
(1) On a pro forma basis to give effect to the Restructuring.
(2) If the Underwriters exercise their over-allotment option in full, the pro
forma net tangible book value per share after the Offering would be $4.91
and dilution of pro forma net tangible book value per share to new investors
would be $10.09.
The following table sets forth, after giving effect to the Offering, the
number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing shareholders
and by new investors (at the assumed initial public offering price of $15.00 per
share):
<TABLE>
<CAPTION>
SHARES OWNED
AFTER THE OFFERING TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders(1)............ 5,800,000 72.5% $3,438,000 9.4% $0.59
New Investors(1).................... 2,200,000 27.5% 33,000,000 90.6% 15.00
--------- ----- ----------- ------
Total..................... 8,000,000 100.0% $36,438,000 100.0%
========= ===== =========== ======
</TABLE>
- ---------------
(1) Sales by Selling Shareholders in the Offering will reduce the number of
shares held by existing shareholders to 5,440,000 or 68.0% (or 64.9% if the
Underwriters exercise their over-allotment option in full) and will increase
the number of shares held by new investors to 2,560,000 or 32.0% (or 35.1%
if the Underwriters exercise their over-allotment option in full) of the
total number of shares of Common Stock outstanding after the Offering. See
"Principal and Selling Shareholders" and "Underwriting."
20
<PAGE> 22
SELECTED COMBINED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected data presented below under the captions "Income Statement
Data" and "Balance Sheet Data" for and as of each of the five years ended
December 31, 1996 are derived from the combined financial statements of the
Company and certain affiliates, which financial statements have been audited by
BDO Seidman, LLP, independent certified public accountants. Such combined
financial statements as of December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996, and the independent certified
public accountants' report thereon, are included elsewhere in this Prospectus.
The selected combined financial data presented below at June 30, 1997, and for
the six months ended June 30, 1996 and 1997 are derived from the Company's
unaudited combined financial statements for such periods, which also are
included in this Prospectus. In the opinion of management, such unaudited
combined interim financial statements have been prepared on a basis consistent
with that utilized in preparation of the annual audited financial statements and
include all adjustments, consisting of normal recurring adjustments necessary
for a fair presentation of the information set forth therein. Results for the
six-month period ended June 30, 1997, are not necessarily indicative of the
results that may be expected by the Company for the complete fiscal year. The
pro forma financial information presented below gives effect to the
Restructuring as if it had occurred as of June 30, 1997 for balance sheet data,
and as of the beginning of the indicated periods for income statement data,
respectively. The data set forth below should be read in conjunction with the
Company's combined financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997(1)
------ ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Lease contract revenue.................. $3,162 $4,286 $7,132 $10,621 $16,834 $6,944 $7,298
Gain on sale of leases.................. -- -- -- -- -- -- 3,448(2)
Fee income.............................. 976 567 607 1,364 2,067 1,099 134
Servicing and other income.............. 344 256 292 555 595 517 738
------ ------ ------ ------- ------- ------ -------
Total revenues.................. 4,482 5,109 8,031 12,540 19,496 8,560 11,618
------ ------ ------ ------- ------- ------ -------
Expenses:
Interest expense........................ 1,490 1,577 2,589 4,513 6,434 2,911 3,726
Compensation and related expenses....... 814 948 1,484 1,796 2,859 1,305 1,986
Amortization of initial direct costs.... 337 640 848 1,302 1,893 854 1,222
Provision for credit losses............. 107 172 223 621 1,137 345 402
Other general and administrative
expenses............................. 507 627 601 807 1,345 757 1,073
------ ------ ------ ------- ------- ------ -------
Total expenses.................. 3,255 3,964 5,745 9,039 13,668 6,172 8,409
------ ------ ------ ------- ------- ------ -------
Net income................................ $1,227 $1,145 $2,286 $3,501 $5,828 $2,388 $3,209
====== ====== ====== ======= ======= ====== =======
PRO FORMA AMOUNTS(3):
Income before minority interest and
income taxes......................... $5,828 $3,209
Minority interest....................... (874) (481)
------- -------
Income before income taxes.............. 4,954 2,728
Provision for income taxes.............. (1,783) (982)
------- -------
Net income.............................. $3,171 $1,746
======= =======
Net income per share................. $0.55 $0.30
Weighted average number of shares of
Common Stock and Common Stock
equivalent shares outstanding........ 5,800 5,800
</TABLE>
- ---------------
(1) Includes operating results relating to Commercial Capital for the period
since its acquisition on June 2, 1997. See "Business -- Recent Acquisition."
(2) Beginning in 1997, the Company has structured its securitizations as sales
for financial reporting purposes. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview."
(3) Pro forma operating results reflect adjustments to historical results as of
the beginning of the periods presented for (a) the inclusion of a 15%
minority interest in the LLC in connection with the Restructuring and (b)
income taxes as if the Company had been treated as a taxable entity rather
than an affiliated group of pass-through entities. See "The Restructuring"
and Notes to the T&W Financial Corporation and Affiliates Financial
Statements.
21
<PAGE> 23
<TABLE>
<CAPTION>
JUNE 30, 1997(1)
DECEMBER 31, -------------------
------------------------------------------------ PRO
1992 1993 1994 1995 1996 ACTUAL FORMA(2)
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $1,056 $2,429 $4,145 $4,323 $8,064 $8,861 $8,861
Net investment in leases............. 19,772 34,528 56,060 90,359 135,087 103,890 103,890
Total assets......................... 21,074 37,311 61,242 96,051 144,437 124,180 124,180
Notes payable -- recourse............ 6,537 14,885 11,481 8,833 32,272 17,659 17,659
Notes payable -- non-recourse........ 9,013 14,253 36,014 67,686 89,975 80,804 80,804
Total liabilities.................... 17,362 32,218 53,775 86,501 134,140 112,016 115,516
Shareholders' equity................. 3,712 5,093 7,467 9,550 10,297 12,164
Pro forma deferred income tax
liability.......................... 3,500
Pro forma minority interest.......... 1,825
Pro forma shareholders' equity....... 6,839
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS
AT OR FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Lease financing receivables
originated:
Number of contracts............. 711 993 1,488 1,370 3,630 2,609 1,257
Lease originations(3)........... $9,833 $21,703 $34,290 $55,348 $80,638 $31,370 $49,245
Leases serviced
Number of contracts............. 1,610 2,554 3,517 4,086 6,983 6,349 7,255
Portfolio of leases
serviced(4)................... $21,649 $38,436 $61,797 $97,772 $148,086 $119,156 $174,729
Average portfolio yield(5)...... 19.8% 16.3% 16.1% 14.7% 15.2% 14.2% 12.7%(6)
Credit quality statistics:
Delinquencies as a percentage of
portfolio or leases serviced
31-60 days...................... 4.40% 2.50% 2.52% 1.50% 2.89% 2.48% 1.19%
61-90 days...................... 1.40% 0.31% 0.42% 0.86% 1.38% 0.71% 1.24%
91-120 days..................... 0.47% 0.10% 0.15% 0.78% 0.32% 0.63% 0.98%
Over 120 days................... -- 0.99% 0.90% -- 1.04% 0.60% 0.96%
------- ------- ------- ------- -------- -------- --------
Total...................... 6.27% 3.90% 3.99% 3.14% 5.63% 4.42% 4.37%
Net charge-offs(7)................. 0.36% 0.09% 0.02% 0.39% 0.64% 0.09% 0.27%
</TABLE>
- ---------------
(1) Includes assets and liabilities of Commercial Capital.
(2) Pro forma balance sheet data reflects adjustments to historical amounts for
(a) the inclusion of a 15% minority interest in the LLC in connection with
the Restructuring at June 30, 1997, and (b) estimated deferred income taxes
as if the Company had been treated as a taxable entity rather than an
affiliated group of pass-through entities. See "The Restructuring" and Notes
to the T&W Financial Corporation and Affiliates Financial Statements.
(3) Represents the equipment cost (or the acquisition cost in the case of
Commercial Capital) for leases originated during the period.
(4) Represents the aggregate of minimum lease payments, excluding residual
values, under all leases serviced by the Company and either held as direct
financing leases or sold.
(5) Represents the average yield recognized during the period for the portfolio
of leases serviced.
(6) Represents the average yield recognized during the period for the portfolio
of leases serviced, determined on a basis as if all securitizations in 1997
had been structured as financing transactions. Yield does not give effect to
revenues or leases attributable to Commercial Capital. During the six months
ended June 30, 1997, the Company's average estimated residual income
inherent in lease contracts has decreased from prior years, causing a
decrease in total yield.
(7) Represents charge-offs (reduced by recoveries), divided by their respective
period's average minimum lease payments, including residuals, under all
leases serviced in the Company and either held as direct financing leases or
sold. Interim data is provided on an annualized basis.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements are made throughout this Management's Discussion
and Analysis of Financial Condition and Results of Operations. Any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the results of the Company to
differ materially from those indicated by such forward-looking statements,
including those detailed in this section and in "Risk Factors." In addition,
this section should be read in light of the effects of the Restructuring. See
"The Restructuring."
OVERVIEW
The leases that the Company originates are "direct financing" leases in
that they transfer substantially all of the benefits and risks of equipment
ownership to the lessee. A lease is classified as a direct financing lease for
accounting purposes if the collection of the minimum lease payments is
reasonably predictable, no significant uncertainties exist relating to
non-reimbursable costs yet to be incurred by the lessor under the lease and the
lease meets one of the following criteria: (i) ownership of the property is
transferred to the lessee at the end of the lease term; (ii) the lease contains
a bargain purchase option; (iii) the term of the lease is at least equal to 75%
of the estimated economic life of the leased equipment; or (iv) the present
value of the minimum lease payments is at least equal to 90% of the fair value
of the leased equipment at the inception of the lease. Since the Company's
leases are classified as direct financing leases, the Company records total
lease rentals, estimated residual values and initial direct costs as the gross
investment in the lease. The difference between the gross investment in the
lease and the cost of the leased equipment (including initial direct costs) is
recorded as "unearned income." Lease contract income is recognized over the term
of the lease by amortizing the unearned income using the interest method. For
income tax purposes, the Company treats its leases as "true" leases or operating
leases which, through depreciation deductions related to the leased equipment,
generate tax benefits for the Company and its affiliates. See "The
Restructuring" and "Certain Transactions."
The Company finances a majority of its lease originations utilizing
securitizations. The Company has utilized several structures in its
securitizations. Prior to 1997, the Company structured such securitizations as
financings for financial reporting purposes. Beginning in 1997, the Company has
structured such securitizations as sales for financial reporting purposes in
accordance with the new accounting standard for the transfer of financial
assets, SFAS No. 125. The Company's current lease securitization structure is a
commercial paper based conduit facility in which the Company contributes its
leases (including related residuals) to a special purpose limited liability
entity. Such entity sells the leases to an owner trust and the owner trust then
sells certificates backed by the leases to an unaffiliated special purpose
corporate entity which administers a multi-seller commercial paper conduit.
The change in structure of the Company's securitizations from financings to
sales has had, and will continue to have, a significant effect on the Company's
balance sheet and income statement. Under financing treatment the Company
recorded its net investment in leases as assets and the funds raised from
securitizations as non-recourse notes payable on its balance sheet. Under sale
treatment the only item to appear on the balance sheet is an asset, the
securitization receivable. The existing balance of net investment in leases and
non-recourse notes payable should decline over time as the related leases are
paid down. Under financing treatment the Company records lease contract revenue
and interest expense on the non-recourse debt. Initial direct costs associated
with the origination of leases are amortized as an expense over the life of the
leases and provisions for credit losses are recorded based upon loss experience.
Under sale treatment the Company records a gain on sale of leases. Initial
direct costs associated with the origination of the leases sold are expensed at
the time of the sale and reduce the reported gain on sale. As a result of
structuring its securitizations as sales, the Company's lease contract revenue
and interest expense on the non-recourse notes payable will decline over time.
23
<PAGE> 25
The Company sells each pool of leases for a price equal to the present
value of future cash flows, including guaranteed residuals. Upon sale, the
Company receives in cash a substantial portion of the present value of future
cash flows, with the remaining balance held as collateral by the owner trust.
Any such amount is included on the Company's balance sheet as the securitization
receivable. Recourse to the Company in such sales is limited to the extent of
the securitization receivable with respect to the leases sold. The Company
retains the servicing rights and responsibilities for each pool of leases sold
and receives as compensation normal servicing fees over the life of such leases.
The Company recognizes gain on the sale of leases at each sale date based
on a determination of the present value of the estimated future amounts to be
realized by the Company in connection with such sale. These estimates consider
all cash flows generated by the leases sold over their life less: (i) trustee
and other transaction related fees; (ii) credit enhancement expenses, if any
(such as the monoline insurers' fee, if the leases are wrapped as in the most
recent securitizations); (iii) normal servicing fees, which are retained by the
Company in its capacity as servicer and are recognized over the life of the
transaction; and (iv) payments to purchasers under the certificates. The
securitization receivable is reduced by an allowance which is estimated by the
Company to be adequate to cover future credit losses. No allowance is made for
estimated prepayments, which historically have been insignificant due to the
non-cancelable nature of the leases.
The Company evaluates the carrying value of securitization receivable for
each sale transaction at the end of each reporting period in light of actual
credit loss experience of the underlying leases sold and would make adjustments
to charge or credit operating results accordingly. To date, the Company has not
recorded any such adjustments. The Company believes that there is no active
market for the sale of its securitization receivable. See "Risk
Factors -- Dependence on Securitizations."
The Company intends to continue to sell a substantial portion of its leases
which it originates, using the most recent securitization structure or similar
securitization structures. There can be no assurance, however, that the Company
will be able to sell its future leases, or that the terms of any such sales will
be as favorable or similar to the terms of the Company's current sale
transactions. See "Risk Factors -- Dependence on Securitizations."
Due to the recognition of earnings from the gain resulting from the sale of
the Company's leases, the Company's reported earnings during a particular period
will be impacted by the amount and timing of sales which the Company may
consummate in such future period. Variations in quarterly earnings will depend
on the amount and timing of the completion of such sales. See "Risk
Factors -- Dependence on Securitizations" and "Risk Factors -- Variable
Quarterly Results."
RESULTS OF OPERATIONS
The Company's revenues comprise lease contract revenue, gain on sale of
leases, fee income, and servicing and other income. Lease contract revenue is
the revenue recognized from the net investment in leases held. Gain on sale of
leases is the revenue recognized under sale treatment for leases securitized.
Fee income represents security deposits which are recognized as income upon
lease expirations and commitment fees received upon the origination of leases.
Servicing and other income includes normal servicing fees, late fees, interest
income and amounts received from the owner trust relating to interest rate
collar agreements.
The Company's expenses comprise interest expense, compensation and related
expenses, amortization of initial direct costs, provisions for credit losses and
other general and administrative expenses. Interest expense includes the expense
related to notes payable and the amortization of related debt issuance costs.
Compensation and related expenses include salaries and bonuses paid to employees
and management fees to affiliates. Amortization of initial direct costs relates
to costs associated with originating leases, including commissions, which are
amortized over the period of the leases. Provisions for credit losses are
provided based on estimated future credit losses. Other general and
administrative expenses include trustee, legal and other professional fees, and
occupancy and other office-related expenses.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30,
1996. Leases originated increased from $31.4 million for the six months ended
June 30, 1996 to $49.2 million for the comparable
24
<PAGE> 26
period in 1997, representing an increase of 57.0%. The number of leases
originated decreased from 2,609 for the six months ended June 30, 1996 to 1,257
for the comparable period in 1997. This increase in dollar volume and the
decrease in the number of leases originated was due to an increase in the
average ticket size in 1997 over the 1996 period. During the six months ended
June 30, 1996, the Company originated a relatively high volume of leases having
a small average ticket size to businesses in the funeral home industry. The
average annualized yield of the portfolio of leases serviced decreased from
14.2% for the six months ended June 30, 1996 to 12.7% for the comparable period
in 1997. This decrease resulted primarily from (i) the Company's decision to
reduce the average estimated residual income inherent in lease contracts
originated in 1997 and (ii) lower effective interest rates associated with the
increase in average equipment cost financed and with certain marketing programs
with Equipment Providers.
The portfolio of leases serviced increased from $119.2 million at June 30,
1996 to $174.7 million at June 30, 1997, representing an increase of 46.6%. This
increase was due to an increase in lease originations.
Lease contract revenue increased from $6.9 million for the six months ended
June 30, 1996 to $7.3 million for the comparable period in 1997, representing an
increase of 5.1%, due primarily to an increased average net investment in leases
owned during the 1997 period.
As described above, in 1997, the Company's securitizations have
predominantly been structured as sales for financial reporting purposes, rather
than as financing transactions as was the case in prior years. During the six
months ended June 30, 1997, the Company recognized a gain on sale of $3.4
million. Since the Company plans to continue to structure its securitizations as
sale transactions, it anticipates that gain on sale of leases will increase and
become a larger portion of revenues in the future.
Fee income decreased from $1.1 million for the six months ended June 30,
1996 to $134,000 for the comparable period in 1997, representing a decrease of
87.8%. This decrease was due primarily to the decline of security deposits
recognized as income upon lease expiration. Commencing in late 1996, the Company
began to credit security deposits to customers at lease expiration rather than
retaining and recognizing such deposits as income.
Servicing and other income increased from $517,000 for the six months ended
June 30, 1996 to $738,000 for the comparable period in 1997, representing an
increase of 42.7%, due primarily to income received from the owner trust
principally related to interest rate collar agreements during 1997.
Total revenues increased from $8.6 million for the six months ended June
30, 1996 to $11.6 million for the comparable period in 1997, representing an
increase of 35.7%.
Interest expense increased from $2.9 million for the six months ended June
30, 1996 to $3.7 million for the comparable period in 1997, representing an
increase of 28.0%. The increase was due to increased average borrowings
outstanding during the 1997 period as compared to the prior year as well as
increased interest rates in 1997 due to the fixing of interest rates associated
with a substantial portion of the borrowings in 1997.
Compensation and related expenses increased from $1.3 million for the six
months ended June 30, 1996 to $2.0 million for the comparable period in 1997,
representing an increase of 52.2%. The increase was due primarily to management
fees of $600,000 paid to PLM during the six months ended June 30, 1997, pursuant
to a management services arrangement which commenced in July 1996, and increases
in the number of employees and compensation levels necessitated by the growth of
the Company. See "Certain Transactions."
Amortization of initial direct costs increased from $854,000 for the six
months ended June 30, 1996 to $1.2 million for the comparable period in 1997,
representing an increase of 43.1%. The increase was due primarily to an
increased average net investment in leases during the 1997 period over the
comparative prior year period. Additionally, initial direct costs, relative to
the investment in leases, increased from December 31, 1995 to December 31, 1996
(the beginning of the six month periods ended June 30, 1996 and 1997,
respectively), which resulted in increased amortization charges during the 1997
period as compared to the prior year.
The provision for credit losses increased from $345,000 for the six months
ended June 30, 1996 to $402,000 for the comparative period in 1997, representing
an increase of 16.5%. This increase was due to
25
<PAGE> 27
increased originations offset by a decrease in the provision rate (as a
percentage of originations) due to improved actual loss experience.
Other general and administrative expenses increased from $757,000 for the
six months ended June 30, 1996 to $1.1 million for the comparable period in
1997, representing an increase of 41.7%. The increase was due primarily to
increased trustee and legal fees incurred during the 1997 period, a significant
portion of which relates to the most recent securitization structure, and to
increased occupancy and related costs associated with supporting the Company's
growth.
Total expenses increased from $6.2 million for the six months ended June
30, 1996 to $8.4 million for the comparable period in 1997, representing an
increase of 36.2%.
As a result of the above factors, net income increased from $2.4 million
for the six months ended June 30, 1996 to $3.2 million for the comparable period
in 1997, an increase of 34.4%. After giving effect to the Restructuring which
would result in a minority interest charge of $481,000 and a provision for
income taxes of $982,000, pro forma net income for the six months ended June 30,
1997 would have been $1.7 million.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31,
1995. Leases originated increased from $55.3 million for the year ended December
1995 to $80.6 million for the comparable period in 1996. The number of leases
originated increased from 1,370 for the year ended December 31, 1995 to 3,630
for the comparable period in 1996. The average yield of the portfolio of leases
serviced increased from 14.7% for the year ended December 31, 1995 to 15.2% for
the comparable period in 1996. The increase in dollar volume and the increase in
the yield of the portfolio of leases serviced were due to the increase in higher
yielding small ticket leases. The corresponding increase in the number of leases
was due to the increased number of small ticket leases to businesses in the
funeral home industry.
Lease contract revenue increased from $10.6 million for the year ended
December 31, 1995 to $16.8 million for 1996, representing an increase of 58.5%.
The increase in lease contract revenue was due to the increase in the Company's
average net investment in leases.
Fee income increased from $1.4 million for the year ended December 31, 1995
to $2.1 million for 1996, representing an increase of 51.5%. The increase in fee
income was primarily attributable to the increase in the amount of security
deposits recognized as income upon lease expiration.
Servicing and other income increased from $555,000 for the year ended
December 31, 1995 to $595,000 for 1996, representing an increase of 7.2%. This
increase was primarily attributable to an increase in interest income.
Total revenues increased from $12.5 million for the year ended December 31,
1995 to $19.5 million for 1996, representing an increase of 55.5%.
Interest expense directly associated with the Company's lease borrowings
increased from $4.5 million for the year ended December 31, 1995 to $6.4 million
for 1996, representing an increase of 42.6%. The increase in such interest
expense was primarily due to the increased borrowings attributable to the
increase in the Company's net investment in leases. At December 31, 1996, such
aggregate recourse and non-recourse borrowings had increased from $76.5 million
for the prior year to $122.2 million, representing an increase of 59.8%.
Compensation related expenses increased from $1.8 million for the year
ended December 31, 1995 to $2.9 million for 1996, representing an increase of
59.2%. The increase was due to management fees of $600,000 paid to PLM for
certain management, accounting, financial and other advisory services and
increases in the number of employees and compensation levels necessitated by the
growth of the Company. See "Certain Transactions."
Amortization of initial direct costs increased from $1.3 million for the
year ended December 31, 1995 to $1.9 million for 1996, an increase of 45.4%, due
primarily to the increase in investment in leases.
26
<PAGE> 28
The provisions for credit losses increased from $621,000 for the year ended
December 31, 1995 to $1.1 million for 1996, representing an increase of 83.1%.
The increase was primarily due to the increased investment in leases. See
"Business -- Collection Procedures and Policies."
General and administrative expenses, increased from $807,000 for the year
ended December 31, 1995 to $1.3 million for 1996, representing an increase of
66.7%. This increase was primarily due to the increased costs associated with
the increased lease originations for the year ended December 31, 1996, over the
prior year and from servicing such portfolio of leases.
Total expenses increased from $9.0 million for the year ended December 31,
1995 to $13.7 million for 1996, representing an increase of 51.2%.
As a result of the above factors, net income increased from $3.5 million
for the year ended December 31, 1995 to $5.8 million for 1996, representing an
increase of 66.5%. After giving effect to the Restructuring, which would result
in a minority interest charge of $874,000 and a provision for income taxes of
$1.8 million, pro forma net income for the year ended December 31, 1996 would
have been $3.2 million.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31,
1994. Leases originated increased from $34.3 million for the year ended December
1994 to $55.3 million for the comparable period in 1995. The number of leases
originated decreased slightly from 1,488 for the year ended December 31, 1994 to
1,370 for the comparable period in 1995. The average yield of the portfolio of
leases serviced decreased from 15.9% for the year ended December 31, 1994 to
14.7% for the comparable period in 1995. The increase in dollar volume and the
decrease in the number of leases and the yield of the portfolio of leases
serviced were due to the relatively larger size of the leases originated.
Lease contract income increased from $7.1 million for the year ended
December 31, 1994, to $10.6 million for 1995, representing an increase of 48.9%.
The increase in lease contract income was due to the increase in the Company's
average net investment in leases.
Fee income increased from $607,000 for the year ended December 31, 1994 to
$1.4 million for 1995, representing an increase of 125%. The increase in fee
income was primarily attributable to the increase in lease originations.
Servicing and other income increased from $292,000 for the year ended
December 31, 1994 to $555,000 for 1995, representing an increase of 90.1%. This
increase was primarily attributable to an increase in interest income.
Total revenue increased from $8.0 million for the year ended December 31,
1994 to $12.5 million for 1995, representing an increase of 56.1%.
Interest expense directly associated with the Company's lease borrowings
increased from $2.6 million for the year ended December 31, 1994 to $4.5 million
for 1995, representing an increase of 74.3%. The increase in interest expense
was primarily due to the increased borrowings attributable to the Company's
aggregate lease portfolio. Such aggregate recourse and non-recourse borrowings
increased from $47.5 million at December 31, 1994, to $76.5 million at December
31, 1995, representing an increase of 61.1%.
Compensation related expenses increased from $1.5 million for the year
ended December 31, 1994 to $1.8 million for 1995, representing an increase of
21.0%. The increase was due to increases in the number of employees and
compensation levels necessitated by the growth of the Company.
Amortization of initial direct costs increased from $848,000 to $1.3
million, an increase of 53.5%, due primarily to the increase in investment in
leases.
The provision for credit losses increased from $223,000 for the year ended
December 31, 1994, to $621,000 for 1995, representing an increase of 178.5%.
This increase was primarily due to the increased investment in leases. See
"Business -- Collection Procedures and Policies."
General and administrative expenses increased from $601,000 for the year
ended December 31, 1994 to $807,000 for 1995, representing an increase of 34.3%.
This increase was primarily due to the increased costs
27
<PAGE> 29
associated with the increased lease originations for the year ended December 31,
1995, over the prior year and from servicing such portfolio of leases.
Total expenses increased from $5.7 million for the year ended December 31,
1994 to $9.0 million for 1995, representing an increase of 57.3%.
As a result of the above factors, net income increased from $2.3 million
for the year ended December 31, 1994 to $3.5 million for 1995, representing an
increase of 53.1%.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires a substantial amount of cash to implement its business
strategy. The Company funds its operations primarily through securitizations and
bank borrowings. The Company will continue to require access to significant
additional funding to maintain and expand its volume of lease originations. See
"Risk Factors -- Liquidity and Capital Resources." The Company's most
significant use of cash includes the purchase of equipment subject to direct
financing leases and the principal payments on notes payable.
The following table sets forth the major components of the increase in cash
and cash equivalents:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
---------------------------------- ---------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used for)
operating activities.............. $5,670 $5,969 $10,704 $2,162 $(171)
Net cash provided by (used for)
investing activities.............. (22,595) (35,176) (49,815) (18,569) 31,528
Net cash provided by (used for)
financing activities.............. 18,640 29,385 42,852 17,230 (30,560)
-------- -------- -------- -------- --------
Net increase in cash and cash
equivalents....................... $1,715 $178 $3,741 $823 $797
======== ======== ======== ======== ========
</TABLE>
The Company must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support lease originations and satisfy line
of credit repayment requirements. The Company generally maintains sufficient
cash and short-term investments to meet short-term liquidity needs. At June 30,
1997, cash and cash equivalents totaled $8.9 million or 7.1% of total assets. At
June 30, 1997, the Company maintained various lines of credit which provided for
immediately available advances of up to $42.5 million, and advances under these
lines of credit totaled $11.1 million.
Cash used in operating activities totaled $171,000 for the six months ended
June 30, 1997 compared to cash provided by operating activities of $10.7 million
and $6.0 million for the years ended December 31, 1996 and 1995, respectively.
This use of cash for operating activities in 1997 is attributed principally to
the non-cash gain on sale of leases of $3.4 million and decreases in payables of
$1.7 million during the six months ended June 30, 1997.
Cash provided by investing activities totaled $31.5 million for the six
months ended June 30, 1997, compared to cash used in investing activities of
$49.8 million and $35.2 million for the years ended December 31, 1996 and 1995,
respectively. Lease payments received and proceeds from leases sold in the six
months ended June 30, 1997 totaled $78.3 million as compared to $36.6 million
and $21.0 million in the years ended December 31, 1996 and 1995, respectively.
Cash used for equipment purchased for leases originated in these same periods
totaled $45.2 million, $82.1 million and $53.8 million, respectively.
Cash used for financing activities was $30.6 million during the six months
ended June 30, 1997, consisting principally of $24.3 million of borrowings under
line of credit arrangements to fund lease originations and paydowns of those
lines of credit of $54.4 million upon receipt of proceeds from the sale of
leases. Financing activities provided cash of $42.9 million and $29.4 million
during the years ended December 31, 1996 and 1995, respectively, principally
resulting from borrowings to finance leases of $76.1 million and $107.9 million,
less pay downs on such borrowings of $30.4 million and $78.9 million during the
years ended December 31, 1996 and 1995, respectively.
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<PAGE> 30
SECURITIZATIONS. Securitizations involve the pooling of lease receivables
for sale in the secondary market. The primary advantages of securitizations
include: (i) quick access to significant amounts of capital to fund growth in
lease originations; (ii) relatively lower cost of funds than commercial bank
financing; and (iii) greater flexibility with respect to sources of funding.
From 1992 through June 30, 1997 the Company has completed the following
securitizations:
<TABLE>
<CAPTION>
COMMENCEMENT
DATE AMOUNT RATING AGENCY SUBORDINATION LEVEL
- ------------------------------- -------------- -------- -------------- -------------------
<S> <C> <C> <C> <C>
April 1992..................... $12.1 million AA+ Duff & Phelps 20%
May 1993....................... 10.6 million AAA/Aaa S&P/Moody's 13%
June 1994...................... 30.0 million A-1/P-1 S&P/Moody's 13%
July 1995...................... 90.0 million AAA/Aaa S&P/Moody's 8%
February 1997.................. 54.2 million AAA/Aaa S&P/Moody's 8%
---------------
TOTAL..................... $196.9 million
</TABLE>
The Company believes that it was one of the first independent leasing
companies to enter into the asset backed securitization market. The Company has
recently entered into its fifth securitization, which is a $100 million
three-year revolving commercial paper based conduit facility with CoreStates
Bank, N.A. Under this facility, the Company contributes its leases (including
related residuals) to a special purpose limited liability entity. Such entity
sells the leases to an owner trust and the owner trust then sells certificates
backed by the leases to an unaffiliated special purpose corporate entity which
administers a multi-seller commercial paper conduit. The transfer and sale of
lease receivables under the commercial paper facility is treated as a sale for
financial reporting purposes and the related gain on sale is recognized on the
date of such sale. The Company expects to increase the commercial paper facility
to $200 million later in 1997.
The Company continually seeks to improve the efficiency of its
securitizations. In the Company's fifth securitization the subordination level
was 8% and the spread was 65 basis points over comparable United States Treasury
securities. The effect of these reduced subordination levels and spreads has
been to decrease the effective cost of the securitizations to the Company.
The Company has been able to finance substantially all of its lease
originations without impairing its working capital. Cash used for principal
payments on notes payable is principally generated from the monthly lease
payments which are pledged as collateral for the notes. See "Risk
Factors -- Dependence on Securitizations."
BANK LINES OF CREDIT. The Company currently maintains an aggregate of $40.0
million in secured lines of credit to finance equipment purchases subject to
direct financing leases. At June 30, 1997, the Company had an aggregate of $31.4
million available under such lines of credit. These lines of credit include: (i)
a $15.0 million line of credit with Seafirst Bank under which interest is
payable monthly at a rate of LIBOR plus 2% (although this line of credit expired
in May 1997, Seafirst Bank has continued to make advances thereunder and the
Company has negotiated an extension to May 1998); (ii) a $10 million line of
credit with CoreStates Bank, N.A. under which interest is payable at the annual
Eurodollar rate (this line of credit expires on October 30, 1997); (iii) a $7.5
million line of credit with Key Bank of Washington under which interest is
payable monthly at a rate of LIBOR plus 2.0% (this line of credit was renewed on
August 12, 1997 for the amount of $5.0 million under which interest is payable
monthly at a rate of LIBOR plus 2% and expires on July 31, 1998); and (iv) a $10
million line of credit with U.S. Bank of Washington under which interest is
payable monthly at the higher of such bank's prime rate or LIBOR plus 1.75%
(this line of credit expires in October 1997). These lines of credit are secured
by the leases financed with funds therefrom and a guarantee from Funding VI and
senior management of the Company, and limit the amount of funds which may be
advanced to the Company to a percentage of the discounted value of such leases.
See Note 3 to T&W Financial Corporation and Affiliates Financial Statements.
The Company also maintains an additional aggregate of $3.0 million in an
unsecured line of credit from a bank and a credit arrangement with PLM to
finance internal operations and the purchase of leases prior to
29
<PAGE> 31
their securitization or placement on "lease-line" secured credit facilities. At
June 30, 1997, the Company had an aggregate of $1.35 million available
thereunder. See "Certain Transactions -- P.L.M. Consulting Group, L.L.C."
The Company recently entered into a commitment letter with CoreStates Bank,
N.A. for a secured line of credit in the amount of $50 million, which would
replace the existing CoreStates Bank, N.A. line of credit. The facility would be
utilized for the financing of eligible leases and loans at an interest rate of
LIBOR plus 1.5%. Such credit facility would be secured by the leases financed
with funds from such credit facility and by a guarantee from Funding Company VI
and senior management of the Company, and would limit the amount of funds which
may be advanced to the Company to a percentage of the discounted value of such
leases.
The Company believes, based on its historical cash requirements and
anticipated uses of cash, that the cash derived from this Offering and the
Company's operating, investing and financing activities will be sufficient to
meet its cash requirements and implement its business plan through the end of
1998. See "Risk Factors -- Liquidity and Capital Resources" and "-- Dependence
on Bank Financing."
IMPACTS OF INFLATION AND CHANGING PRICES
The combined financial statements and related financial data presented
herein have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time due to inflation. The primary
impact of inflation is reflected in the increased cost of the Company's
operations. As a result, interest rates generally have a more significant impact
on the Company's performance than do general levels of inflation. Interest rates
do not necessarily move in the same direction or the same extent as the prices
of goods and services. See "Risk Factors -- Interest Rate Risk."
IMPACTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS -- Recently issued
accounting standards having relevant applicability to the Company consist
primarily of Statement of Financial Accounting Standard No. 125 ("SFAS No. 125")
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," which is effective for transactions occurring after 1996,
applied prospectively. The primary effect of adoption of SFAS No. 125 is in the
recording of an asset relating to the present value of the net cash flow
resulting from servicing assets for leases sold. Other relevant recently issued
accounting standards consist of Statement of Financial Accounting Standard No.
128 "Earnings per Share" Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" and Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related Information",
each of which relate to additional reporting and disclosure requirements
effective for financial statement periods beginning after December 15, 1997. It
is not expected that the adoption of these accounting pronouncements will have a
material effect on the Company's operating results or financial condition.
30
<PAGE> 32
BUSINESS
OVERVIEW
T&W Financial Corporation is a specialized commercial finance company that
provides equipment financing, principally in the form of leases, to small and
medium-sized businesses. The Company originates leases through direct
relationships with Equipment Providers that generally offer the Company's
leasing services as a preferred method of financing equipment sales. The Company
also originates leases through referrals from financial institutions and other
lessors. The Company is a "credit lender" and, as such, its underwriting
policies and procedures focus on the creditworthiness of the lessee rather than
the value of the equipment financed. The Company concentrates on "prime
credits," which it defines as lessees that have been under the same ownership
for at least 10 years and have a record of meeting their financial obligations.
T&W has been continuously engaged in the leasing business since 1976, and as of
June 30, 1997, the Company's portfolio of leases serviced totaled $174.7 million
and included over 7,200 leases.
The Company focuses on financing equipment with a purchase price of less
than $250,000 ("small ticket" equipment leases) in various industries, including
fast food franchises, independent grocery stores, funeral homes, hospitality,
liquid waste disposal and horticulture. As of June 30, 1997, these six
industries accounted for approximately 46.2% of the Company's portfolio of
leases serviced. The Company finds these industries attractive because lessees
in these industries generally have credit characteristics favored by the Company
and the equipment financed is generally not subject to obsolescence within the
lease term. By utilizing dedicated marketing teams to service and expand its
penetration within a particular industry, the Company is able to develop
long-term relationships with Equipment Providers, which generates a continuing
source of new lease originations. The Company maintains a diversified portfolio
in order to minimize its credit exposure to any single industry or individual
lessee. As of June 30, 1997, no single industry accounted for more than 12.2% of
the Company's portfolio of leases serviced and no single lessee accounted for
more than 3% of its portfolio of leases serviced. The average annualized yield
on the Company's portfolio of leases serviced for the six months ended June 30,
1997 was 12.7%. For leases originated in the first six months of 1997, the
average contractual yield was 12.4%, the average term was 44 months, and the
average equipment cost was $39,200.
The Company attributes its strong financial performance to adherence to a
consistent operating strategy. The Company's operating strategy is to: i)
provide on-going, high quality service and support to Equipment Providers and
lessees; ii) maintain strong credit quality; iii) access low-cost funding
through securitizations; and iv) maintain efficient operations and relatively
low overhead costs. The Company believes that its operating strategy provides
multiple opportunities for continued growth. The Company's growth strategy is
to: i) finance additional types of equipment in industries it currently serves;
ii) develop strategic alliances with leading Equipment Providers to finance a
higher share of their equipment sales; iii) continue expansion within its
existing industries throughout the United States and Canada; iv) generate
additional equipment and non-equipment financing from its existing lessees and
from referral sources; v) pursue selected acquisitions of other companies to
expand in existing and enter into new industries; and vi) develop relationships
in new industries. As part of its expansion strategy, in June 1997, the Company
acquired the assets of Commercial Capital, a specialized commercial lease
finance company located near Kansas City, Missouri.
COMMERCIAL FINANCE INDUSTRY
The equipment financing industry in the United States has grown rapidly
during the last decade and includes a wide range of entities that provide
funding for the purchase of equipment. According to research by the ELA using
United States Department of Commerce data, the financing of capital equipment by
businesses through leasing increased from approximately $122 billion in 1992 to
approximately $169 billion in 1996, and represented approximately 30% of the
$563 billion spent on productive assets in 1996.
The Company believes that "small ticket" equipment leasing is one of the
most rapidly growing segments of the industry primarily due to: (i) the
increasing acceptance of leasing by small and medium-sized businesses as a means
of financing the acquisition of capital equipment; (ii) the consolidation of the
banking
31
<PAGE> 33
industry, which has led to diminished service to small and medium-sized
businesses; and (iii) the recognition by small and medium-sized businesses that
specialized lease financing companies, such as T&W, can provide faster and more
direct services than traditional financial institutions.
OPERATING STRATEGY
The Company has operated its business based on adherence to a strategy that
stresses a high level of customer service, strong credit quality, low-cost
funding and efficient operations.
CUSTOMER SERVICE. The Company strives for excellence in service to
Equipment Providers and lessees. The Company encourages high-quality service by
providing its employees with monthly economic incentives tied to this goal. A
key aspect of the Company's customer service is its ability to process and
respond to credit applications rapidly. T&W's application process is designed to
be simple and easy to understand. The Company typically approves transactions
under $50,000 within 1 to 2 business days and approves transactions greater than
$50,000 within 3 to 5 business days.
The Company is also flexible and willing to work with potential lessees to
create customized financing packages. The Company's expertise within selected
industries allows the Company to customize its leases to fit the needs of
lessees and allows Equipment Providers to offer integrated sale and financing
transactions. For example, in industries that are seasonal in nature, a step
payment plan may be adopted which ties lease payments to the seasonal nature of
the industry. The term of the Company's leases are also variable, ranging from
12 to 84 months.
STRONG CREDIT QUALITY. The Company concentrates on "prime credits," which
it defines as lessees that have been under the same ownership for at least 10
years and have a record of meeting their financial obligations. See
"-- Underwriting." As a credit lender, T&W believes it has differentiated itself
from many commercial finance companies which are asset-based lenders. T&W bases
its credit decisions primarily on the creditworthiness of the lessee and the
lessee's owners rather than the value of the equipment financed. The Company
believes its focus on the creditworthiness of its lessees, plus careful
underwriting, have resulted in a high return on its assets.
LOW COST FUNDING. Securitizations have provided the Company with a
relatively low cost of funds to purchase the equipment that it leases. The
Company believes that it was one of the first independent leasing companies to
enter into the asset-backed securitization market by completing a $12.1 million
securitization. Through June 30, 1997, the Company has raised $196.9 million
through securitizations. In the Company's fifth securitization the subordination
level was 8% and the spread was 65 basis points over comparable United States
Treasury Securities.
OPERATING EFFICIENCY. In addition to providing a high degree of customer
service, the Company believes that operating efficiency is a key factor in
achieving high profitability. Operating efficiency is enhanced by the Company's
focus on marketing through Equipment Providers in selected industries,
maintaining strong credit quality and centralizing its operations.
GROWTH STRATEGY
The Company's objective is to become one of the leading providers of
equipment lease financing to small and medium-sized businesses in specific
industries. The Company believes that it has significant opportunities to expand
its operations as spending on equipment rises and small and medium-sized
businesses increasingly use leasing to finance equipment purchases. The
Company's specific strategies for achieving growth are:
INCREASED EQUIPMENT FINANCING WITHIN INDUSTRIES. Within certain industries,
the Company has strong relationships with Equipment Providers but these
Equipment Providers may only provide a portion of the equipment utilized in the
particular industry. The Company believes its expertise in certain industries
provides opportunities to develop relationships with other Equipment Providers,
thereby expanding the types of equipment financed within a particular industry.
For example, in the horticulture industry the Company provides financing for
horticulture automation equipment, and has recently begun financing other types
of horticulture equipment, such as greenhouses.
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<PAGE> 34
STRATEGIC ALLIANCES WITH EQUIPMENT PROVIDERS. The Company is working to
develop strategic alliances with selected Equipment Providers through its "Sales
Maximizer Program." The program would involve the formation of a joint venture
between the Company and an Equipment Provider. The joint venture would purchase
equipment from the Equipment Provider and then lease the equipment to the
lessee. The Sales Maximizer Program would be beneficial to the Company and the
Equipment Provider because it would allow both to realize certain tax benefits,
enable the Equipment Provider to increase sales and customer allegiance, and
allow the Company to enhance its relationship with the Equipment Provider,
increase its share of the Equipment Provider's sales and initiate relationships
with new lessees. In connection with the program, the Equipment Provider would
assume a portion of the residual and remarketing risks on the financed
equipment. See "Risk Factors -- New Product Offerings."
GEOGRAPHIC EXPANSION. While the Company currently finances equipment
throughout the United States and Canada, in many cases its relationships with
Equipment Providers in particular industries have been regionally focused. The
Company plans to expand its regional participation in certain industries
nationwide and in Canada. For example, the Company had traditionally dealt with
independent grocery cooperatives primarily in the Northwest, but over the last
several years has begun to develop relationships with independent grocery
cooperatives in other regions based on its expertise in this industry. T&W's
most significant presence is in the States of Washington, California, Texas and
New York, representing approximately 34%, 9%, 5% and 4%, respectively, of the
Company's portfolio of leases serviced as of June 30, 1997. See "Risk Factors --
Geographic and Industry Concentration Risks."
EXPANDED MARKETING TO EXISTING LESSEES. Although the Company has
experienced significant repeat business through its relationships with Equipment
Providers, the Company believes opportunities exist to expand originations with
current and past lessees, both through the financing of additional equipment
purchases and through the introduction of financing to support other areas of
their businesses that may not be associated with their current leases, such as
loans for facility construction or expansion. As of June 30, 1997, the Company
had an aggregate of $1.7 million outstanding in such non-lease financing solely
in the independent grocery store industry. See "Risk Factors -- Risks Associated
with New Product Offerings.
ACQUISITIONS. Where appropriate, the Company plans, as part of its
expansion strategy, to pursue acquisitions of other finance companies such as
its acquisition of Commercial Capital. The Commercial Capital acquisition will
enable the Company to expand its presence in the independent grocery store
industry, particularly in the Midwest where Commercial Capital is seeking to
develop a strong relationship with a national grocery wholesaler. See "-- Recent
Acquisition." The Company intends to target acquisition opportunities that will
enable it to build upon existing industries or enter into new industries.
Additionally, the Company believes it can utilize its access to relatively lower
cost of funds to enhance the financial performance of acquired companies.
Currently, the Company has not targeted any other specific acquisitions. See
"Risk Factors -- Acquisition Risks."
RELATIONSHIPS IN NEW INDUSTRIES. The Company is constantly investigating
opportunities to develop relationships in new industries, including but not
limited to aviation support, water well drilling and automobile franchises. The
Company intends to focus on new industries that provide potential for growth
while maintaining credit quality.
33
<PAGE> 35
MARKETING
Approximately 46.2% of the Company's portfolio of leases serviced consist
of leases in selected industries where the Company has focused its marketing
efforts:
PORTFOLIO OF LEASES SERVICED AT JUNE 30, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY PORTFOLIO(1)
-------------------------------------------------------------- ---------------------
<S> <C> <C>
Selected Industries........................................... 46.2%
Fast Food Franchises........................................ 12.2%
Independent Grocery Stores.................................. 10.6%
Funeral Homes............................................... 8.6%
Hospitality................................................. 8.5%
Liquid Waste Disposal....................................... 3.9%
Horticulture................................................ 2.4%
Other Industries.............................................. 53.8%
------
100.0%
</TABLE>
- ---------------
(1) Percentages are approximate and are based upon Standard Industrial
Classification codes.
SELECTED INDUSTRIES. The Company focuses its marketing efforts in specific
industries where it develops direct relationships with Equipment Providers.
Relationships with Equipment Providers are based on informal arrangements
whereby T&W generally does not pursue relationships with competitors of the
Equipment Provider and the Equipment Provider generally does not promote
competitive sources of equipment financing. The Company provides marketing
materials to Equipment Providers which include the specific Equipment Provider's
name and promote leasing from T&W as a cost-effective method of financing
equipment purchases. The marketing representatives of the Equipment Providers
then use such marketing materials as part of their overall sales presentation.
The Company believes that it has developed strong relationships with
Equipment Providers by providing lessees with excellent customer service,
including a rapid response to credit applications and flexible lease terms that
are tailored to the specific needs of lessees. Equipment Providers benefit from
the Company's knowledge of and active participation in their businesses,
including joint marketing efforts and attendance at industry trade shows. As a
result, many of the Equipment Providers are continuing sources of a significant
amount of leases originated by the Company. The principal industries where the
Company has relationships with Equipment Providers include fast food franchises,
independent grocery stores, funeral homes, hospitality, liquid waste disposal
and horticulture. Although the Company does not currently rely on brokers to
originate leases it may choose to do so in the future. See "Risk
Factors -- Relationships with Equipment Providers."
Fast Food Franchises. Since 1992, the Company has originated equipment
leases to recognized fast food franchises, including Mrs. Fields and Subway. T&W
is an approved lender for these franchises. Typically, the franchisor provides
not only the equipment necessary for the franchisee's business, but also access
to potential financing sources for such equipment. Such equipment includes
ovens, fryers, refrigeration units and point of sale equipment. The Company
believes that the nature of the franchisor/franchisee relationship reduces the
risk that the Company will suffer losses on leases to fast food franchisees
because the franchisor is generally motivated to find a replacement if the
franchisee does not perform. At June 30, 1997, leases to fast food franchises
represented 12.2% of the Company's portfolio of leases serviced.
Independent Grocery Stores. The Company originates leases for the
purchase of equipment for use by independent grocery stores. Such equipment
includes refrigeration units, point of sale equipment and shelving as well as
other essential equipment. According to the Progressive Grocer Annual Report
published in April 1997, based on data from the National Grocers Association,
there are currently 10,980 independent grocery stores in the United States and,
at June 30, 1997, 90 independent grocery stores were lessees of T&W. At June 30,
1997, leases to independent grocery stores represented 10.6% of the Company's
portfolio of leases serviced.
34
<PAGE> 36
Cooperative associations of independent grocery stores and independent
grocery store wholesalers buy equipment directly from manufacturers at a
discount for resale to independent grocery stores, allowing the independent
grocer to purchase equipment at a price similar to that paid by supermarket
chains. The Company has developed strong but non-exclusive relationships with
several leading cooperatives and wholesalers, including Associated Foods and
Super Valu. These cooperatives and wholesalers refer independent grocery stores
to T&W, promoting it as one of their recommended financial service providers.
The Company's relationship with cooperatives and wholesalers began in 1972 when
Michael A. Price, the founder of the Company, started working with equipment
manufacturers who provide equipment to cooperatives and wholesalers for resale
to independent grocery stores. The Company actively participates in the
independent grocery store industry through its membership in the National
Grocers Association, Ohio Grocers Association and Oregon Grocery Industry
Association, and its participation in industry trade shows.
The Company has expanded its financing opportunities by providing financing
not only for equipment purchases by independent grocery stores but also for
facility construction and expansion. The Company believes that such expansion
complements its existing leasing products and provides significant opportunities
for additional financings for its existing lessees.
Funeral Homes. The Company originates leases for operators of funeral
homes. Since 1987, T&W has financed audio and visual equipment used by the
funeral home industry, and currently is actively pursuing relationships with
other Equipment Providers, such as manufacturers of hearses, crematory equipment
and floral refrigeration units. The Company has attempted to increase its
visibility in the industry through its participation in industry trade shows. At
June 30, 1997, leases to businesses in the funeral home industry represented
8.6% of the Company's portfolio of leases serviced.
Hospitality. Since 1987, the Company has originated leases from
hoteliers and hotel franchisees for equipment acquisitions through its
relationship with hotel management companies such as West Coast Hotels and hotel
franchises such as Holiday Inns. Historically, the Company has financed
telephone and reservation systems; however, recently the Company has begun to
finance equipment for "food courts" comprising fast food franchises located in
hotels. The Company actively participates in the hospitality industry through
participation in industry trade shows. At June 30, 1997, leases to businesses in
the hospitality industry represented 8.5% of the Company's portfolio of leases
serviced.
Liquid Waste Disposal. Since 1989, the Company has originated leases for
the purchase of liquid waste disposal equipment, including storage containers
ranging in size from portable toilets to portable holding tanks. The Company
actively participates in liquid waste disposal industry trade shows and is a
member of the Portable Sanitation Association International.
T&W has developed a strong relationship with a leading manufacturer of
portable toilets, which actively markets T&W to its customers. The Company is
currently exploring the possibility of expanding its business with this
manufacturer through its Sales Maximizer Program discussed above.
The Company also originates leases for sewer and septic cleaning and
maintenance equipment for franchisees. T&W is a recommended financing service
company for a national sewer and septic cleaning and maintenance franchisor. At
June 30, 1997, leases to businesses in the liquid waste disposal industry
represented 3.9% of the Company's portfolio of leases serviced.
Horticulture. The Company originates leases for the purchase of
horticultural equipment from leading horticulture equipment manufacturers. The
horticultural equipment is used by wholesale and retail nurseries to automate
and expand their production. The Company actively participates in the
horticulture industry through its membership in the Ohio Florist's Association
as well as participation in industry trade shows. The Company has developed a
strong relationship with a leading manufacturer of automated pot filling,
planting and watering equipment. The Company has also begun leasing other types
of equipment including greenhouses from other manufacturers. At June 30, 1997,
leases to businesses in the horticulture industry represented 2.4% of the
Company's portfolio of leases serviced.
OTHER INDUSTRIES. Approximately 53.8% of the Company's portfolio of leases
serviced consists of leases originated through direct contacts with Equipment
Providers and equipment users in a wide variety of
35
<PAGE> 37
other industries as well as through referrals. The Company believes that it has
the opportunity to develop significant new originations in other industries. The
Company's marketing personnel are constantly developing contacts in new
industries and expanding contacts within industries already serviced by the
Company.
In addition to its focus on specific industries, the Company originates
leases based on referrals from existing lessees, regional and community banks,
other financial institutions and other lessors, who are unwilling to provide
financing to the lessee or may not have the underwriting, servicing or financial
capability to do so. A number of regional and community banks refer business to
the Company rather than refer the business to competing banks. The Company has
developed strong relationships with a number of the regional and community banks
and other financial institutions in the Northwest. The Company is a member of
the Washington Bankers Association and actively participates in its conferences
and meetings. A referral fee is paid to the referring bank or lessor.
RECENT ACQUISITION
On June 2, 1997, the Company acquired substantially all of the assets and
liabilities of Commercial Capital for approximately $5.5 million. Commercial
Capital is an equipment leasing business located near Kansas City, Missouri
which focuses on small ticket equipment leases. Commercial Capital's lease
originations for the year ended October 31, 1996 totaled approximately $13.6
million. The acquisition expanded the Company's presence in the Midwest and the
Company will continue to operate Commercial Capital's former office near Kansas
City as a lease production facility.
The purchase price was comprised of 10% cash and a promissory note for the
remainder. The promissory note bears interest at 8%, and is payable in equal
quarterly installments of principal and interest over a ten year period ending
April 1, 2007. In addition, an amount equal to 15% of the purchase price is
payable under (and subject to deduction from) the promissory note upon the one
year anniversary date of the effective date of this Offering. The promissory
note is secured by the acquired assets and guaranteed by the Company and by
Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy, Jr. The
business combination has been accounted for utilizing the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based upon estimated fair values. The estimated
fair value of assets acquired in the acquisition approximated $7.1 million,
including intangible assets of approximately $2.2 million, and the estimated
fair value of liabilities assumed approximated $1.6 million. Intangible assets
recorded in purchase accounting are amortized over their respective estimated
lives, which range from 5 to 10 years.
In connection with the Company's acquisition of Commercial Capital, the
Company entered into employment agreements with two principals of Commercial
Capital, James R. Neese and Larry E. Rice. The employment agreements provide,
among other things, that in the event that the Company completes the Offering
the Company shall grant to each of Messrs. Neese and Rice an option to acquire
22,000 shares of Common Stock as of the effective date of the Offering at an
exercise price equal to the initial public offering price. Such options shall
vest 20% per year over a five year period and shall be governed by the terms and
conditions of the Company's 1997 Stock Option Plan. See "Management -- Benefit
Plans."
TERMS OF EQUIPMENT LEASES
Substantially all equipment leases acquired or originated by the Company
are non-cancelable by the lessee. During the term of the lease, the Company
generally receives scheduled payments sufficient, in the aggregate, to cover the
Company's borrowing costs and the costs of the underlying equipment and to
provide the Company with an acceptable profit margin. The term of the lease is
equal to or less than the equipment's estimated economic life and generally
ranges from 12 to 84 months, with a weighted average initial term of 44 months
for leases originated in the first six months of 1997.
The standard terms and conditions of the Company's leases require lessees
to: (i) use the equipment in a careful manner and make all necessary repairs;
(ii) bear the entire risk of loss, theft, damage or destruction of the
equipment; (iii) insure the equipment against loss, theft, damage or
destruction; (iv) pay all charges and taxes associated with the equipment; and
(v) make all scheduled contract payments regardless of loss, theft,
36
<PAGE> 38
damage or destruction of the equipment. The Company's standard forms of lease
provide that in the event of a default by the lessee, the Company may, at its
election: (i) repossess and remove the equipment for re-lease or subsequent
sale; (ii) require the lessee, at its expense, to return the equipment in good
repair to such place as the Company may specify; (iii) cancel or terminate the
lease and retain any and all prior payments; (iv) accelerate the future payments
due under the lease; and (v) sue for and recover from the lessee the sum of all
unpaid rents and other payments due under the lease then accrued. All additions,
repairs or improvements made to the equipment, regardless of the source of
payment, are automatically incorporated into and deemed a part of the equipment
and belong to the Company.
Generally, the Company requires the lessee and its owners to guarantee that
the Company will receive a specific amount of proceeds upon sale of the
underlying equipment at the end of the lease term. The terms of the guarantee
require the lessee to pay the Company in cash any deficiency between the
guaranteed amount of sale proceeds and the actual amount of sale proceeds. See
"Risk Factors -- Residence Value Risk."
UNDERWRITING
The Company has developed credit underwriting procedures and policies that
it believes are effective in identifying creditworthy lessees and minimizing the
risks of delinquencies and charge-offs. The Company reviews individual leases
for compliance with lease underwriting guidelines prepared by the Company's
Credit Committee, currently consisting of the Company's Chairman, President and
Assistant Vice President-Credit Operations.
CREDIT PROCEDURES. The lessee approval process begins with the submission
by the lessee of a credit application, at which time the Company conducts its
own independent credit investigation through recognized commercial credit
reporting agencies such as Dun & Bradstreet, Equifax, Inc. and Experian. The
credit application is then reviewed by the Assistant Vice President-Credit
Operations. Credit applications involving more than $40,000 but less than
$100,000 must be reviewed by two members of the Company's Credit Committee, and
transactions involving more than $100,000 must be reviewed by all three members
of the Credit Committee.
In order to provide prompt service, the Company generally approves the
application within 1 to 2 business days of receipt if the transaction is for
less than $50,000 and within 3 to 5 business days if the transaction is for
$50,000 or more. The Company believes the response time for approval of a credit
application is usually important to the lessee, because the Company's leases
typically involve equipment important to the operation of the lessee's business.
After an application has been approved, the Company requires receipt of
signed documents on the Company's standard forms, or other pre-approved forms,
before funding. Once the equipment is shipped and installed, the Equipment
Provider invoices the Company, and thereafter the Company's funding and
documentation department verifies that the lessee has received and accepted the
equipment. Upon the lessee's authorization of payment to the Equipment Provider,
the lease is forwarded for funding, accounting and billing.
CREDIT POLICIES. The Company's lease underwriting guidelines generally
require verification of the lessee's time in business (10 years is the preferred
minimum), corporate name, bank account information, a credit investigation of
the personal credit of the owners, partners or principals of the lessee, and at
least three trade references. Most credit applications are evaluated under a
credit grading model which serves as an indicator for further evaluation by the
Company's Credit Committee.
The Company's credit grading model is based on the following factors
relating to the lessee: (i) length of time in business; (ii) primary standard
industrial classification code number or industry classification; (iii) the
average balance in the lessee's bank account generally over the last three
months; (iv) the bank's rating of the customer; (v) bank loan payment history;
(vi) length of relationship with the bank; (vii) trade payment history; (viii)
length of relationship with trade references; (ix) landlord payment history; (x)
the lessee's status with the Secretary of State of its state of incorporation;
(xi) personal credit history of the lessee's owner(s) or principal(s); (xii) the
lessee's Dun & Bradstreet rating; and (xiii) the payment history with the
37
<PAGE> 39
Company, if any. Each factor is allocated a score from one through five by the
Company. After scoring each factor, an average is taken of the scores for each
of the factors. If the average is three or greater the Company will generally
approve the credit application. If the average is less than three, the Company
may still evaluate the credit application based on a determination by the
Company's Assistant Vice President -- Credit Operations. However, the
application must be further evaluated by an additional member of the Company's
Credit Committee, who may approve or deny the credit application.
Transactions involving more than $50,000 also require the submission of two
years of financial statements and an interim financial statement. If year-end
financial statements are not audited or reviewed, corresponding tax returns are
required. Personal tax returns of the owners or principals of the lessees are
also required. Transactions involving $75,000 or more require an additional year
of financial statements. In addition, the Company evaluates certain financial
aspects of the lessee specific to the particular transaction, including its debt
to equity ratios, cash flow and equity coverage, assets, sales, inventory,
accounts receivable and accounts payable, based on industry standards formulated
by Robert Morris and Associates. The Company generally requires personal
guarantees by the principals or owners of the lessee, including guarantees of
the amount of sale proceeds from the underlying equipment at the end of the
lease term.
The Company adheres to strict guidelines in order to preserve lessee and
industry diversity within its portfolio of leases serviced, thus minimizing the
risk associated with lessee location, lessee obligation and industry cycles.
Diversification standards are also imposed by the Company's securitization
programs. As of June 30, 1997, no single industry accounted for more than 12.2%
of its portfolio of leases serviced and no single lessee accounted for more than
3% of the Company's portfolio of leases serviced. In connection with the
Company's securitizations, reviews of the Company's underwriting standards and
procedures are conducted by insurers and rating agencies.
SERVICING AND ADMINISTRATION
The Company's strategy has been to retain the servicing rights for
substantially all of the leases it originates. The Company's lease servicing
activities generally include: billing; collecting and remitting lease payments;
contacting delinquent obligors; handling obligor defaults; recording security
interests; investor and securitization reporting; portfolio management
reporting; conducting foreclosure proceedings; disposing of foreclosed
properties and otherwise administering the leases. As of June 30, 1997, the
Company serviced over 7,200 leases.
The Company receives a monthly servicing fee for all leases, plus late
fees, if any, which are collected from monthly lease payments.
The following table sets forth information regarding the Company's
portfolio of leases serviced:
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------------------------- ----------------
1992 1993 1994 1995 1996 1997
--------------- --------------- --------------- --------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
AMOUNT NO. AMOUNT NO. AMOUNT NO. AMOUNT NO. AMOUNT NO. AMOUNT NO.
------- ------ ------- ------ ------- ------ ------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of period.... $23,518 1,600 $21,649 1,610 $38,436 2,554 $61,797 3,517 $ 97,772 4,086 $148,086 6,983
Originations(1)................. 9,833 711 21,703 993 34,290 1,488 55,348 1,370 80,638 3,630 49,245 1,257
Runoff.......................... 11,702 701 4,916 49 10,929 525 19,373 801 30,324 733 22,602 985
------- ----- ------- ----- ------- ----- ------- ----- -------- ----- -------- -----
Balance, end of period(2)....... $21,649 1,610 $38,436 2,554 $61,797 3,517 $97,772 4,086 $148,086 6,983 $174,729 7,255
======= ===== ======= ===== ======= ===== ======= ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) Represents the equipment cost (or the acquisition cost in the case of
Commercial Capital) for leases originated during the period.
(2) Represents the aggregate of minimum lease payments, excluding residual
values, under all leases serviced by the Company and either held as direct
financing leases or sold.
38
<PAGE> 40
COLLECTION PROCEDURES AND POLICIES
The Company manages its risk of credit losses through adherence to its
underwriting guidelines and prompt and diligent collection procedures. All
collection activity is entered into a computerized collection system with
activity notes entered directly into the collection system in order to
facilitate routine collection activity. Collectors have available at their
computer terminals the latest status and collection history on each account.
The Company's practice with respect to collections is as follows: on the
day on which a lease becomes 10 days delinquent, T&W's credit and collection
review system generates a computerized late notice which is sent directly to the
lessee. Telephone contact is normally initiated when an account is 15 days past
due, but may be initiated more quickly. A late charge is assessed to the lessees
20 days after the payment due date. When an account becomes 30 days past due, a
default letter is sent to the lessee and to anyone providing personal guarantees
on the lease. An acceleration letter is sent to all lessees and guarantors when
a lease becomes 40 days past due. Telephone contact is continued throughout the
delinquency period. Accounts which become over 90 days past due are subject to
repossession of the equipment and action by the Company's agencies and
attorneys. The Company utilizes two outside companies who specialize such
collection proceeding and have been working for the Company for the last 12
years. Prior to being charged-off (which is generally prior to the lease being
180 days delinquent), each lease is evaluated on the merits of its specific
circumstances, with consideration of the value of the equipment as well as the
current financial strength of the lessee and guarantors.
The following table sets forth certain information with respect to the
Company's delinquent leases:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------------------- --------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Delinquencies as a percentage
of portfolio of leases
serviced
31-60 days past due............ 4.40% 2.50% 2.52% 1.50% 2.89% 1.19%
61-90 days past due............ 1.40% 0.31% 0.42% 0.86% 1.38% 1.24%
91-120 days past due........... 0.47% 0.10% 0.15% 0.78% 0.32% 0.98%
Over 120 days.................. -- 0.99% 0.90% -- 1.04% 0.96%
------- ------- ------- ------- ------- -------
Total.......................... 6.27% 3.90% 3.99% 3.14% 5.63% 4.37%
======= ======= ======= ======= ======= =======
</TABLE>
As a result of the Company's credit underwriting policies and collection
procedures, the Company's net chargeoffs of delinquent leases as a percent of
the net investment in leases has been generally low. The following table sets
forth certain information with respect to the Company's net charge-offs:
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- --------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Gross charge-offs.............. 1.21% 0.53% 0.29% 0.49% 1.53% 0.31%
Recoveries..................... (0.85%) (0.44%) (0.27%) (0.10%) (0.89%) (0.04%)
------- ------- ------- ------- ------- -------
Net charge-offs(1)............. 0.36% 0.09% 0.02% 0.39% 0.64% 0.27%
======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Represents charge-offs (reduced by recoveries), divided by the respective
period's average minimum lease payments, including residuals, under all
leases serviced by the Company and either held as direct financing leases or
sold. Interim data is provided on an annualized basis.
The allowance for credit losses is maintained by the Company at a level
that it believes is sufficient to absorb probable losses. The Company determines
the adequacy of the allowance based upon reviews of individual leases,
historical loss experience, current economic conditions, the known and inherent
risk characteristics of the various categories of leases and other pertinent
factors. Leases determined uncollectible are charged to the allowance.
Provisions for losses and recoveries on leases previously charged-off are added
to the allowance.
39
<PAGE> 41
MANAGEMENT INFORMATION SYSTEM
The Company's servicing operations are currently operated on a local area
network. Management continually evaluates the need to update and expand its
current systems. Such program includes upgrading and enhancing the Company's
current software application programs. The Company is evaluating certain
document imaging technologies and direct Internet communications with Equipment
Providers and lessees. Such technology would allow Equipment Providers and
lessees to communicate directly with the Company, including submitting lease
applications, checking the status of applications and leases and printing
documents remotely. Management believes that such technologies will increase the
efficiency of the Company's underwriting and servicing operations.
SERVICE MARK
"T&W" is a service mark of the Company and is registered for use in the
United States. The Company's name is regarded as a valuable asset.
COMPETITION
The "small ticket" equipment leasing market is highly competitive. The
Company competes with a number of national, regional and local finance
companies, Equipment Providers that provide financing for the sale or lease of
equipment themselves and traditional financial services companies, such as
commercial banks and savings and loan associations, many of whom possess
substantially greater financial, marketing and operational resources than the
Company. In addition, the Company's competitors and potential competitors
include many larger, more established companies which may have a lower cost of
funds than the Company and access to capital markets and to other funding
sources that may be unavailable to the Company.
EMPLOYEES
At June 30, 1997, the Company had 48 full-time employees, of which 12 were
engaged primarily in marketing and product origination, 15 were engaged
primarily in servicing and the remaining were engaged in various other clerical
and administrative functions. Of the total number of employees at such date, 35
were located at the Company's headquarters in Tacoma, Washington, and 13 were
located at facilities near Kansas City, Missouri. None of the Company's
employees is subject to a collective bargaining agreement, and the Company
believes that its relations with its employees are good.
PROPERTIES
Presently, the Company's corporate headquarters are located in a leased
office space of approximately 7,800 square feet at 6416 Pacific Highway East,
Tacoma, Washington. The lease is between the Company and Michael A. Price. The
lease terminates on December 31, 1997, and requires monthly rental payments of
$8,500. The Company believes that the construction of the Company's new
corporate headquarters which will be located in a leased space of approximately
25,000 square feet at the same premises, which will be completed by June 30,
1998. The lease on the new premises will also be with Michael A. Price, and the
Company expects that the lease will extend through March 2003, and that the
monthly rental payments will be approximately $28,125. The Company will continue
to lease its existing space as well as the new premises. See "Certain
Transactions -- Officers and Directors."
The Company also leases an aggregate of approximately 2,800 square feet of
space for two adjoining facilities near Kansas City, Missouri. The leases on
these facilities require aggregate monthly rental payments of $3,020 and expire
on October 31, 2001.
The Company believes that its current and new facilities will provide
adequate space for its future needs.
LEGAL PROCEEDINGS
On February 28, 1997, the Company filed a complaint in Pierce County
Superior Court in Tacoma, Washington against several parties, asserting claims
for breach of contract, fraud and negligence in a lease
40
<PAGE> 42
transaction. The Company is alleging joint and several liability and is seeking
approximately $940,000 plus interest and legal fees. See Note 7 to T&W Financial
Corporation and Affiliates Financial Statements.
In addition to the litigation noted above, the Company is, from time to
time party to various claims, lawsuits, and administrative proceedings arising
in the ordinary course of business. Although the ultimate dispositions of legal
proceedings cannot be predicted with certainty, to the best knowledge of the
Company, there is no litigation or claim threatened against the Company that is
likely to have a material adverse effect on its business, financial condition or
results of operations. See "Risk Factors -- Dependence on Creditworthiness of
Lessees and Portfolio Performance."
41
<PAGE> 43
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The name, age and position of each person who is an executive officer or
director of the Company is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Michael A. Price 52 Chief Executive Officer and Chairman of the Board
Thomas W. Price 34 President and Director
Kenneth W. McCarthy, Jr. 56 Senior Vice President, General Counsel and Director
Paul B. Luke 41 Senior Vice President, Chief Financial Officer, Secretary,
Treasurer and Director
Kenneth L. Hatch 62 Director
David N. Syferd 52 Director
</TABLE>
Michael A. Price has served as Chief Executive Officer and Chairman of the
Board of the Company and its predecessors since its formation in 1976. Prior to
1976, Mr. Price was a Vice President of International Finance, an independent
leasing company. Mr. Price was one of the founders, and is a director, of the
United Association of Equipment Lessors ("UAEL"), a national association of
leasing companies.
Thomas W. Price is the son of Michael A. Price and has served as President
of the Company and its predecessors since 1996. Mr. Price has also served as a
director of the Company since 1991. He was Vice President, Secretary and
Treasurer of the Company from 1992 through 1995, and has been employed by the
Company since 1982. Mr. Price received his B.S. in Finance and Economics from
Central Washington University.
Kenneth W. McCarthy, Jr. was elected a director of the Company and was
appointed Senior Vice President and General Counsel in July 1996. Mr. McCarthy
is a principal with the law firm of McCarthy & Hogan, P.S. which has performed
general legal services for the Company from time to time since 1991. Mr.
McCarthy received his B.S. in Chemistry from Seattle University and his J.D.
from Gonzaga University.
Paul B. Luke joined the Company in July 1996 as Senior Vice President and
Chief Financial Officer. He was elected a director of the Company in July 1996.
From 1993 through June 1996, Mr. Luke was with the accounting firm of BDO
Seidman, LLP, where he was most recently a partner responsible for the
structured finance and equipment leasing practice group. Mr. Luke worked
extensively on assisting BDO Seidman clients in securitizations. Prior to 1993,
Mr. Luke owned an accounting firm, besides being an associate for a Washington
based accounting firm. Mr. Luke received his B.S. in Accounting and Economics
from Nebraska Wesleyan University, his J.D. from the University of Pittsburgh
and his M.B.A. from Pepperdine University.
Kenneth L. Hatch has been a director of the Company since July 1997. Since
February 1996, he has served as the President of The Pacific Institute, a
corporate consulting firm. From February 1995 through February 1996, Mr. Hatch
was a Senior Vice President of AH Belo. From 1980 through 1995, Mr. Hatch served
as Chairman, President and Chief Executive Officer of KIRO, Inc., a division of
Bonneville International Corporation. From 1980 through 1995, Mr. Hatch also had
additional responsibilities as Senior Vice President of Bonneville International
Corporation. Mr. Hatch received his B.S. in Business and Finance from the
University of Utah.
David N. Syferd has been a director of the Company since July 1997. Mr.
Syferd has been a partner in the Seattle based advertising/public relations
agency of KNCF/Dave since its formation in 1995. From 1981 through 1995, Mr.
Syferd was the chairman of Elgin Syferd/DDB Needham. Mr. Syferd received his
B.S. in Political Science in 1967 from Whitworth College.
COMPENSATION OF DIRECTORS
Prior to the Offering, members of the Board of Directors of the Company
have not received compensation for their services as directors. Following the
closing of this Offering, each director who is not an officer will
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<PAGE> 44
receive a quarterly fee of $750 and an additional fee of $250 for each meeting
of the Board or committee attended other than regular quarterly meetings of the
Board and an annual meeting of each committee. Each director who is not an
officer will also receive 50 shares of Common Stock for attendance at each
meeting of the Board pursuant to the Company's 1997 Director Stock Grant Plan.
The Company will continue to reimburse all directors for all travel-related
expenses incurred in connection with their activities as directors. See
"-- Benefit Plans."
BOARD COMMITTEES
In connection with the Offering, the Company is forming two new committees
of the Board, the Audit Committee and the Compensation Committee. The members of
the Company's Audit Committee will be Messrs. Hatch, Syferd and Luke. The Audit
Committee's functions will include reviewing the Company's internal accounting
procedures and consulting with and reviewing the services provided by the
Company's independent auditors. The members of the Company's Compensation
Committee will be Messrs. Hatch, Syferd and Michael A. Price. The Compensation
Committee will review and recommend to the Board the compensation and benefits
to be provided to the Company's officers and key employees and review general
policy matters relating to employee compensation and benefits. During 1996, all
compensation for the Company was determined by Michael A. Price, the Company's
Chief Executive Officer, and Thomas W. Price, the Company's President, because
the Company had not yet established a Compensation Committee.
BENEFIT PLANS
1997 STOCK OPTION PLAN. The Company's 1997 Stock Option Plan (the "1997
Stock Option Plan") was adopted by the Board of Directors and approved by the
shareholders on July 22, 1997. The 1997 Stock Option Plan is designed as a means
to retain and motivate employees, directors and consultants. A total of
1,000,000 shares of Common Stock has been reserved for issuance under the 1997
Stock Option Plan. The 1997 Stock Option Plan provides for grants of incentive
stock options to employees and nonstatutory stock options to employees,
officers, directors and consultants of the Company. The 1997 Stock Option Plan
will be administered by the Board of Directors or by a committee appointed by
the Board, which will select optionees and determine the terms of options
granted, including the exercise price, the number of shares subject to the
option and the vesting provisions thereof. The terms of incentive stock options
granted under the 1997 Stock Option Plan generally may not exceed ten years.
As of the date of this Prospectus no options are outstanding under the 1997
Stock Option Plan. In connection with the Company's acquisition of Commercial
Capital, the Company entered into employment agreements with two principals of
Commercial Capital, James R. Neese and Larry E. Rice. The employment agreements
provide that upon completion of the Offering, the Company shall grant to each of
Messrs. Neese and Rice an option to purchase 22,000 shares of Common Stock at an
exercise price per share equal to the initial public offering price. Such
options will be issued under the 1997 Stock Option Plan and will vest ratably
over a five year period.
1997 EMPLOYEE STOCK PURCHASE PLAN. The Company's 1997 Employee Stock
Purchase Plan (the "1997 Stock Purchase Plan") was adopted by the Board of
Directors and approved by the shareholders on July 22, 1997. A total of 100,000
shares of Common Stock has been reserved for issuance under the 1997 Stock
Purchase Plan. The 1997 Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code of 1986, as amended, is administered by
the Board of Directors or by a committee appointed by the Board. Employees
(including officers and employee directors of the Company) are eligible to
participate if they have been employed for more than six months in any calendar
year and are customarily employed for at least 20 hours per week. The 1997 Stock
Purchase Plan will become effective after the closing of the Offering. No
employee is eligible to participate if that employee owns, or after a proposed
purchase under the 1997 Stock Purchase Plan would own, five percent more of the
voting stock of the Company. The 1997 Stock Purchase Plan permits eligible
employees to purchase Common Stock through payroll deductions. The purchase
price of the Common Stock under the 1997 Stock Purchase Plan will be equal to
85% of the fair market value per share of Common Stock.
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<PAGE> 45
1997 DIRECTOR STOCK GRANT PLAN. The Company's 1997 Director Stock Grant
Plan was adopted by the Board of Directors and approved by the shareholders on
July 22, 1997. A total of 10,000 shares of Common Stock has been reserved for
issuance under the 1997 Director Stock Grant Plan. Under the 1997 Director Stock
Grant Plan, each individual who is a director of the Company who has not been an
officer of the Company during the preceding 12 months shall be awarded 50 shares
of Common Stock for attendance at each annual, quarterly or special meeting of
the Board. The 1997 Director Stock Grant Plan is administered by the Board of
Directors.
EXECUTIVE COMPENSATION
The following table sets forth all information regarding the annual
compensation during fiscal year 1996 for the Company's Chief Executive Officer
and those officers of the Company who received compensation in excess of
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------
------------------------------- NUMBER OF SHARES
NAME AND ALL OTHER UNDERLYING
PRINCIPAL POSITION SALARY COMPENSATION(2)(3) OPTIONS
- ----------------------------------------------- -------- ------------------ ----------------
<S> <C> <C> <C>
Michael A. Price............................... $141,750 $666,432 --
Chairman of the Board and Chief Executive
Officer
Thomas W. Price................................ $481,000 $207,000 --
President
Kenneth W. McCarthy, Jr.(1).................... $77,940 $82,500 147,900
Senior Vice President and General Counsel
Paul B. Luke (1)............................... $77,940 $82,500 147,900
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
</TABLE>
- ---------------
(1) Employment commenced July 1, 1996.
(2) Includes management and consulting fees paid to PLM, the members of which
are Michael A. Price, Thomas W. Price, Kenneth W. McCarthy, Jr. and Paul B.
Luke. See "Certain Transactions -- P.L.M. Consulting Group, L.L.C." Includes
lease origination related commissions of $438,432 to Michael A. Price.
(3) Does not include distributions from pass-through entities.
44
<PAGE> 46
T&W Financial Corporation has entered into an agreement with PLM pursuant
to which PLM will provide the Company with the services of Michael A. Price,
Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy, Jr. to act as executive
officers of T&W Financial Corporation. Under the agreement, PLM is entitled to
an annual base fee of $1,440,000 and an annual bonus equal to 35% of T&W
Financial Corporation's annual audited after tax return on equity in excess of
20%, with proportionate reductions in the event that any of such individuals
ceases to be an executive officer of T&W Financial Corporation. See "Certain
Transactions -- P.L.M. Consulting Group, L.L.C."
STOCK OPTIONS. In July 1997, Paul B. Luke and Kenneth W. McCarthy, Jr. each
exercised options for 147,900 shares of the Common Stock of the Company. Messrs.
Luke and McCarthy each paid for the exercise price of such options with a
promissory note payable to the Company. As of August 1, 1997, the aggregate
amount outstanding for each of Messrs. Luke and McCarthy, under their respective
promissory notes was $581,079 with interest at 8% payable annually. All of the
unpaid interest and principal under the promissory notes will be paid in full
upon the closing of the Offering with proceeds received from the sale of shares
of Common Stock individually offered by Messrs. Luke and McCarthy. Such options
were granted in July 1996 at an exercise price equal to the fair market value of
the Common Stock. See Notes 6 and 9 to the T&W Financial Corporation and
Affiliates Financial Statements.
45
<PAGE> 47
CERTAIN TRANSACTIONS
T&W FUNDING COMPANY VI, L.L.C.
Michael A. Price, Thomas W. Price and PLM own all of the membership
interests of T&W Funding Company VI, L.L.C. ("Funding VI"). As a result of the
Restructuring, T&W Financial Corporation will own an 85% membership interest in
T&W Financial Services Company L.L.C., (the "LLC") and Funding Company VI will
own the remaining 15% membership interest in the LLC. Profits and losses of the
LLC will be allocated to T&W Financial Corporation and Funding Company VI in
accordance with their respective ownership of the LLC; however, 99% of the
deductions or losses associated with secured lines of credit or other recourse
liabilities of the LLC will be allocated to Funding Company VI, whose principals
will guarantee such liabilities. See "Risk Factors -- Potential Conflicts of
Interest Between the Company and Certain Affiliates" and "The Restructuring."
P.L.M. CONSULTING GROUP, L.L.C.
Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy,
Jr. own all of the membership interests of P.L.M. Consulting Group, L.L.C.
("PLM"). PLM provides consulting services to, and holds certain investments in,
other companies, including companies in the specialized commercial finance
industry. The Company and PLM are parties to a management services arrangement,
which commenced in July 1996, pursuant to which PLM provides management,
accounting, financial and other advisory services to the Company. The amounts
paid by the Company to PLM under such arrangement were $600,000 for the six
months ended June 30, 1997 and $600,000 for the year ended December 31, 1996,
respectively. Such arrangement will be terminated upon the closing of the
Offering. See "Management -- Executive Compensation."
T&W Financial Corporation has entered into an agreement with PLM pursuant
to which PLM will provide the Company with the services of Michael A. Price,
Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy, Jr. to act as executive
officers of T&W Financial Corporation. Under the agreement, PLM is entitled to
an annual base fee of $1,440,000 and an annual bonus equal to 35% of T&W
Financial Corporation's annual audited after tax return on equity in excess of
20%, with proportionate reductions in the event that any of such individuals
ceases to be an executive officer of T&W Financial Corporation. The agreement
will become effective upon the closing of the Offering. See
"Management -- Executive Compensation."
The Company and PLM are parties to a credit arrangement pursuant to which,
PLM borrows amounts from time to time from third party lenders and advances such
amounts to the Company at the same rate and on the same terms and conditions
offered to PLM by its lenders. As of June 30, 1997, the outstanding principal
balance and accrued interest under such arrangement was $1.65 million. The
Company intends to use a portion of the net proceeds of the sale of shares of
Common Stock by the Company in the Offering to repay all amounts outstanding
under such arrangement and such arrangement will be terminated upon the closing
of the Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
PLM owns substantially all of the membership interests of Bonney Lake
Supermarket, LLC ("Bonney Lake"). Bonney Lake owns and operates an independent
grocery store located in the Seattle area. The Company and Bonney Lake are
parties to three lease agreements pursuant to which the Company leases certain
equipment to Bonney Lake on standard market terms. The first lease was entered
into in December 1996 with monthly lease payments of $4,000 for the first year,
$8,000 for the second year, $11,000 for the third year, $15,000 for the fourth
year and $19,000 for the fifth year. The second lease was entered into in
February 1997 with monthly lease payments of $6,500 over a five year term. The
third lease was entered into in May 1997 with monthly lease payments of $2,000
over a seven year term. See "Risk Factors -- Potential Conflicts of Interest
Between the Company and Certain Affiliates."
PLM is the beneficial owner of 25% of the membership interests of Universal
Metering L.L.C. ("Universal Metering"). Universal Metering was created for the
purpose of selling water meter installation,
46
<PAGE> 48
reading and maintenance services to residential and commercial properties. The
Company and Universal Metering are parties to a letter of intent pursuant to
which the Company and Universal Metering would enter into an agreement under
which the Company would lease certain water meter equipment to the owners or
operators of such properties on standard market terms. The Company has approved
six leases with lease payments aggregating approximately $800,000. To date, none
of such leases has been funded. See "Risk Factors -- Potential Conflicts of
Interest Between the Company and Certain Affiliates."
OFFICERS AND DIRECTORS
Michael A. Price and Thomas W. Price own 40% of the membership interests of
NW, L.L.C. ("NW LLC"). NW LLC provides consulting and financial services to
small and medium-sized businesses in the commercial mortgage industry. The
Company and NW LLC are parties to four lease agreements pursuant to which the
Company leases certain computer and office equipment to NW LLC on standard
market terms. The first lease was entered into in January 1996 with monthly
lease payments of $5,683 over a five year term. The second and third leases were
entered into in February 1996 with monthly lease payments of $524 and $1,378,
respectively, over five year terms. The fourth lease was entered into in March
1996 with monthly lease payments of $830 over a five year term. See "Risk
Factors -- Potential Conflicts of Interest Between the Company and Certain
Affiliates."
The Company and Michael A. Price are parties to a lease agreement pursuant
to which the Company leases its current headquarters and related property from
Mr. Price on standard market terms. The lease was entered into in December 1991
with current monthly rental payments of $8,500 per month and expires on December
31, 1997. The Company intends to enter into a new lease agreement with Mr.
Michael Price for its existing facilities. The amounts paid by the Company to
Mr. Price under the lease were $51,000 for the six months ended June 30, 1997,
and $60,000, $49,000 and $36,000 for the years ended December 31, 1996, 1995 and
1994, respectively. See "Business -- Properties."
The Company intends to enter into a lease agreement with Mr. Price pursuant
to which the Company would lease its new headquarters on the same premises from
Mr. Price on standard market terms. The Company anticipates that the lease will
commence in April 1998 and will run through March 2003 with monthly rental
payments of approximately $28,125. See "Business -- Properties."
Kenneth L. Hatch, a director of the Company, is the President of The
Pacific Institute. The Pacific Institute provides management consulting services
to businesses. In July 1997, the Company engaged The Pacific Institute to
provide certain employee continuity consulting to the Company for a total fee of
$81,820. See "Management -- Directors and Executive Officers."
David N. Syferd, a director of the Company, is a partner of KNCF/Dave.
KNCF/Dave provides public relations services to businesses. In July 1997, the
Company engaged KNCF/Dave to provide certain public relations consulting to the
Company for a total fee of $37,000. See "Management -- Directors and Executive
Officers."
CERTAIN RELATIONSHIPS TERMINATING AT CLOSING
In July 1997, Paul B. Luke and Kenneth W. McCarthy, Jr. each exercised
options for 147,900 shares of the Common Stock of the Company. Messrs. Luke and
McCarthy each paid for the exercise price of such options with a promissory note
payable to the Company. As of August 1, 1997, the aggregate amount outstanding
for each of Messrs. Luke and McCarthy under their respective promissory notes
was $581,079 with interest at 8% payable annually. All of the unpaid interest
and principal under the promissory notes will be paid in full upon the closing
of the Offering with proceeds received from the sale of shares of Common Stock
individually offered by Messrs. Luke and McCarthy. "See Principal and Selling
Shareholders."
In August 1997, the Company will loan Right Price Recreation, which is
principally owned by Thomas W. Price, an aggregate amount of $400,000 with
interest at 8% payable annually, which amount, including accrued interest, will
be paid in full upon the closing of the Offering with proceeds received from the
sale of shares of Common Stock offered by Thomas W. Price.
47
<PAGE> 49
The Company entered into two lease agreements with R.P.R. Company, L.L.C.
("RPR"), which is principally owned by Thomas W. Price, for an airplane and
related equipment leased by the Company to RPR. The first lease was entered into
in September 1995 with monthly lease payments of $11,584 over a five year term.
The second lease was entered into in May 1997 with monthly lease payments of
$3,423 per month over a five year term. As of August 1, 1997, the balance of the
remaining lease payments was $671,872. The balance of the remaining lease
payments will be paid in full upon the closing of the Offering with proceeds
received from the sale of shares of Common Stock offered by Thomas W. Price and
such leases will be terminated.
The Company entered into six lease agreements with Waterhouse Charters,
which is principally owned by Michael A. Price for a boat and related equipment
leased by the Company to Waterhouse Charters. The first lease was entered into
in December 1993 with monthly lease payments of $3,515 over a five year term.
The second lease was entered into in August 1994 with monthly lease payments of
$1,110 over a three year term. The third lease was entered into in February 1995
with monthly lease payments of $1,424 over a three year term. The fourth lease
was entered into in August 1995 with monthly lease payments of $3,049 over a
three year term. The fifth lease was entered into in May 1996 with monthly lease
payments of $13,860 over a five year term. The sixth lease was entered into in
March 1997 with monthly lease payments of $3,525 over a five year term. As of
August 1, 1997, the balance of the remaining lease payments was $951,278. The
balance of the remaining lease payments will be paid in full upon the closing of
the Offering with proceeds received from the sale of shares of Common Stock
offered by Michael A. Price and such leases will be terminated.
The Company entered into two transactions with AST Leasing, which is
principally owned by Michael A. Price for certain personal property primarily
consisting of furniture, fixtures and other related equipment leased by the
Company to AST Leasing. The first lease was entered into in October 1995 with
monthly lease payments of $18,514 over a five year term. The second lease was
entered into in September 1996 with monthly lease payments of $24,620 over a two
year term. As of August 1, 1997, the balance of the remaining lease payments was
$1,085,250. The balance of the remaining lease payments will be paid in full
upon the closing of the Offering with proceeds received from the sale of shares
of Common Stock offered by Michael A. Price and such leases will be terminated.
See "Risk Factors -- Potential Conflicts of Interest Between the Company
and Certain Affiliates," "The Restructuring" and Note 5 to the T&W Financial
Corporation and Affiliates Financial Statements.
48
<PAGE> 50
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of the effective date hereof, and as adjusted
to reflect the sale of shares of Common Stock in the Offering for: (i) each
person known to T&W Financial Corporation to be the beneficial owner of more
than 5% of the outstanding Common Stock; (ii) each director and executive
officer of the T&W Financial Corporation; (iii) all directors and executive
officers of the T&W Financial Corporation as a group; and (iv) each Selling
Shareholder. Except as otherwise noted, the named beneficial owner has sole
voting and investment power.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
BENEFICIAL OWNERS, DIRECTORS, PRIOR TO OFFERING(2) AFTER OFFERING(3)
EXECUTIVE OFFICERS ------------------------ SHARES TO ------------------------
AND SELLING SHAREHOLDERS(1) NUMBER PERCENTAGE BE SOLD NUMBER PERCENTAGE
- ------------------------------------ --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Michael A. Price(4)................. 4,915,251 84.75% 166,000 4,749,251 59.36%
Thomas W. Price(5).................. 588,949 10.15% 80,000 508,949 6.36%
Paul B. Luke........................ 147,900 2.55% 57,000 90,900 1.14%
Kenneth W. McCarthy, Jr............. 147,900 2.55% 57,000 90,900 1.14%
Kenneth L. Hatch.................... -- -- -- -- --
David N. Syferd..................... -- -- -- -- --
--------- ----- ------- --------- -----
All directors and executive officers
as a group (6 persons)............ 5,800,000 100.00% 360,000 5,440,000 68.00%
========= ===== ======= ========= =====
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities, subject to the community
property laws, where applicable. The address of each beneficial owner is c/o
T&W Financial Corporation, 6416 Pacific Highway East, Tacoma, Washington
98424.
(2) Based on an aggregate of 5,800,000 shares of Common Stock outstanding as of
the date hereof.
(3) Based on an aggregate of 8,000,000 shares of Common Stock to be outstanding
upon the closing of the Offering.
(4) Includes 2,374,626 shares of Common Stock owned by the Michael A. Price
Guarantor Retained Annuity Trust, dated August 1, 1997, and 2,374,625 shares
of Common Stock as Trustee of the Katherine M. Price Guarantor Retained
Annuity Trust, dated August 1, 1997.
(5) Includes 148,613 shares of Common Stock owned by Thomas W. Price through a
limited liability company.
49
<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock and certain
provisions of the Articles and Bylaws of the Company are summaries which do not
purport to be complete, and are subject to and qualified in their entirety by
reference to the Articles and Bylaws, forms of which are filed as exhibits to
the Registration Statement of which this Prospectus is a part. Reference is made
to such exhibits for a detailed description of the provisions summarized below.
As used in this section the term "Company" shall refer to T&W Financial
Corporation.
The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock").
On the date of this Prospectus, there were 5,800,000 shares of Common Stock
and no shares of Preferred Stock issued and outstanding. Upon the closing of the
Offering, there will be 8,000,000 shares of Common Stock and no shares of
Preferred Stock issued and outstanding.
COMMON STOCK. Holders of Common Stock are entitled to one vote per share on
all matters to be voted on by the shareholders. There are no cumulative voting
rights. Accordingly, the holders of a majority of the shares of Common Stock
voting for the election of directors can elect all the directors if they choose
to do so. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." In the
event of the liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of the Company's liabilities. Holders of Common Stock have no preemptive rights
and the Common Stock is neither redeemable nor convertible into any other
securities. As of July 3, 1997, there were four record holders of the Common
Stock, Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy,
Jr. The right of holders of the Common Stock to elect all of the Company's
directors, to receive dividends and to share ratably in assets upon a
liquidation of the Company may be subject to the rights of holders of shares of
Preferred Stock, if any such shares are issued.
PREFERRED STOCK. Pursuant to the Articles, the Company is authorized to
issue "blank check" Preferred Stock, which may be issued from time to time in
one or more series upon authorization by the Company's Board of Directors. The
Board of Directors, without further approval of the shareholders, is authorized
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each series of the
Preferred Stock. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, among other
things, could adversely affect the voting power of the holders of Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for the Company's Common Stock at a
premium to the prevailing market price or otherwise adversely affect the market
price of the Common Stock. Currently, the Company has no plans to issue shares
of Preferred Stock.
ANTITAKEOVER RESTRICTIONS
STATUTORY PROVISIONS. Washington law contains certain provisions that may
have the effect of delaying, deterring or preventing a change in control of the
Company. Chapter 23B.19 of the Washington Business Corporation Act (the "WBCA")
prohibits the Company, with certain exceptions, from engaging in certain
significant business transactions with a person or group of persons who acquire
10% or more of the Company's voting securities without the prior approval of the
Company's Board of Directors (an "Acquiring Person") for a period of five years
after such acquisition. Chapter 23B.19 applies to domestic public corporations,
domestic corporations electing to be governed by Chapter 23B.19, and to foreign
corporations in certain limited circumstances. The prohibited transactions
include, among others, a merger with, disposition of assets to, or issuance or
redemption of stock to or from, the Acquiring Person, or otherwise allowing the
Acquiring Person to receive any disproportionate benefit as a shareholder. The
Company may not exempt itself from coverage of this statute. These statutory
provisions may have the effect of delaying, deterring or preventing a change in
control of the Company.
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<PAGE> 52
ARTICLE PROVISIONS. Under the Company's Articles, the Board of Directors
has the authority to issue up to 10,000,000 shares of Preferred Stock with such
rights and preferences as the Board of Directors may determine. The issuance of
such shares may have the effect of delaying, deterring or preventing a change in
control of the Company. See "-- Preferred Stock."
LIMITATION OF LIABILITY AND INDEMNIFICATION
Article 5 of the Articles limits to the fullest extent permitted by
Washington law, the personal liability of directors of the Company for monetary
damages for certain conduct as a director. The Articles and the Section
23B.08.320 of the WBCA do not permit limitations on a director's liability in
circumstances involving intentional misconduct or a knowing violation of law,
illegal corporate distributions, or any transaction from which the director
personally receives a benefit in money, property or services to which the
director is not legally entitled. Article 6 of the Articles provides that the
Company shall, to the full extent permitted by Washington law, indemnify and
advance or reimburse the reasonable expenses incurred by any person made a party
to a proceeding because that person is or was a director of the Company. In
addition, Article VIII of the Bylaws permits the Company's Board of Directors to
indemnify the Company's officers, employees and agents to the fullest extent
permitted by Washington law.
The Company plans to enter indemnification agreements with its directors.
The Company intends to secure insurance on behalf of its executive officers and
directors for certain liabilities arising out of their actions in such
capacities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is TranSecurities
International, Inc.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 8,000,000 shares of
Common stock outstanding. The 2,560,000 shares of Common Stock offered hereby
will be freely tradable without restriction or further registration under the
Securities Act, except for shares purchased by persons deemed to be "affiliates"
of the Company or acting as "underwriters," as those terms are defined in the
Securities Act. The remaining 5,440,000 shares will be Restricted Securities.
Following the expiration of the lock-up period described below, all of the
remaining outstanding shares of Common Stock may only be sold in the public
market if such shares are registered under the Securities Act or sold in
accordance with Rule 144 promulgated under the Securities Act.
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated) who has beneficially owned, for at least one year, shares of
Common Stock that have not been registered under the Securities Act or that were
acquired from an "affiliate" of the Company is entitled to sell within any
three-month period the number of shares of Common Stock which does not exceed
the greater of one percent of the number of the then outstanding shares of the
Company's Common Stock or the average weekly reported trading volume during the
four calendar weeks preceding the sale. Sales under Rule 144 are also subject to
certain notice requirements and to the availability of current public
information about the Company and must be made in unsolicited brokers'
transactions or to a market maker. A person (or persons whose shares are
required to be aggregated) who was not an "affiliate" of the Company under the
Securities Act during the three months preceding a sale and who has beneficially
owned such shares for at least two years is entitled to
51
<PAGE> 53
sell such shares under Rule 144 without regard to the volume, notice,
information and manner of sale provisions of Rule 144.
An aggregate of 1,000,000 shares of Common Stock are reserved for issuance
to directors, officers, consultants and employees of the Company pursuant to the
1997 Stock Option Plan. An aggregate of 100,000 shares of Common Stock are
reserved for issuance to certain employees of the Company pursuant to the 1997
Stock Purchase Plan. An aggregate of 10,000 shares of Common Stock are reserved
for issuance to the directors who are not officers of the Company pursuant to
the 1997 Director Stock Grant Plan. See "Management -- Benefit Plans." The
Company intends to file a registration statement on Form S-8 covering the
issuance of shares of plans. Accordingly, shares issued pursuant to these plans
will be freely tradable, except for any shares held by an "affiliate" of the
Company.
The Company, its executive officers and directors and certain shareholders
of the Company, have agreed not to sell, offer to sell, contract to sell, pledge
or otherwise dispose of or transfer, directly or indirectly, any shares of
Common Stock, or any securities convertible into or exchangeable or exercisable
for, or any rights to purchase or acquire, shares of Common Stock for a period
of 180 days commencing on the date of this Prospectus without the prior written
consent of Oppenheimer & Co., Inc., other than the sale of the shares of Common
Stock in the Offering and the issuance by the Company of: (i) options to
purchase shares of Common Stock (and shares of Common Stock issuable upon the
exercise of such options) in connection with the 1997 Stock Option Plan; (ii)
shares of Common Stock in connection with the 1997 Employee Stock Purchase Plan;
(iii) shares of Common Stock in connection with the 1997 Director Stock Grant
Plan; and (iv) 13,700 shares of Common Stock to be awarded to certain employees
of the Company. See "Underwriting."
Prior to the Offering, there has been no public trading market for the
Common Stock. No predictions can be made of the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale will
have on the market price prevailing from time to time. Nevertheless, sales of
significant amounts of Common Stock could adversely affect the prevailing market
price of the Common Stock, as well as impair the ability of the Company to raise
capital through the issuance of additional equity securities.
52
<PAGE> 54
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
among the Company, the Selling Shareholders and the underwriters named below
(the "Underwriters"), for whom Oppenheimer & Co., Inc. is acting as
representative (the "Representative"), each of the Underwriters has severally
agreed to purchase from the Company and the Selling Shareholders and the
Company, and the Selling Shareholders have agreed to sell to the Underwriters,
the respective numbers of shares of Common Stock set forth opposite their names
below:
<TABLE>
<CAPTION>
NAME
-------------------------------------------------------------------------
<S> <C>
Oppenheimer & Co., Inc. .................................................
Total..........................................................
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The Underwriters are committed to
purchase and pay for all of the above shares of Common Stock if any are
purchased.
The Underwriters have advised the Company that the Underwriters propose to
offer the shares of Common Stock directly to the public at the offering price
set forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share of Common Stock. The
Underwriters may allow, and such dealers may re-allow, a concession not in
excess of $ per share of Common Stock on sales to certain other dealers.
After the initial public offering of the shares, the public offering price,
concession and re-allowance to dealers may be changed by the Underwriters.
Prior to the Offering, there has been no public trading market for the
Common Stock. Although the Common Stock has been approved for quotation on
Nasdaq, there can be no assurance that any active trading market will develop
for the Common Stock or, if developed, will be maintained. The initial public
offering price was determined through negotiations among the Company and the
Representative. The factors considered in determining the initial public
offering price included the history of and the prospects for the industry in
which the Company competes, the ability of the Company's management, the past
and present operations of the Company, the historical results of operations of
the Company, the prospects for future earnings of the Company, the general
condition of the securities markets at the time of the Offering and the recent
market prices of securities of generally comparable companies.
In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot in connection with
the Offering, creating a short position in the Common Stock for their own
account. In addition, to cover over-allotments or to stabilize the price of the
Common Stock, the Underwriters may bid for and purchase, shares of Common Stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Common
Stock in the Offering, if the syndicate repurchases previously distributed
Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
The Company has granted the Underwriters an option exercisable during the
30-day period after the date of this Prospectus to purchase up to 384,000
additional shares of Common Stock, solely to cover over-allotments, if any, at
the public offering price less the underwriting discount, as set forth on the
cover page of this Prospectus. If the Underwriters exercise such over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof as the number of shares of
Common Stock offered hereby. The Underwriters may exercise such option only to
cover over-allotments made in connection with the sale of the shares of Common
Stock offered hereby.
The Representative has informed the Company that the Underwriters will not
confirm, without customer authorization, sales to their customer accounts as to
which they have discretionary trading power.
53
<PAGE> 55
The Company, its executive officers and directors and certain shareholders
of the Company, have agreed not to sell, offer to sell, contract to sell, pledge
or otherwise dispose of or transfer, directly or indirectly, any shares of
Common Stock, or any securities convertible into or exchangeable or exercisable
for, or any rights to purchase or acquire, shares of Common Stock for a period
of 180 days commencing on the date of this Prospectus without the prior written
consent of Oppenheimer & Co., Inc., other than the sale of the shares of Common
Stock in the Offering and the issuance by the Company of: (i) options to
purchase shares of Common Stock (and shares of Common Stock issuable upon the
exercise of such options) in connection with the 1997 Stock Option Plan; (ii)
shares of Common Stock in connection with the 1997 Purchase Plan; (iii) shares
of Common Stock in connection with the 1997 Director Stock Grant Plan and (iv)
13,700 Shares of Common Sock to be awarded to certain employees of the Company.
The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Graham & James LLP, San Francisco,
California. Certain legal matters relating to the Common Stock offered hereby
will be passed upon for the Underwriters by Gibson, Dunn & Crutcher LLP, San
Francisco, California.
EXPERTS
The combined financial statements of T&W Financial Corporation and
Affiliates included in this Prospectus have been audited by BDO Seidman, LLP,
independent certified public accountants, to the extent and for the periods
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in auditing and accounting.
54
<PAGE> 56
T&W FINANCIAL CORPORATION AND AFFILIATES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Combined Balance Sheets as of December 31, 1995 and 1996 and (Unaudited) June 30,
1997................................................................................ F-3
Combined Statements of Income for the years ended December 31, 1994, 1995 and 1996 and
(Unaudited) the Six Months Ended June 30, 1996 and 1997............................. F-4
Combined Statement of Shareholders' Equity for the years ended December 31, 1994, 1995
and 1996 and (Unaudited) the Six Months Ended June 30, 1997......................... F-5
Combined Statements of Cash Flows for the years ended December 31, 1994, 1995, 1996
and (Unaudited) the Six Months Ended June 30, 1996 and 1997......................... F-6
Notes to Combined Financial Statements................................................ F-7
</TABLE>
F-1
<PAGE> 57
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
T&W Financial Corporation and Affiliates
We have audited the accompanying combined balance sheets of T&W Financial
Corporation and Affiliates (the "Company") as of December 31, 1995 and 1996, and
the related combined statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used, and significant estimates made, by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of T&W
Financial Corporation and Affiliates at December 31, 1995 and 1996, and the
combined results of their operations and cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
BDO SEIDMAN, LLP
Seattle, Washington
March 7, 1997
F-2
<PAGE> 58
T&W FINANCIAL CORPORATION AND AFFILIATES
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
------------------- --------------------------
1995 1996 ACTUAL PRO FORMA
------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash and Cash Equivalents........................ $ 4,323 $ 8,064 $ 8,861 $ 8,861
Net Investment in Leases (Notes 2, 3 and 4)...... 90,359 135,087 103,890 103,890
Securitization Receivable (Note 9)............... -- -- 6,750 6,750
Intangible Assets, net........................... -- -- 2,190 2,190
Other Assets..................................... 1,369 1,286 2,489 2,489
------- -------- -------- --------
Total Assets........................... $96,051 $144,437 $ 124,180 $ 124,180
======= ======== ======== ========
Accounts Payable and Other Accrued Liabilities... $ 5,056 $ 5,634 $ 6,111 $ 6,111
Notes Payable -- Recourse (Note 3)............... 8,833 32,272 17,659 17,659
Notes Payable -- Nonrecourse (Note 4)............ 67,686 89,975 80,804 80,804
Security Deposits................................ 4,926 6,259 7,442 7,442
Pro Forma Deferred Income Tax Liabilities (Note
9)............................................. -- -- -- 3,500
------- -------- -------- --------
Total Liabilities...................... 86,501 134,140 112,016 115,516
------- -------- -------- --------
Pro Forma Minority Interest (Note 9)............. -- -- -- 1,825
------- -------- -------- --------
Commitments and Contingencies (Notes 7 and 9)
Shareholders' Equity:
Common stock and paid-in capital............... 3,438 3,438 3,438 3,438
Retained earnings.............................. 6,112 6,859 8,726 3,401
------- -------- -------- --------
Total Shareholders' Equity............. 9,550 10,297 12,164 6,839
------- -------- -------- --------
Total Liabilities and Shareholders'
Equity............................... $96,051 $144,437 $ 124,180 $ 124,180
======= ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 59
T&W FINANCIAL CORPORATION AND AFFILIATES
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------- -------------------------
1994 1995 1996 1996 1997
------ ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Lease contract revenue...................... $7,132 $10,621 $16,834 $ 6,944 $ 7,298
Gain on sale of leases...................... -- -- -- -- 3,448
Fee income.................................. 607 1,364 2,067 1,099 134
Servicing and other income.................. 292 555 595 517 738
------ ------- ------- ------ -------
Total Revenues...................... 8,031 12,540 19,496 8,560 11,618
------ ------- ------- ------ -------
Expenses:
Interest expense............................ 2,589 4,513 6,434 2,911 3,726
Compensation and related expenses........... 1,484 1,796 2,859 1,305 1,986
Amortization of initial direct costs........ 848 1,302 1,893 854 1,222
Provision for credit losses................. 223 621 1,137 345 402
Other general and administrative expenses... 601 807 1,345 757 1,073
------ ------- ------- ------ -------
Total Expenses...................... 5,745 9,039 13,668 6,172 8,409
------ ------- ------- ------ -------
Net Income.................................... $2,286 $ 3,501 $ 5,828 $ 2,388 $ 3,209
====== ======= ======= ====== =======
PRO FORMA AMOUNTS (UNAUDITED) (NOTE 9):
Income before minority interest and income
taxes.................................... $ 5,828 $ 3,209
Minority interest........................... (874) (481)
------- -------
Income before income taxes.................. 4,954 2,728
Provision for income taxes.................. (1,783) (982)
------- -------
Net income.................................. $ 3,171 $ 1,746
======= =======
Net income per share........................ $ 0.55 $ 0.30
Weighted average number of shares of Common
Stock and Common Stock Equivalents
Outstanding.............................. 5,800 5,800
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 60
T&W FINANCIAL CORPORATION AND AFFILIATES
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
AND PAID IN RETAINED
CAPITAL EARNINGS TOTAL
------------ --------- -------
<S> <C> <C> <C>
Balance, January 1, 1994.................................. $2,888 $ 2,205 $ 5,093
Net income.............................................. -- 2,286 2,286
Capital contributions................................... 208 -- 208
Distributions to shareholders........................... -- (120) (120)
------ ------ -------
Balance, December 31, 1994................................ 3,096 4,371 7,467
Net income.............................................. -- 3,501 3,501
Capital contributions................................... 342 -- 342
Distributions to shareholders........................... -- (1,760) (1,760)
------ ------ -------
Balance, December 31, 1995................................ 3,438 6,112 9,550
Net income.............................................. -- 5,828 5,828
Distributions to shareholders........................... -- (5,081) (5,081)
------ ------ -------
Balance, December 31, 1996................................ 3,438 6,859 10,297
Net income (Unaudited).................................. -- 3,209 3,209
Distributions to shareholders (Unaudited)............... -- (1,342) (1,342)
------ ------ -------
Balance, June 30, 1997 (Unaudited)........................ $3,438 $ 8,726 $12,164
====== ====== =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 61
T&W FINANCIAL CORPORATION AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
----------------------------- JUNE 30,
1994 1995 1996 --------------------------
------- ------- ------- 1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Income............................... $ 2,286 $ 3,501 $ 5,828 $ 2,388 $ 3,209
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Amortization........................... 1,074 1,676 2,108 512 1,352
Provision for credit losses............ 223 621 1,137 345 402
Gain on sale of leases................. -- -- -- -- (3,448)
Changes in assets and liabilities,
exclusive of the effects of business
combinations:
Increase (decrease) in accounts payable
and other accrued liabilities....... 1,885 171 1,631 (1,083) (1,666)
Other.................................. 202 -- -- -- (20)
------- ------- ------- ------- -------
Net Cash Provided (Used) by Operating
Activities............................. 5,670 5,969 10,704 2,162 (171)
------- ------- ------- ------- -------
Cash Flows From Investing Activities:
New leases originated.................. (34,700) (53,767) (82,066) (32,032) (45,243)
Lease payments received................ 13,390 21,026 36,575 14,324 24,072
Initial direct costs incurred.......... (1,285) (1,776) (4,324) (759) (1,376)
Increase in other assets............... -- (659) -- (102) (329)
Proceeds from sale of lease
portfolio........................... -- -- -- -- 54,213
Cash received in acquisition net of
cash paid........................... -- -- -- -- 191
------- ------- ------- ------- -------
Net Cash (Used) Provided by Investing
Activities............................. (22,595) (35,176) (49,815) (18,569) 31,528
------- ------- ------- ------- -------
Cash Flows From Financing Activities:
Proceeds from recourse and nonrecourse
borrowings.......................... 65,300 107,941 76,098 28,541 24,332
Payments on recourse and nonrecourse
borrowings.......................... (46,944) (78,916) (30,368) (11,510) (54,440)
Net increase in security deposits...... 1,315 1,950 1,333 823 1,182
Debt issue costs paid.................. (310) (431) (90) (80) (294)
(Increase) decrease in advances to
related party....................... (601) 601 -- -- --
Distributions to shareholders.......... (120) (1,760) (4,121) (544) (1,340)
------- ------- ------- ------- -------
Net Cash Provided (Used) by Financing
Activities.......................... 18,640 29,385 42,852 17,230 (30,560)
------- ------- ------- ------- -------
Net Increase in Cash and Cash
Equivalents............................ 1,715 178 3,741 823 797
Cash and Cash Equivalents, beginning of
period................................. 2,430 4,145 4,323 4,323 8,064
------- ------- ------- ------- -------
Cash and Cash Equivalents, end of
period................................. $ 4,145 $ 4,323 $ 8,064 $ 5,146 $ 8,861
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 62
T&W FINANCIAL CORPORATION AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
T&W Financial Corporation and special purpose entities ("SPE's), T&W
Finance Corporation I through III ("Corp I", "Corp II," and "Corp III") and T&W
Funding Company IV through VI, LLC ("LLC IV," "LLC V" and "LLC VI") (together,
the "Company" or "Companies" and individually, the "Affiliates"), are affiliated
companies, each having primarily the same two individual owners. The Company's
business operations consist primarily of writing leases on various types of
capital equipment for commercial entities. The Company's operations extend
throughout the United States, with no significant concentration in any region
except the Pacific Northwest. The Company's headquarters are located in Tacoma,
Washington.
As described more fully in Note 9, in June 1997, the Company acquired
certain assets and liabilities of Commercial Capital Corporation ("Commercial
Capital"), an equipment leasing business located near Kansas City. The
accompanying unaudited June 30, 1997 balance sheet includes assets and
liabilities of Commercial Capital and the accompanying unaudited statements of
income and cash flows for the six months ended June 30, 1997 includes operating
results relating to Commercial Capital for the period since its acquisition.
Principles of Combination -- These combined financial statements include
the accounts of the Affiliates. Interaffiliate transactions and accounts are
eliminated in combination in a manner similar to that followed in preparing
consolidated financial statements.
Income Taxes -- The Company, with the consent of its shareholders, has
elected for the shareholders to be taxed on their proportionate share of the
Companies' taxable income. Therefore, no provision or liability for federal
income taxes has been included in the financial statements. The leases are
considered "true" or operating leases for federal income tax purposes and
therefore, the Companies' income for tax purposes could be materially different
from the Companies' income for financial statement purposes. As a result of
accounting for leases as (i) direct financing for financial reporting purposes
and as "true" leases for tax purposes, and (ii) sales transactions for financial
reporting purposes versus borrowing transactions for tax purposes, the tax basis
in company assets is approximately $10.5 million less than the recorded
financial reporting basis at December 31, 1996.
Lease Accounting -- All of the Company's leases are accounted for as direct
financing leases. Under this accounting method, net present value of future
minimum lease rentals and estimated residual value of equipment at lease end are
recorded as assets. Lease contract revenue is recognized over the lease term at
a constant rate of return on the Company's net investment in the lease. Initial
direct costs of acquiring a lease are capitalized and amortized over the lease
term in order to produce a constant net rate of return on the net lease
investment.
Allowance for Credit Losses -- The allowance for credit losses is
maintained at a level the Company believes is sufficient for estimated future
losses related to uncollectible lease receivables. Management estimates the
allowance based upon reviews of individual leases, historical loss experience,
current economic conditions, the known and inherent risk characteristics of the
various categories of leases and other pertinent factors. Leases determined
uncollectible are charged to the allowance. Provisions for losses and recoveries
on leases previously charged off are added to the allowance. Allowances relating
to leases sold are removed from the allowance for credit losses. The Company's
allowance for credit losses is based on estimates and qualitative evaluations,
and ultimate losses will vary from current estimates. These estimates are
reviewed periodically and as adjustments, either positive or negative, become
necessary they are reported in earnings in the period in which they become
known.
Cash and Cash Equivalents -- The Company considers all short-term
investments with an initial maturity of three months or less when purchased to
be cash equivalents. Cash received from SPE lease receivables is deposited in
separate bank accounts. These funds are required to be utilized to pay SPE debt
service and other associated costs, with the balance being remitted monthly to
the Company.
F-7
<PAGE> 63
T&W FINANCIAL CORPORATION AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Estimates -- The presentation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments -- The carrying amounts of assets and
liabilities are considered to be reasonable estimates of fair value because of
the short maturity of these items. The carrying amounts of long-term debt are
considered to approximate fair value because they bear interest at relatively
recently established market rates or at variable interest rates which are
repriced frequently.
Concentration of Credit and Financial Instrument Risk -- The Company
controls its credit risk through credit standards, limits on exposure, and by
monitoring the financial condition of its lessees. The Company uses a credit
scoring system as a guide in evaluating the credit risk of applicants. The
Company generally requires the leased assets to serve as collateral for the
leases and requires all lessees to provide adequate collateral protection and
liability insurance throughout the base contract term. Additionally, the Company
controls its credit exposure to any one client or industry by monitoring and
limiting such exposure through additional credit enhancement. Inherent to
leasing is the residual value risk associated with lease contracts. The Company
manages this residual risk through adherence to a residual valuation procedure
at lease inception.
Interest Rate Collars -- In order to manage interest rate exposure, the
Company has entered into interest rate collar agreements which have the effect
of exchanging fixed rate debt of the owner trust to which the Company has sold
lease contracts into variable rate debt whereby the rate is limited to not
exceed 8% and not be less than 5.2%. Amounts received by the owner trust under
the agreements are used to cover monthly expenses of the owner trust and any
excess is recognized by the Company as other income upon receipt from the owner
trust.
Stock-Based Compensation -- Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," ("SFAS 123") encourages, but
does not require companies to record compensation cost for stock-based employee
compensation. The Company has chosen to continue to account for stock-based
compensation utilizing the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the fair market price of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock.
Effect of Recently Issued Accounting Standards -- Recently issued
accounting standards having relevant applicability to the Company consist
primarily of Statement of Financial Accounting Standards No. 125 ("SFAS No.
125") "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," which is effective for transactions occurring
after 1996, applied prospectively. The primary effect of adoption of SFAS No.
125 is in the recording of an asset relating to the present value of the net
cash flow resulting from servicing leases sold. Other relevant recently issued
accounting standards consist of Statement of Financial Accounting Standards No.
128 "Earnings per Share", Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" and Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related Information",
each of which relate to additional reporting and disclosure requirements
effective for financial statement periods beginning after December 15, 1997. It
is not expected that the adoption of these accounting pronouncements will have a
material effect on the Company's operating results or financial condition.
Interim Financial Statements -- The interim financial data at and for the
six months ended June 30, 1996 and 1997 is unaudited; however, in the opinion of
Company management, the interim data includes all adjustments, consisting only
of normal recurring adjustments necessary for a fair statement of results for
the
F-8
<PAGE> 64
T&W FINANCIAL CORPORATION AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
interim periods. The interim results of operations for the six months ended June
30, 1997 are not necessarily indicative of results expected for the entire year.
NOTE 2. NET INVESTMENT IN LEASES
The Company's investments in leases have been pledged as collateral for
certain notes payable. The investment in leases which are in SPE's and pledged
as collateral for related debt are referred to herein as "Securitized". The net
investment in leases presented on a basis by type of borrowing for which the
investment is pledged as collateral is summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Securitized --
Minimum lease payments receivable................... $ 85,194 $106,279 $ 95,559
Estimated residual value of leased equipment, net... 7,489 9,719 9,651
Unearned lease revenue.............................. (15,935) (19,683) (17,106)
-------- -------- --------
Securitized, net............................... 76,748 96,315 88,104
-------- -------- --------
Not Securitized --
Minimum lease payments receivable................... 12,578 41,807 15,205
Estimated residual value of leased equipment, net... 1,833 2,337 2,200
Unearned lease revenue.............................. (2,007) (8,576) (3,283)
-------- -------- --------
Not Securitized, net........................... 12,404 35,568 14,122
-------- -------- --------
Allowance For Credit Losses......................... (889) (1,323) (1,005)
Initial Direct Costs, net........................... 2,096 4,527 2,669
-------- -------- --------
Net Investment in Leases....................... $ 90,359 $135,087 $ 103,890
======== ======== ========
</TABLE>
Accumulated amortization of initial direct costs approximated $2.4 million
and $3.1 million at December 31, 1995 and 1996, respectively. As of December 31,
1996, future minimum annual lease payments receivable excluding guaranteed
residual values are as follows (in thousands):
<TABLE>
<S> <C>
1997.............................................. $ 52,432
1998.............................................. 39,668
1999.............................................. 27,071
2000.............................................. 24,312
2001 and thereafter............................... 4,603
--------
$148,086
========
</TABLE>
F-9
<PAGE> 65
T&W FINANCIAL CORPORATION AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A summary of activity in the allowance for credit losses account is as
follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- --------------------------
1994 1995 1996 1996 1997
----- ----- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE, beginning of period................ $ 332 $ 548 $ 889 $ 889 $ 1,323
----- ----- ------- ------ ------
Provision for credit losses................. 223 621 1,137 345 402
----- ----- ------- ------ ------
Charge-offs................................. (127) (354) (1,691) (328) (226)
Recoveries.................................. 120 74 988 283 31
----- ----- ------- ------ ------
Net Charge-offs............................. (7) (280) (703) (45) (195)
----- ----- ------- ------ ------
Decrease related to leases sold............. -- -- -- -- (525)
----- ----- ------- ------ ------
BALANCE, end of period...................... $ 548 $ 889 $ 1,323 $ 1,189 $ 1,005
===== ===== ======= ====== ======
</TABLE>
NOTE 3. NOTES PAYABLE -- RECOURSE
Notes payable for which the lender has recourse against the Company are
secured by guarantees of shareholders and for lines of credit borrowings,
underlying pledged leases, and are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Payable to bank drawn on a $15 million credit line, interest
payable monthly at 2.0% above the 30 day LIBOR rate, (7.5% at
December 31, 1996), due May 1997............................. $4,551 $14,996 $ 2,954
Payable to bank drawn on a $15 million credit line (reduced to
$10 million in February 1997), interest payable monthly at
the annual Eurodollar rate, (7.65% to 7.9% at December 31,
1996), due October 1997...................................... 2,772 15,000 6,905
Payable to bank drawn on a $7.5 million credit line, interest
payable monthly at 2.0% above LIBOR (7.5% at December 31,
1996), due July 1997......................................... 1,510 1,526 1,253
Payable to affiliate, interest payable monthly at 2.0% above
LIBOR, due May and July 1997................................. -- 750 1,650
Acquisition notes payable, interest at 8%, $750,000 due October
1998 with remaining principal and interest due quarterly to
2007, net of imputed interest discount of $255,000........... -- -- 4,750
Other.......................................................... 147
------ ------- -------
Total Notes Payable -- Recourse...................... $8,833 $32,272 $17,659
====== ======= =======
</TABLE>
The payable to affiliate is pursuant to a borrowing arrangement whereby the
Company obtains working capital funds on the same terms as the related party
borrows from a financial institution. The related party's debt is guaranteed by
the related party's shareholders, which includes certain of the Company's
executive officers and owners and by each of the Companies and Affiliates,
except LLC IV.
In addition to the above, the Company has a $10 million line of credit
available to October 1997 providing for borrowings bearing interest at the
higher of the Bank's prime rate or 1.75% above LIBOR. In total, at December 31,
1996, the Company has approximately $16 million of unused line-of-credit
availability. The Company's lease receivables, except for leases pledged as SPE
collateral, are pledged as collateral for the line-of-credit borrowings. Terms
of certain credit agreements require, among other things, that the Company
maintain certain financial ratios and net worth, as defined. The Company is in
compliance with these
F-10
<PAGE> 66
T&W FINANCIAL CORPORATION AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
restrictive covenants at December 31, 1996. The borrowings provide for principal
repayments that are generally payable as lease receivable payments are received.
At December 31, 1996, future annual maturities of notes payable -- recourse
principal payments are estimated as follows (in thousands):
<TABLE>
<S> <C>
1997............................................... $10,137
1998............................................... 8,404
1999............................................... 6,532
2000............................................... 4,025
2001 and thereafter................................ 3,174
-------
$32,272
=======
</TABLE>
Information regarding recourse borrowings is summarized as follows (dollars
in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Average balance............................... $ 3,828 $13,412 $14,847
Average interest rate......................... 7.4% 8.7% 8.4%
Maximum month-end balance..................... $11,481 $26,527 $32,272
</TABLE>
NOTE 4. NOTES PAYABLE -- NON-RECOURSE
During 1994, Corp III entered into a revolving asset purchase facility and
issued $30 million of non-recourse debt as part of a multi-bank asset-backed
commercial paper program. The facility was purchased by a corporate entity that
issues commercial paper in the public market (the "Purchaser") and the interest
rate on this borrowing was the Purchaser's commercial paper rate plus a program
fee. During 1995, the remaining portion of Corp III borrowings, approximately
$28.5 million, were paid in full pursuant to an assignment of leases transaction
in which LLC IV acquired the leases and a security interest in the underlying
assets.
During 1995, LLC IV entered into a $70 million revolving asset purchase
facility and issued debt as part of an asset-backed financing conduit program.
This facility was increased to $90 million during 1996. The facility was
purchased by an entity that issues commercial paper (the "Purchaser"). The
interest rate on the $53.3 million initial tranche of borrowings, which are due
in 2002, is approximately 6.5%. The interest rate on additional borrowings is
based upon the 30-day LIBOR rates. At December 31, 1996 and June 30, 1997,
approximately $61 million and $4 million (unaudited) of variable rate borrowings
were outstanding. At December 31, 1995 and 1996, approximately $64 million and
$90 million, respectively, of borrowings were outstanding on this facility and
the average interest rate approximated 6.5% and 6.0%, respectively. At June 30,
1997, approximately $81 million (unaudited) of borrowings were outstanding on
the facility and the average interest rate approximated 6.5%. Borrowings are
generally payable as lease receivable payments are received. LLC IV entered into
an interest rate swap agreement whereby the floating rate interest risk exposure
on the facility is borne by T&W Financial Corporation and not by LLC IV.
Private placement fees, legal, printing and other expenses associated with
the issuance of lease-backed notes are being amortized over the life of the
notes to produce a constant periodic rate of interest. Amortization expense,
which is included in interest expense, approximated $227,000, $373,000 and
$215,000 for the years ended December 31, 1994, 1995 and 1996, respectively, and
$113,000 (unaudited) for the six months ended June 30, 1997. Accumulated
amortization approximated $238,000 and $373,000 at December 31, 1995 and 1996,
respectively.
F-11
<PAGE> 67
T&W FINANCIAL CORPORATION AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1996, future annual maturities of notes payable
non-recourse are estimated as follows (in thousands):
<TABLE>
<S> <C>
1997............................................... $33,993
1998............................................... 24,095
1999............................................... 15,547
2000............................................... 16,034
2001 and thereafter................................ 306
-------
$89,975
=======
</TABLE>
Information regarding non-recourse borrowings is summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Average balance............................... $32,634 $49,778 $80,080
Average interest rate......................... 7.1% 6.7% 6.5%
Maximum month-end balance..................... $36,245 $67,686 $89,989
</TABLE>
Cash paid by the Company for interest (related to both recourse and
non-recourse debt) approximated $2.3 million, $4.1 million and $6.2 million in
1994, 1995 and 1996, respectively.
NOTE 5. RELATED PARTY TRANSACTIONS
The principal shareholder of the Company was a major shareholder of a bank.
The Company had deposits in accounts with this bank of approximately $600,000
and $870,000 at December 31, 1995 and 1996, respectively.
The Company has lease receivables from companies owned by its principal
shareholders; the Company's net investment in such lease receivables
approximates $2.6 million at December 31, 1996. Additionally, the Company leases
property and equipment from it's principal shareholder under short-term
operating leases, rent expense for which approximated $270,000, $333,000 and
$60,000 in 1994, 1995 and 1996, respectively.
During 1996, the Company distributed to its shareholders certain non-cash
assets and investments having a net book value of approximately $960,000, such
net book value considered by the Company's Board of Directors to approximate
fair value at the distribution date. During 1994 and 1995, the Company
shareholders made capital contributions to the Company (primarily non-cash) of
approximately $208,000 and $342,000, respectively.
Commencing in July 1996, the Company receives certain management and lease
sourcing services from a related party owned and operated by the Company's
shareholders. During the year ended December 31, 1996 and during the six months
ended June 30, 1997 (unaudited), the Company paid fees of $600,000 to this
related party. As described in Note 3, commencing in 1996, the Company has a
line of credit borrowing arrangement with this related party.
NOTE 6. STOCK OPTIONS AND EMPLOYEE BENEFIT PLAN
In July 1996, the Company granted fully vested, ten-year option rights to
certain key employees for the purchase of 6% of the Company's shareholders'
equity at an exercise price which was determined by the Company's Board of
Directors to be not less than the fair value of such ownership interest at the
date of grant. Inasmuch as all option rights issued to employees have an
exercise price not less than the fair market value of the Company's underlying
securities on the date of grant, in accordance with accounting for such options
utilizing the intrinsic value method there is no related compensation expense
recorded in the Company's financial statements. Had compensation cost for
stock-based compensation been determined based on the fair value of the options
at the grant dates consistent with the method prescribed by SFAS 123, the
Company's net income would not have differed materially. See Note 9 -- Events
(Unaudited) Subsequent to Date of Report of Independent Accountants for
information regarding the subsequent exercise of options.
F-12
<PAGE> 68
T&W FINANCIAL CORPORATION AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Company maintains a qualified retirement plan pursuant to Section
401(k) of the Internal Revenue Code with a salary deferral feature and matching
component covering all eligible employees. Company contributions are
discretionary, as determined annually by the Board of Directors, and
approximated $53,000, $59,000 and $67,000 for the years ended December 31, 1994,
1995 and 1996, respectively.
NOTE 7. CONTINGENCIES
Subsequent to December 31, 1996, the Company filed a complaint with the
Pierce County Superior Court of Washington against several parties, asserting
claims for breach of contract, fraud and negligence in a lease transaction. The
Company is alleging joint and several liability and is seeking approximately
$940,000 plus interest and legal fees. The receivable relating to this matter is
included in other assets at December 31, 1996 and June 30, 1997.
In addition to the litigation noted above, the Company is from time to time
involved in various claims and legal proceedings of a nature considered normal
to its business. Although the ultimate disposition of legal proceedings cannot
be predicted with certainty, it is the present opinion of the Company's
management that the outcome of the above noted litigation and other pending
legal proceedings will not have a material adverse effect on the Company's
financial position, results of operations or liquidity.
NOTE 8. SUBSEQUENT EVENTS
In February 1997, the Company entered into a three-year, revolving credit
$100 million commercial paper securitization facility with a conduit entity, and
in connection therewith a SPE was formed to issue lease-backed certificates.
Pursuant to terms of the facility, the Company sells and transfers pools of
leases to the SPE which then sells and transfers rights and title to the leased
equipment to a trust in the form of certificates, and the Company retains
servicing rights for which it receives monthly servicing fee income. These
certificates in turn are sold to a third party special purpose entity, except
for a portion which is not received in cash. In February 1997, the Company
received proceeds from this facility of approximately $10 million and accounted
for such transaction for financial reporting purposes as a sale of the lease
interests. See Note 9 -- Events (Unaudited) Subsequent to Date of Report of
Independent Accountants for information regarding additional sales to this
facility.
NOTE 9. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT
ACCOUNTANTS
The Restructuring. In connection with the Company's initial public
offering, the Company has entered into certain agreements with its existing
shareholders pursuant to which there will be a restructuring of the Company's
corporate organization and ownership (the "Restructuring") to be effective
concurrently with the closing of the offering. Among other things, the
Restructuring will result in the transfer of substantially all of the Company's
and its affiliated entities' assets and liabilities to a newly formed limited
liability company to be owned 85% by the Company and 15% by a limited liability
company owned by the Company's senior management. Additionally, upon completion
of the Restructuring and initial public offering, the Company will no longer be
treated as pass-through entities for income tax purposes.
The accompanying unaudited June 30, 1997 pro forma combined balance sheet
information is presented on a basis giving effect to a 15% minority interest and
estimated deferred income tax liabilities, both of which will be determined and
recorded as of the effective date of the transaction and will decrease
shareholders' equity and increase minority interest and deferred tax
liabilities. Deferred income taxes to be recorded in connection with the
conversion of the Company to a tax paying entity relate to temporary differences
arising from accounting for leases as (i) direct financing for financial
reporting purposes and as "true leases" or operating leases for tax purposes,
and (ii) sale transactions for financial reporting purposes versus debt or
borrowing transactions for income tax purposes, both differences initially
resulting in a net deferral of income for income tax purposes.
F-13
<PAGE> 69
T&W FINANCIAL CORPORATION AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The accompanying unaudited pro forma combined statements of income
information is presented on a basis giving effect to establishment of a 15%
minority interest and conversion from an affiliated group of pass-through
entities to a taxable corporate entity, as if such transactions and events had
occurred as of the beginning of the periods presented. The pro forma tax
provision excludes the effect of recognizing the deferred tax liability upon
change in tax status, which will be reported as a component of the income tax
provision. Pro forma income per share is determined on a basis of 5.8 million
shares outstanding, the actual number of shares to be outstanding immediately
prior to the closing of the offering.
Business Combination -- On June 2, 1997, the Company acquired for
approximately $5.5 million, the operations of Commercial Capital, including
substantially all the assets and liabilities related to this equipment leasing
business located near Kansas City. The purchase price was comprised of 10% cash
and a promissory note payable for the remainder. The promissory note bears
interest at 8%, is guaranteed by the Company and the Company's shareholders, and
is due in equal annual installments, including interest, through 2007;
additionally, 15% of the promissory note is due on the one year anniversary date
of the effective date of the Company's initial public offering. The business
combination has been accounted for utilizing the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets acquired
and liabilities assumed based upon estimates of fair values. The estimated fair
value of assets acquired in the acquisition approximated $7.1 million, including
intangible assets of approximately $2.2 million, and liabilities assumed
approximated $1.6 million. Intangible assets recorded in purchase accounting are
amortized over their respective estimated lives, which range from 5 to 10 years.
The Company's operating results for 1996 and the six months ended June 30, 1997,
determined on a pro forma basis as if the business combination had occurred as
of the beginning of such periods, would not have differed materially from actual
operating results.
Exercise of Stock Option -- In July 1997, certain members of Company senior
management exercised in full all outstanding and fully vested stock options in
exchange for demand promissory notes having a combined total amount of
approximately $1.1 million. Pursuant to terms of the stock options, the Company
issued 295,800 shares at an exercise price of $3.93 per share. It is anticipated
that a sufficient number of shares will be sold in the Company's initial public
stock offering by the exercising option holders such that the net proceeds will
be paid to the Company in full repayment of the promissory notes.
Gain on Sale of Leases -- During the six months ended June 30, 1997 the
Company sold leases having a net investment of approximately $59.7 million
through the commercial paper securitization facility as described in Note 8.
Gain on sale of leases sold in securitization transactions, which totaled $3.4
million during the six months ended June 30, 1997, is recorded based on cash
received and the present value of the estimated future amounts to be received by
the Company in connection with such sales. The Company has the right to receive
any excess cash flows of the trust; such amount is included in the Company's
balance sheet as the securitization receivable. Cash flows to ultimately be
received are dependent upon the actual default rates and recoveries experienced
on the leases held by the trust. The securitization receivable is reduced by an
allowance which is estimated by the Company to be adequate to cover future
credit losses. Such allowance is based on estimates and qualitative evaluation,
and ultimate losses will vary from current estimates. To the extent that events
occur which cause such cash flows to be materially below those estimated, the
Company would reduce the carrying amount of the securitization receivable and
record a charge to earnings. Such charge would be recorded in the period in
which the event occurred or became known to management.
Line of Credit -- The Company recently entered into a commitment letter
with CoreStates Bank, N.A. for a secured line of credit in the amount of $50
million, which will replace the existing line of credit with this bank. The
facility would be utilized for the financing of eligible leases and loans at an
interest rate of LIBOR plus 1.5%. Such credit facility would be secured by the
leases financed with funds from such credit facility and by a guarantee from
Funding Company VI and senior management, and would limit the amount of funds
which may be advanced to the Company to a percentage of the discounted value of
such leases. Additionally, the Company has renewed or is in the process of
negotiating extensions for its other bank lines of credit.
F-14
<PAGE> 70
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ANY
UNDERWRITER OR THE COMPANY OR ANY SELLING SHAREHOLDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE COMMON
STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Restructuring..................... 17
Use of Proceeds....................... 18
Dividend Policy....................... 18
Capitalization........................ 19
Dilution.............................. 20
Selected Combined Financial and
Operating Data...................... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 31
Management............................ 42
Certain Transactions.................. 46
Principal and Selling Shareholders.... 49
Description of Capital Stock.......... 50
Shares Eligible for Future Sale....... 51
Underwriting.......................... 53
Legal Matters......................... 54
Experts............................... 54
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
2,560,000 SHARES
LOGO - T&W FINANCIAL CORPORATION
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
OPPENHEIMER & CO., INC.
, 1997
======================================================
<PAGE> 71
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
<TABLE>
<S> <C>
Registration Fee Securities and Exchange Commission............................. $ 14,274
NASD Filing Fee................................................................. $ 5,210
Nasdaq National Market Listing Fee.............................................. $ 37,535
Accountant's Fees and Expenses.................................................. $ 75,000
Blue Sky Filing and Counsel Fees and Expenses................................... $ 10,000
Printing and Engraving Expenses................................................. $150,000
Legal Fees and Expenses......................................................... $275,000
Transfer Agent and Registration Fees............................................ $ 20,000
Directors' and Officers' Liability Insurance.................................... $100,000
Miscellaneous Expenses.......................................................... $ 12,981
TOTAL......................................................................... $700,000
========
</TABLE>
- ---------------
* All expenses other than the Securities and Exchange Commission Registration
Fee, the NASD Filing Fee and the Nasdaq National Market Fee are estimated. All
expenses are payable by the Company.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article 6 of the Registrant's Articles of Incorporation
(Exhibit 3.1 hereto) and Article VIII of the Registrant's Bylaws (Exhibit 3.2
hereto) provide for mandatory indemnification of the Registrant's directors,
officers, employees and agents to the maximum extent permitted by law. The
directors and officers of the Registrant also may be indemnified against
liability they may incur for serving in that capacity pursuant to a liability
insurance policy maintained by the Company for such purpose.
Section 23B.08.320 of the Washington Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
shareholders for monetary damages for acts or omissions as a director, except in
certain circumstances involving intentional misconduct, self-dealing or illegal
corporate loans or distributions, or any transaction from which the director
personally receives a benefit in money, property or services to which the
director is not legally entitled. Article 5 of the Registrant's Articles of
Incorporation contains provisions implementing, to the fullest extent permitted
by Washington law, such limitations on a director's liability to the Registrant
and its shareholders.
Reference is made to the Registrant's Articles of Incorporation, filed as
Exhibit 3.1 to this Registration Statement, and the Registrant's Bylaws, filed
as Exhibit 3.2 to this Registration Statement.
Reference is also made to the form of Underwriting Agreement filed as
Exhibit 1.1 to this Registration Statement for certain provisions regarding the
indemnification of officers and directors of the Registrant by the Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since August 1, 1994, the Registrant has issued the following unregistered
securities:
An aggregate of 295,800 shares of Common Stock were issued in July
1997 to Paul B. Luke and Kenneth W. McCarthy, Jr. upon exercise of stock
options at an exercise price of $3.93 per share. The
II-1
<PAGE> 72
issuances of Common Stock to Messrs. Luke and McCarthy were made in
reliance upon the exemption from registration set forth in Section 4(2) of
the Securities Act relating to sales by an issuer not involving a public
offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Form of Restructuring Agreement dated August , 1997 by and among T&W Financial
Corporation, T&W Leasing, Inc., T&W Funding Company I, L.L.C., T&W Funding Company
IV, L.L.C., T&W Funding Company V, L.L.C., T&W Funding Company VI, L.L.C., T&W
Finance Corp. II, T&W Finance Corp. III, Michael A. Price, Trustee of the Price
Grantor Retained Annuity Trusts, Michael A. Price, individually, Thomas W. Price,
P.L.M. Consulting Group, L.L.C., Kenneth W. McCarthy, Jr. and Paul B. Luke.
3.1 Articles of Incorporation of T&W Financial Corporation.
3.2 Bylaws of T&W Financial Corporation.
4.1* Specimen Stock Certificate.
5.1 Opinion of Graham & James LLP.
10.1 Trust and Security Agreement dated February 1, 1997, by and among T&W Funding
Company I, L.L.C., T&W Financial Corporation and Norwest Bank Minnesota, National
Association.
10.2 Contribution Agreement dated February 1, 1997, by and among T&W Financial
Corporation, T&W Funding Company V, L.L.C., T&W Funding Company VI, L.L.C. and T&W
Funding Company I, L.L.C.
10.3 Servicing Agreement dated February 1, 1997, by and among T&W Funding Company I,
L.L.C., T&W Financial Corporation and Norwest Bank Minnesota, National
Association.
10.4 Certificate Purchase Agreement dated February 7, 1997, by and among T&W Financial
Corporation, T&W Funding Company I, L.L.C. and Centre Square Funding Corporation.
10.5 Assignment and Assumption Agreement dated February 7, 1997, by and between T&W
Funding Company V, L.L.C. and T&W Funding Company I, L.L.C.
10.6 Assignment and Assumption Agreement dated February 7, 1997, by and between T&W
Funding Company VI, L.L.C. and T&W Funding Company I, L.L.C.
10.7 Insurance Agreement dated February 1, 1997, by and among MBIA Insurance
Corporation, T&W Financial Corporation, T&W Funding Company I, L.L.C., K&P
Financial Corp. I and Norwest Bank Minnesota, National Association.
10.8 Certificate Guaranty Insurance Policy, issued by MBIA Insurance Corporation, dated
February 7, 1997.
10.9 Commitment to Issue a Certificate Guaranty Insurance Policy, issued by MBIA
Insurance Corporation, dated February 5, 1997.
10.10 Custodian Agreement dated February 4, 1997, by and among T&W Financial
Corporation, T&W Funding Company VI, L.L.C., T&W Funding Company I, L.L.C.,
Seafirst Bank N.A., CoreStates Bank, N.A., and Norwest Bank Minnesota, National
Association.
10.11 Interest Rate Hedge Assignment dated February 7, 1997, by and between T&W
Financial Corporation and CoreStates Bank, N.A.
10.12 Master Agreement dated February 4, 1997 by and between T&W Funding Company IV,
L.L.C. and CoreStates Bank, N.A.
10.13 Indenture dated July 1, 1995, by and among T&W Funding Company IV, L.L.C., T&W
Leasing, Inc., and Norwest Bank Minnesota, National Association.
</TABLE>
II-2
<PAGE> 73
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S>
10.14 Second Supplemental Indenture dated April 30, 1996, by and among T&W Funding
Company IV, L.L.C., T&W Financial Corporation and Norwest Bank Minnesota, National
Association.
10.15 Contribution Agreement dated July 1, 1995, by and among T&W Leasing, Inc., T&W
Finance Corp. III, T&W Finance Corp. VI, T&W Finance Company V, L.L.C. and T&W
Funding Company IV, L.L.C.
10.16 First Amendment to Contribution Agreement dated April 30, 1996, by and among T&W
Funding Company IV, L.L.C., T&W Financial Corporation, T&W Finance Corp. III, T&W
Finance Corp. IV and T&W Finance Company V, L.L.C.
10.17 Servicing Agreement dated July 1, 1995, by and among T&W Funding Company IV,
L.L.C., T&W Leasing, Inc. and Norwest Bank Minnesota, National Association.
10.18 Note Purchase Agreement dated July 28, 1995, by and among T&W Funding Company IV,
L.L.C., T&W Leasing, Inc., and TLC Investment Trust.
10.19 Assignment and Assumption Agreement dated July 28, 1995, by and between T&W
Finance Corp. III and T&W Funding Company IV, L.L.C.
10.20 Assignment and Assumption Agreement dated July 28, 1995, by and between T&W
Finance Corp. IV and T&W Funding Company IV, L.L.C.
10.21 Assignment and Assumption Agreement dated July 28, 1995, by and between T&W
Finance Company V, L.L.C. and T&W Funding Company IV, L.L.C.
10.22 Insurance Agreement dated July 1, 1995, by and among MBIA Insurance Corporation,
T&W Leasing, Inc., T&W Funding Company IV, L.L.C., K&P Finance Corp. and Norwest
Bank Minnesota, National Association.
10.23 Note Insurance Policy, issued by MBIA Insurance Corporation, dated July 28, 1995.
10.24 Master Agreement dated August 1, 1995, by and between T&W Funding Company IV,
L.L.C. and Merrill Lynch Capital Services, Inc.
10.25 Asset Purchase Agreement dated June 2, 1997, by and among T&W Funding Company VI,
L.L.C., Commercial Capital Corporation, James R. Neese, Larry E. Rice, Trustee and
Larry E. Rice, Individually.
10.26 Form of Promissory Note dated June 2, 1997.
10.27 Unconditional Guaranty dated June 2, 1997, by and among Michael A. Price,
Katherine M. Price, Kenneth W. McCarthy, Jr., Carol L. McCarthy, Paul B. Luke and
T&W Financial Corporation in favor of Commercial Capital Corporation, James R.
Neese and Larry E. Rice.
10.28 Business Loan Agreement dated December 10, 1996, by and between T&W Funding
Company VI, L.L.C. and U.S. Bank of Washington, National Association.
10.29 Alternative Rate Options Promissory Note dated December 10, 1996, by and between
T&W Funding Company VI, L.L.C. and U.S. Bank of Washington, National Association.
10.30 Business Loan Agreement dated November 22, 1996, by and between T&W Funding
Company VI, L.L.C. and Bank of America N.W., dba Seafirst Bank.
10.31 Collateral Line, Loan and Security Agreement dated November 22, 1996, by and
between T&W Funding Company VI, L.L.C. and Bank of America NW, N.A., dba Seafirst
Bank.
10.32 Business Loan Agreement dated March 29, 1996, by and between T&W Funding Company
VI, L.L.C. and Key Bank of Washington.
10.33 Loan Modification and/or Extension Agreement dated July 31, 1996, by and between
T&W Funding Company VI, L.L.C. and Key Bank of Washington.
10.34 Amended and Restated Master Loan and Security Agreement dated October 30, 1996, by
and between T&W Funding Company VI, L.L.C. and CoreStates Bank, N.A.
</TABLE>
II-3
<PAGE> 74
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
10.35 Commercial Lease Agreement dated December 31, 1991, by and between T&W Financial
Corporation (as lessee) and Michael A. Price (as lessor).
10.36 Amended and Restated Commercial Lease Agreement dated January 1, 1997, by and
between T&W Financial Corporation (as lessee) and Michael A. Price (as lessor).
10.37 Commercial and Industrial Lease Agreement dated November 1, 1996, by and among
James R. Neese, Terry Neese (as lessors) and Commercial Capital Corporation (as
lessee) (Suite 100 facility).
10.38 Commercial and Industrial Lease Agreement dated November 1, 1996, by and among
James R. Neese, Terry Neese (as lessors) and Commercial Capital Corporation (as
lessee) (Suite 200 facility).
10.39 Stock Option Letter Agreement dated June 30, 1996, by and between T&W Financial
Corporation and Paul B. Luke.
10.40 Addendum to Stock Option Letter Agreement dated August 15, 1997.
10.41 Stock Option Letter Agreement dated June 30, 1996, by and between T&W Financial
Corporation and Kenneth W. McCarthy, Jr.
10.42 Addendum to Stock Option Letter Agreement dated August 15, 1997.
10.43 Promissory Note dated August 19, 1997 by and between T&W Financial Corporation and
Paul B. Luke.
10.44 Promissory Note dated August 18, 1997 by and between T&W Financial Corporation and
Kenneth W. McCarthy, Jr.
10.45 Form of T&W Financial Services Company L.L.C. Operating Agreement.
10.46 T&W Financial Corporation 1997 Stock Option Plan.
10.47 T&W Financial Corporation 1997 Director Stock Grant Plan.
10.48 T&W Financial Corporation 1997 Employee Stock Purchase Plan.
10.49 Employment and Noncompetition Agreement dated June 2, 1997, by and between T&W
Financial Corporation and James R. Neese.
10.50 Employment and Noncompetition Agreement dated June 2, 1997, by and between T&W
Financial Corporation and Larry E. Rice.
10.51 Form of Management Agreement dated August , 1997, by and between T&W Financial
Services Company L.L.C. and P.L.M. Consulting Group, L.L.C.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Graham & James LLP (included in its opinion filed as Exhibit 5.1
hereto).
23.2 Consent of BDO Seidman, LLP.
24.1 Power of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In
II-4
<PAGE> 75
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant- in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of Seattle, State of
Washington, on August 19, 1997.
T&W FINANCIAL CORPORATION
By /s/ MICHAEL A. PRICE
------------------------------------
Michael A. Price, Chief Executive
Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby constitutes and
appoints Michael A. Price and Kenneth W. McCarthy, Jr., and each of them
severally, as his true and lawful attorney-in-fact, with full power of
substitution, to execute in the name and on behalf of such person, individually
and in each capacity stated below, and to file, any and all amendments to this
Registration Statement, including any and all post-effective amendments, and any
related registration statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below:
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
--------- -------------- ----
<S> <C> <C>
/s/ MICHAEL A. PRICE Chief Executive Officer, August 19, 1997
- --------------------------------------------- (Principal Executive Officer)
Michael A. Price and Director
/s/ THOMAS W. PRICE President and Director August 19, 1997
- ---------------------------------------------
Thomas W. Price
/s/ PAUL B. LUKE Senior Vice President, August 19, 1997
- --------------------------------------------- Treasurer and Secretary
Paul B. Luke (Principal Financial and
Accounting Officer) and
Director
/s/ KENNETH W. MCCARTHY, JR. Senior Vice President and August 19, 1997
- --------------------------------------------- Director
Kenneth W. McCarthy, Jr.
/s/ KENNETH L. HATCH Director August 7, 1997
- ---------------------------------------------
Kenneth L. Hatch
/s/ DAVID N. SYFERD Director August 7, 1997
- ---------------------------------------------
David N. Syferd
</TABLE>
II-6
<PAGE> 1
EXHIBIT 1.1
GDC DRAFT Dated August 20, 1997
2,944,000 Shares
T&W FINANCIAL CORPORATION
Common Stock
UNDERWRITING AGREEMENT
October ___, 1997
Oppenheimer & Co., Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281
On behalf of the Several Underwriters named on Schedule II attached hereto.
Ladies and Gentlemen:
T&W Financial Corporation, a Washington corporation (the "Company"), and
the persons named on Schedule I to this Agreement (individually, a "Selling
Shareholder," and collectively, the "Selling Shareholders") propose to sell to
you and the other underwriters named on Schedule II to this Agreement (the
"Underwriters"), for whom you are acting as Representative, an aggregate of
2,560,000 shares (the "Firm Shares") of the Company's Common Stock, no par value
per share (the "Common Stock"). In addition, the Company proposes to grant to
the Underwriters an option to purchase up to an additional 384,000 shares (the
"Option Shares") of Common Stock from it for the purpose of covering
over-allotments in connection with the sale of the Firm Shares. The Firm Shares
and the Option Shares are together called the "Shares."
1. Sale and Purchase of the Shares. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company and each Selling Shareholder, severally and
not jointly, agrees to sell to the Underwriters the number of Firm Shares set
forth opposite the name of the Company and such Selling Shareholder on Schedule
I to this Agreement, and each of the Underwriters, severally and not jointly,
agrees to purchase from the Company and the Selling Shareholders, at $_____ per
share (the "Initial Price"), the number of Firm Shares set forth opposite the
name of such Underwriter on Schedule II to this Agreement.
<PAGE> 2
(b) The Company grants to the several Underwriters an option
to purchase, severally and not jointly, all or any part of the Option Shares at
the Initial Price. The number of Option Shares to be purchased by each
Underwriter shall be the same percentage (adjusted by the Representative to
eliminate fractions) of the total number of Option Shares to be purchased by the
Underwriters as such Underwriter is purchasing of the Firm Shares. Such option
may be exercised only to cover over-allotments in the sales of the Firm Shares
by the Underwriters and may be exercised, in whole or in part, at any time
within 30 days after the date of this Agreement upon written or telegraphic
notice, or verbal or telephonic notice confirmed by written or telegraphic
notice, by the Representative to the Company no later than 12:00 noon, New York
City time, at least two business days before the Option Shares Closing Date (as
defined below), setting forth the number of Option Shares to be purchased and
the time and date (if other than the Firm Shares Closing Date (as defined
below)) of such purchase.
2. Delivery and Payment. Delivery by the Company and the Selling
Shareholders of the Firm Shares to the Representative for the respective
accounts of the Underwriters, and payment of the purchase price by wire
transfer, certified or official bank check or checks payable in same day funds
to the Company and the Selling Shareholders, shall take place at the offices of
Oppenheimer & Co., Inc., at Oppenheimer Tower, World Financial Center, New York,
New York 10281, at 10:00 a.m., New York City time (or such other place as may be
agreed upon by the Company and the Representative), on the third (or, if the
Firm Shares are priced, as contemplated by Rule 15c6-1(c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after 4:30 p.m.,
Washington, D.C. time, the fourth) business day following the date of this
Agreement, or at such time on such other date, not later than 10 business days
after the date of this Agreement, as shall be agreed upon by the Company and the
Representative (such time and date of delivery and payment are called the "Firm
Shares Closing Date").
In the event the option with respect to the Option Shares is exercised,
delivery by the Company of the Option Shares to the Representative for the
respective accounts of the Underwriters, and payment of the purchase price by
wire transfer, certified or official bank check or checks payable in same day
funds to the Company shall take place at the offices of Oppenheimer & Co., Inc.
specified above at the time and on the date (which may be the same date as, but
in no event shall be earlier than, the Firm Shares Closing Date) specified in
the notice referred to in Section 1(b) (such time and date of delivery and
payment are called the "Option Shares Closing Date"). The Firm Shares Closing
Date and the Option Shares Closing Date are called, individually, a "Closing
Date," and together, the "Closing Dates."
Certificates evidencing the Shares shall be registered in such names and
shall be in such denominations as the Representative shall request at least two
full business days before the Firm Shares Closing Date or, in the case of Option
Shares, on the day of notice of exercise of the option as described in Section
l(b) and shall be made available to the Representative for checking and
packaging, at such place as is designated by the Representative, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
2
<PAGE> 3
3. Registration Statement and Prospectus; Public Offering. The
Company has prepared in conformity with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the published rules and
regulations thereunder (the "Rules") adopted by the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No.
333-_____), including a preliminary prospectus relating to the Shares, and has
filed with the Commission the Registration Statement (as hereinafter defined)
and such amendments thereof as may have been required to the date of this
Agreement. Copies of such Registration Statement (including all amendments
thereof) and of the related preliminary prospectus have heretofore been
delivered by the Company to you. The term "preliminary prospectus" means any
preliminary prospectus (as described in Rule 430 of the Rules) included at any
time as a part of the Registration Statement. The Registration Statement, as
amended at the time and on the date it becomes effective (the "Effective Date"),
including all exhibits and information, if any, deemed to be part of the
Registration Statement pursuant to Rule 424(b) and Rule 430A of the Rules and
any Registration Statement filed pursuant to Rule 462(b) of the Rules, is called
the "Registration Statement." The term "Prospectus" means the prospectus in the
form first used to confirm sales of the Shares (whether such prospectus was
included in the Registration Statement at the time of effectiveness or was
subsequently filed with the Commission pursuant to Rule 424(b) of the Rules).
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date and the date of this Agreement as the Representative
deems advisable. The Company hereby confirms that the Underwriters and dealers
have been authorized to distribute or cause to be distributed each preliminary
prospectus and are authorized to distribute the Prospectus (as from time to time
amended or supplemented if the Company furnishes amendments or supplements
thereto to the Underwriters).
4. Representations and Warranties of the Company. The Company and
T&W Financial Services Company L.L.C. ("LLC"), jointly and severally, represent
and warrant to each Underwriter as follows:
(a) On the Effective Date the Registration Statement
complied, and on the date of the Prospectus, on the date any post-effective
amendment to the Registration Statement shall become effective, on the date any
supplement or amendment to the Prospectus is filed with the Commission and on
each Closing Date, the Registration Statement and the Prospectus (and any
amendment thereof or supplement thereto) will comply, in all material respects,
with the applicable provisions of the Securities Act and the Rules and the
Exchange Act, and the rules and regulations of the Commission thereunder; the
Registration Statement did not, as of the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or
3
<PAGE> 4
necessary in order to make the statements therein not misleading; and on the
other dates referred to above neither the Registration Statement nor the
Prospectus, nor any amendment thereof or supplement thereto, will contain any
untrue statement of a material fact or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. When any related preliminary prospectus was first filed
with the Commission (whether filed as part of the Registration Statement or any
amendment thereto or pursuant to Rule 424(a) of the Rules) and when any
amendment thereof or supplement thereto was first filed with the Commission,
such preliminary prospectus as amended or supplemented complied in all material
respects with the applicable provisions of the Securities Act and the Rules and
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. Notwithstanding the foregoing, neither the
Company nor the LLC makes any representation or warranty as to the last
paragraph on the cover page of the Prospectus, the legend with respect to
stabilization on the inside front cover page of the Prospectus and the
statements contained under the caption "Underwriting" in the Prospectus. The
Company and the LLC acknowledge that the statements referred to in the previous
sentence constitute the only information furnished in writing by the
Representative on behalf of the several Underwriters specifically for inclusion
in the Registration Statement, any preliminary prospectus or the Prospectus.
(b) All contracts and other documents required to be filed
as exhibits to the Registration Statement have been filed with the Commission as
exhibits to the Registration Statement.
(c) The combined financial statements of the Company and its
affiliates (including all notes thereto) included in the Registration Statement
and Prospectus present fairly the financial position, the results of operations
and cash flows and the shareholder' equity and the other information purported
to be shown therein of the Company at the respective dates and for the
respective periods to which they apply. Such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved and all adjustments
necessary for a fair presentation of the results for such periods have been
made.
(d) BDO Seidman, LLP, whose reports are filed with the
Commission as a part of the Registration Statement, are and, during the periods
covered by their reports, were independent public accountants as required by the
Securities Act and the Rules.
(e) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Washington. The Company
has no subsidiary or subsidiaries and does not control, directly or indirectly,
any corporation, limited liability company, partnership, joint venture,
association or other business organization other than those listed on Exhibit A
hereto (individually, a "Subsidiary," and collectively, the "Subsidiaries").
Each Subsidiary has been duly incorporated or formed and is validly existing as
a corporation or limited liability company, as the case may be, in good standing
under the laws of its jurisdiction of incorporation or formation. The Company
and each Subsidiary is duly qualified and in good standing as a foreign
corporation or limited liability company, as the case may be, in each
jurisdiction in which the character or location of its assets or properties
(owned, leased or licensed) or the nature of its business makes such
qualification necessary, except for such jurisdictions where the failure to so
qualify would not have a material adverse effect on the
4
<PAGE> 5
assets or properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole.
Except as disclosed in the Registration Statement and the Prospectus, neither
the Company nor any Subsidiary owns, leases or licenses any asset or property or
conducts any business outside the United States of America and Canada. The
Company and each Subsidiary has all requisite corporate power and authority, and
all necessary authorizations, approvals, consents, orders, licenses,
certificates and permits of and from all governmental or regulatory bodies or
any other person or entity, to own, lease and license its assets and properties
and conduct its businesses as now being conducted and as described in the
Registration Statement and the Prospectus, except for such authorizations,
approvals, consents, orders, material licenses, certificates and permits the
failure to so obtain would not have a material adverse effect upon the assets or
properties, business, results of operations, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a whole; no such
authorization, approval, consent, order, license, certificate or permit contains
a materially burdensome restriction other than as disclosed in the Registration
Statement and the Prospectus; and each of the Company and the LLC has all such
corporate power and authority, and such authorizations, approvals, consents,
orders, licenses, certificates and permits to enter into, deliver and perform
this Agreement and, in the case of the Company, to issue and sell the Shares
(except as may be required under the Securities Act and state and foreign Blue
Sky laws).
(f) The Company and each Subsidiary owns or possesses
adequate and enforceable rights to use all trademarks, trademark applications,
trade names, service marks, copyrights, copyright applications, licenses,
know-how and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as described in the
Registration Statement and the Prospectus. Neither the Company nor any
Subsidiary has received any notice or is aware of any infringement of or
conflict with asserted rights of others with respect to any Intangibles which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect upon the assets or properties,
business, results of operations, prospects or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole.
(g) The Company and each Subsidiary has good title to each
of the items of personal property which are reflected in the financial
statements referred to in Section 4(c) or are referred to in the Registration
Statement and the Prospectus as being owned by it and valid and enforceable
leasehold interests in each of the items of real and personal property which are
referred to in the Registration Statement and the Prospectus as being leased by
it, in each case free and clear of all liens, encumbrances, claims, security
interests and defects, other than those described in the Registration Statement
and the Prospectus and those which do not and will not have a material adverse
effect upon the assets or properties, business, results of operations, prospects
or condition (financial or otherwise) of the Company and the Subsidiaries, taken
as a whole.
(h) Except as disclosed in the Registration Statement and
the Prospectus, there is no litigation or governmental or other proceeding or
investigation before any court or before or by any public body or board pending
or, to the Company's or the LLC's
5
<PAGE> 6
best knowledge, threatened (and neither the Company nor the LLC knows of no
basis therefor) against, or involving the assets, properties or business of, the
Company or any Subsidiary which would materially adversely affect the value or
the operation of any such assets or properties or the business, results of
operations, prospects or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole.
(i) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
described therein, (i) there has not been any material adverse change in the
assets or properties, business, results of operations, prospects or condition
(financial or otherwise), of the Company and the Subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of business;
(ii) neither the Company nor any Subsidiary has sustained any material loss or
interference with its assets, businesses or properties (whether owned or leased)
from fire, explosion, earthquake, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree; and (iii) and since the date of the
latest balance sheet included in the Registration Statement and the Prospectus,
except as reflected therein, neither the Company nor any Subsidiary has (A)
issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, except such liabilities or obligations incurred
in the ordinary course of business, (B) entered into any material transaction
not in the ordinary course of business or (C) declared or paid any dividend or
made any distribution on any shares of its stock or redeemed, purchased or
otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares
of its stock.
(j) There is no document or contract of a character required
to be described in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required. Each agreement listed in the Exhibits to the Registration Statement is
in full force and effect and is valid and enforceable by and against the Company
or the applicable Subsidiary in accordance with its terms, assuming the due
authorization, execution and delivery thereof by each of the other parties
thereto. Neither the Company, any Subsidiary nor, to the best of the Company's
or the LLC's knowledge, any other party is in default in the observance or
performance of any term or obligation to be performed by it under any such
agreement, and no event has occurred which with notice or lapse of time or both
would constitute such a default, in any such case which default or event would
have a material adverse effect on the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole. No default exists, and no event has occurred
which with notice or lapse of time or both would constitute a default, in the
due performance and observance of any term, covenant or condition, by the
Company or any Subsidiary of any other agreement or instrument to which the
Company or such Subsidiary is a party or by which it or its properties or
business may be bound or affected which default or event would have a material
adverse effect on the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole.
(k) Neither the Company nor any Subsidiary is in violation
of any term or provision of its charter or bylaws or of any franchise, license,
permit, judgment,
6
<PAGE> 7
decree, order, statute, rule or regulation, where the consequences of such
violation would have a material adverse effect on the assets or properties,
business, results of operations, prospects or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole.
(l) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance and sale by the
Company of the Shares) will give rise to a right to terminate or accelerate the
due date of any payment due under, or conflict with or result in the breach of
any term or provision of, or constitute a default (or an event which with notice
or lapse of time or both would constitute a default) under, or require any
consent or waiver under, or result in the execution or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company or any
Subsidiary pursuant to the terms of, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any Subsidiary is a party,
or by which it or any of its properties or businesses is bound, or any
franchise, license, permit, judgment, decree, order, statute, rule or regulation
applicable to the Company or any Subsidiary, or violate any provision of the
charter or bylaws of the Company or any Subsidiary, except for such consents or
waivers which have already been obtained and are in full force and effect.
(m) The Company has an authorized and outstanding capital
stock as set forth under the caption "Capitalization" in the Prospectus. All of
the outstanding shares of Common Stock have been duly and validly issued and are
fully paid and nonassessable and none of them was issued in violation of any
preemptive or other similar right. The Shares, when issued and sold by the
Company pursuant to this Agreement will be duly and validly issued, fully paid
and nonassessable and none of them will be issued in violation of any preemptive
or other similar right. Except as disclosed in the Registration Statement and
the Prospectus, there is no outstanding option, warrant or other right calling
for the issuance of, and there is no commitment, plan or arrangement to issue,
any share of stock of the Company or any security convertible into, or
exercisable or exchangeable for, such stock. The Common Stock and the Shares
conform in all material respects to all statements in relation thereto contained
in the Registration Statement and the Prospectus.
(n) There are no persons with registration or other similar
rights to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the Securities Act. Each director
and executive officer of the Company has delivered to the Representative an
enforceable written agreement that each such person will not sell, offer to
sell, contract to sell, pledge or otherwise dispose of or transfer, directly or
indirectly, any shares of Common Stock, or any securities convertible into or
exchangeable for, or any rights to purchase or acquire, shares of Common Stock,
for a period of 180 days commencing on the date of the Prospectus without the
prior written consent of Oppenheimer & Co., Inc., other than the Firm Shares to
be sold by such person pursuant to this Agreement.
(o) All necessary action has been duly and validly taken by
the Company and the LLC to authorize the execution, delivery and performance of
this Agreement and, in the case of the Company, the issuance and sale of the
Shares by the Company. This
7
<PAGE> 8
Agreement has been duly and validly authorized, executed and delivered by the
Company and the LLC and constitutes the legal, valid and binding obligations of
the Company and the LLC enforceable against the Company and the LLC in
accordance with its terms, except (i) as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles and (ii) to the extent that rights to indemnity or
contribution under this Agreement may be limited by Federal and state securities
laws or the public policy underlying such laws.
(p) Neither the Company nor any Subsidiary is involved in
any labor dispute nor, to the knowledge of the Company or the LLC, is any such
dispute threatened, which dispute would have a material adverse effect on the
assets or properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole.
(q) No transaction has occurred between or among the Company
or any Subsidiary and any of the Company's officers or directors, or any
Affiliate (as defined in the Rules) of any such officer or director, that is
required to be described in and is not described in the Registration Statement
and the Prospectus.
(r) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of any of the Shares.
(s) The Company and each Subsidiary has filed all Tax
Returns which are required to be filed through the date hereof, or has received
extensions thereof, and has paid all Taxes, whether or not shown on such Tax
Returns, to the extent that the same are material and have become due. No
action, proceeding or investigation for the assessment or collection of Taxes by
any Federal, state, local or foreign authority is pending, or to the best of the
Company's or the LLC's knowledge, threatened against the Company or any
Subsidiary, except such as would have a material adverse effect on the assets or
properties, business, results of operations, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a whole. Each of T&W
Leasing, Inc., T&W Finance Corp. I, Finance Corp. II, and T&W Finance Corp. III
elected to be treated as an S corporation under Sections 1361 through 1363 of
the Internal Revenue Code of 1986, as amended (the "Code"), at the time of its
incorporation and has maintained its qualification as an S corporation at all
times since the time of such election. Each of T&W Financial Services Company
L.L.C., T&W Funding Company I, LLC, T&W Funding Company IV, LLC and T&W Funding
Company V, LLC qualified as a partnership for Federal and state tax purposes at
the time of its formation and has maintained its qualification as a partnership
Federal and state tax purposes at all times since the time if such formation.
The term "Tax Return" means any Federal, state, local or foreign return,
declaration, report, form, claim for refund or information return or statement,
or any schedule, attachment or amendment thereto, relating to Taxes. The term
Taxes means all Federal, state,
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<PAGE> 9
local or foreign income, payroll, employee withholding, unemployment insurance,
social security, sales, use, service use, leasing use, excise, franchise, gross
receipts, value added, alternative or added-on minimum, estimated occupation,
real and personal property, stamp transfer, workers' compensation, severance,
windfall profits or other tax of the same or of a similar nature, including any
interest, penalty, or addition thereto, whether disputed or not.
(t) The Company has filed a registration statement pursuant
to Section 12(g) of the Exchange Act to register the Common Stock. The Shares
have been duly authorized for quotation on the Nasdaq Stock Market's National
Market System.
(u) Neither the Company nor any Subsidiary is, nor will they
become upon the issuance and sale of the Shares by the Company as herein
contemplated and the application of the net proceeds therefrom as described in
the Prospectus under the caption "Use of Proceeds," an "investment company or an
entity "controlled" by and an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(v) The Company and each Subsidiary maintains insurance of
the types and in the amounts generally deemed adequate for its business,
including, but not limited to, insurance covering real and personal property
owned or lease by the Company or such Subsidiary against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against,
all of which insurance is in full force and effect.
(w) The Company and its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of its financial statements in conformity with generally accepted
accounting principals (including, without limitation, the recordation of
securitization as necessary to permit the accounting treatment of such
transactions in conformity with Statement of Financial Accounting Standard No.
125); (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
lease contracts is compared with the existing lease contracts in connection with
securitizations and appropriate action is taken with respect to any differences.
(x) The Company and each Subsidiary possess all permits,
licenses and other authorizations that are required under all environmental
laws, including, but not limited to, the Federal Water Pollution Control Act (33
U.S.C. Section 1251 et seq.), Resource Conservation & Recovery Act (42 U.S.C.
Section 6901 et seq.), Safe Drinking Water Act (21 U.S.C. Sections 201, 300f),
Toxic Substances Control Act (15 U.S.C. Section 349, 42 U.S.C. Section 7401 et
seq.), Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 et seq.), and any other laws of any applicable jurisdiction,
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants,
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<PAGE> 10
chemicals or industrial, toxic or hazardous substances or wastes or under any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder (collectively, the
"Environmental Laws"), except to the extent that the failure to possess any such
permit, license or authorization would not have a material adverse effect on the
assets or properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole.
The Company and each Subsidiary is in compliance with all terms and conditions
of any such permits, except to the extent that the failure to comply with any
such permit, license or authorization would not have a material adverse effect
on the assets or properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole.
(y) There are no past or present events, conditions,
circumstances, activities, facts, practices, incidents, actions, or plans
relating to the business as presently being conducted by the Company or any
Subsidiary that interfere with or prevent material compliance or continued
material compliance with Environmental Laws, or which would be reasonably
likely to give rise to any legal liability (whether statutory or common law)
or otherwise would be reasonably likely to form the basis of any claim,
action, demand, suit, proceeding, hearing, notice of violation, study,
investigation, remediation or cleanup based on or related to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release into the workplace,
the community or the environment of any pollutant, contaminant, chemical or
industrial, toxic or hazardous substance or waste, except for any liabilities
or any claims, demands or other actions specified above that will not
individually or in the aggregate have a material adverse effect on the assets
or properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole.
(z) The transactions contemplated by that certain
Restructuring Agreement, dated as of October __, 1997 (the "Restructuring
Agreement"), by and among the Company and the other parties thereto, other than
contribution by the Company to the LLC of the net proceeds from the sale of the
Shares to be sold by the Company pursuant to this Agreement and the issuance by
the LLC to each of the Company and T&W Funding Company VI, LLC of their
membership interests, have been consummated in accordance with the terms of such
Restructuring Agreement.
(aa) Neither the Company nor any Subsidiary does business
with the government of Cuba or with any person or entity located in Cuba.
5. Representations and Warranties of the Selling Shareholders. Each
Selling Shareholder, severally and not jointly, hereby represents and warrants
to each Underwriter as follows:
(a) The Registration Statement did not, as of the Effective
Date, contain any untrue statement of a material fact or omit to state any
material fact with respect to the Selling Shareholder required to be stated
therein or necessary in order to make the statements therein with respect to the
Selling Shareholder not misleading; and on the date of the
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<PAGE> 11
Prospectus, on the date any post-effective amendment to the Registration
Statement shall become effective, on the date any supplement or amendment to the
Prospectus is filed with the Commission and on each Closing Date, the
Registration Statement and the Prospectus (and any amendment thereof or
supplement thereto) will not contain any untrue statement of a material fact or
omit to state any material fact with respect to the Selling Shareholder required
to be stated therein or necessary in order to make the statements therein with
respect to the Selling Shareholder not misleading. When any related preliminary
prospectus was first filed with the Commission (whether filed as part of the
Registration Statement or any amendment thereto or pursuant to Rule 424(a) of
the Rules) and when any amendment thereof or supplement thereto was first filed
with the Commission, such preliminary prospectus did not contain any untrue
statement of a material fact or omit to state any material fact with respect to
the Selling Shareholder required to be stated therein or necessary in order to
make the statements therein with respect to the Selling Shareholder not
misleading.
(b) Neither the execution, delivery and performance of this
Agreement by the Selling Shareholder nor the consummation of any of the
transactions contemplated hereby (including, without limitation, sale by the
Selling Shareholder of the Shares) will give rise to a right to terminate or
accelerate the due date of any payment due under, or conflict with or result in
the breach of any term or provision of, or constitute a default (or an event
which with notice or lapse of time or both would constitute a default) under, or
require any consent or waiver under, or result in the execution or imposition of
any lien, charge or encumbrance upon any properties or assets of the Selling
Shareholder pursuant to the terms of, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Selling Shareholder is a party, or by
which it or any of its properties or businesses is bound, or any franchise,
license, permit, judgment, decree, order, statute, rule or regulation applicable
to the Selling Shareholder, except for such consents or waivers which have
already been obtained and are in full force and effect.
(c) The Selling Shareholder has delivered to the
Representative an enforceable written agreement that the Selling Shareholder
will not sell, offer to sell, contract to sell, pledge or otherwise dispose of
or transfer, directly or indirectly, any shares of Common Stock, or any
securities convertible into or exchangeable for, or any rights to purchase or
acquire, shares of Common Stock, for a period of 180 days commencing on the date
of the Prospectus without the prior written consent of Oppenheimer & Co., Inc.,
other than the Firm Shares to be sold by such Selling Shareholder pursuant to
this Agreement.
(d) The Selling Shareholder has delivered to the
Representative a Custody Agreement and Power of Attorney with respect to the
Shares to be sold by the Selling Shareholder to the Underwriters pursuant to
this Agreement, and has deposited with the Custodian under the Custody Agreement
the stock certificates representing such Shares, duly endorsed for transfer or
accompanied by a duly executed stock power. The Selling Shareholder understand
and acknowledges that the arrangements for such custody are irrevocable and that
the obligations of the Selling Shareholder thereunder shall not be terminated,
except as provided in this Agreement or the Custody Agreement, by any act of the
Selling Shareholder, by operation of law or by the occurrence of any other
event.
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<PAGE> 12
(e) The Selling Shareholder is the record and beneficial
owner of the Shares to be sold by the Selling Shareholder hereunder. Upon the
sale and delivery of, and payment for, such Shares, as provided herein, the
Selling Shareholder will convey good and marketable title to such Shares, free
and clear of any security interests, liens, encumbrances, equities, claims,
options, rights of third parties or other interests.
(f) This Agreement, the Custody Agreement and the Power of
Attorney have been duly and validly authorized, executed and delivered by the
Selling Shareholder and constitute the legal, valid and binding obligations of
the Selling Shareholder enforceable against the Selling Shareholder in
accordance with their terms, except (i) as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles and (ii) to the extent that rights to indemnity or
contribution under this Agreement may be limited by Federal and state securities
laws or the public policy underlying such laws.
(g) The Selling Shareholder has not taken, nor will it take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of any of the Shares.
(h) No transfer taxes are required to be paid in connection
with the sale and delivery of the Firm Shares to be sold by the Selling
Shareholders to the Underwriters hereunder.
6. Conditions of the Underwriters' Obligations. The obligations of
the Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject to each of
the following terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 7(a)(i) of this Agreement.
(b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall be in effect
and no order suspending the effectiveness of the Registration Statement shall be
in effect and no proceedings for such purpose shall be pending before or
threatened by the Commission, and any requests for additional information on the
part of the Commission (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction of
the Representative.
(c) The representations and warranties of the Company, the
LLC and the Selling Shareholders contained in this Agreement and in the
certificates delivered pursuant
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<PAGE> 13
to Sections 6(d)(i), (d)(ii) and (d)(iii) of this Agreement shall be true and
correct when made and on and as of each Closing Date as if made on such date and
the Company, the LLC and the Selling Shareholders shall have performed all
covenants and agreements and satisfied all the conditions contained in this
Agreement required to be performed or satisfied by them at or before such
Closing Date.
(d) (i) The Representative shall have received on each
Closing Date a certificate, addressed to the Representative and dated such
Closing Date, of the chief executive or chief operating officer and the chief
financial officer or chief accounting officer of the Company to the effect that
the signers of such certificate have carefully examined the Registration
Statement, the Prospectus and this Agreement and that the representations and
warranties of the Company in this Agreement are true and correct in all material
respects on and as of such Closing Date with the same effect as if made on such
Closing Date and the Company has performed all covenants and agreements and
satisfied all conditions contained in this Agreement required to be performed or
satisfied by it at or prior to such Closing Date.
(ii) The Representative shall have received on each Closing
Date a certificate, addressed to the Representative and dated such Closing Date,
of each the managing member of the LLC to the effect that the signer of such
certificate has carefully examined the Registration Statement, the Prospectus
and this Agreement and that the representations and warranties of the LLC in
this Agreement are true and correct in all material respects on and as of such
Closing Date with the same effect as if made on such Closing Date and the LLC
has performed all covenants and agreements and satisfied all conditions
contained in this Agreement required to be performed or satisfied by it at or
prior to such Closing Date.
(iii) The Representative shall have received on each Closing
Date a certificate, addressed to the Representative and dated such Closing Date,
of each Selling Shareholder to the effect that the signer of such certificate
has carefully examined the Registration Statement, the Prospectus and this
Agreement and that the representations and warranties of such Selling
Shareholder in this Agreement are true and correct in all material respects on
and as of such Closing Date with the same effect as if made on such Closing Date
and such Selling Shareholder has performed all covenants and agreements and
satisfied all conditions contained in this Agreement required to be performed or
satisfied by such Selling Shareholder at or prior to such Closing Date.
(e) The Representative shall have received at the time this
Agreement is executed and on each Closing Date a signed letter from BDO Seidman,
LLP addressed to the Representative and dated, respectively, the date of this
Agreement and each such Closing Date, in form and substance reasonably
satisfactory to the Representative and its counsel, confirming that they are
independent certified public accountants within the meaning of the Securities
Act and the Rules, that the response to Item 10 of the Registration Statement is
correct insofar as it relates to them and stating in effect that:
(i) in their opinion the combined financial
statements included in the Registration Statement and the Prospectus and
reported on by them comply as to form in
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<PAGE> 14
all material respects with the applicable accounting requirements of the
Securities Act and the Rules;
(ii) on the basis of a reading of the amounts
included in the Registration Statement and the Prospectus under the headings
"Prospectus Summary -- Summary Combined Financial Data" and "Selected Combined
Financial and Operating Data," carrying out certain procedures (but not an
examination in accordance with generally accepted auditing standards) which
would not necessarily reveal matters of significance with respect to the
comments set forth in such letter, a reading of the minutes of the meetings of
the Shareholders and directors of the Company, and inquiries of certain
officials of the Company who have responsibility for financial and accounting
matters of the Company as to transactions and events subsequent to the date of
the latest audited combined financial statements
(A) the amounts in "Prospectus Summary --
Summary Combined Financial Data" and "Selected Combined Financial and Operating
Data" included in the Registration Statement and the Prospectus agree with the
corresponding amounts in the financial statements from which such amounts were
derived; and
(B) except as disclosed in the Registration
Statement and the Prospectus, nothing came to their attention which caused them
to believe that, with respect to the Company, there were, at a specified date
not more than five business days prior to the date of the letter: (i) any
changes in the capital stock, any increases in notes payable - recourse, notes
payable - nonrecourse and total liabilities, or any decreases in net investment
in leases, total assets and total shareholders' equity of the Company, as
compared with the amounts shown on the Company's combined balance sheet for the
six month period ended June 30, 1997 included in the Registration Statement; and
(ii) for the period from July 1, 1997 to such specified date, any decreases in
the lease contract revenue, gain on sale of leases and net income, as compared
with the corresponding period in the preceding year.
(iii) they have performed certain other procedures as
a result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company) set forth in the Registration Statement and the Prospectus and
reasonably specified by the Representative agrees with the accounting records of
the Company.
References to the Registration Statement and the Prospectus in this
Section 6(e) are to such documents as amended and supplemented at the date of
the letter.
(f) The Representative shall have received on each Closing
Date from Graham & James LLP, counsel for the Company and the Selling
Shareholders, an opinion, addressed to the Representative and dated such Closing
Date, and stating in effect that:
(i) The Company and each Subsidiary has been duly
incorporated or formed, as the case may be, and is validly existing as a
corporation or limited
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<PAGE> 15
liability, as the case may be, under the laws of its jurisdiction of
incorporation or formation. The Company and each Subsidiary is duly qualified
and in good standing as a foreign corporation or limited liability company, as
the case may be, in each jurisdiction in which the character or location of its
assets or properties (owned, leased or licensed) or the nature of its businesses
makes such qualification necessary, except for such jurisdictions where the
failure to so qualify would not have a material adverse effect on the assets or
properties, business, results of operations, prospects or condition (financial
or otherwise) of the Company and its subsidiaries, taken as a whole.
(ii) The Company and each Subsidiary has all
requisite corporate power and authority to own, lease and license its assets and
properties and conduct its business as now being conducted and as described in
the Registration Statement and the Prospectus; and the Company has all requisite
corporate power and authority and all necessary authorizations, approvals,
consents, orders, licenses, certificates and permits to enter into, deliver and
perform this Agreement and to issue and sell the Shares, other than those
required under the Securities Act and state and foreign Blue Sky laws.
(iii) The Company has authorized and issued capital
stock as set forth in the Registration Statement and the Prospectus; the
certificates evidencing the Shares are in due and proper legal form and have
been duly authorized for issuance by the Company; all of the outstanding shares
of Common Stock of the Company have been duly and validly authorized and have
been duly and validly issued and are fully paid and nonassessable and none of
them was issued in violation of any preemptive or other similar right. The
Shares, when issued and sold pursuant to this Agreement, will be duly and
validly issued, outstanding, fully paid and nonassessable and none of them will
have been issued in violation of any preemptive or other similar right. To the
best of such counsel's knowledge, except as disclosed in the Registration
Statement and the Prospectus, there is no outstanding option, warrant or other
right calling for the issuance of, and no commitment, plan or arrangement to
issue, any share of stock of the Company or any security convertible into,
exercisable for, or exchangeable for stock of the Company. The Common Stock and
the Shares conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus.
(iv) To the best of such counsel's knowledge, the
beneficial ownership of the Company and its Affiliates, giving effect to the
transactions described under the caption "The Restructuring" in the Prospectus,
is as described in the Prospectus and the Company has no subsidiaries other than
the Subsidiaries set forth in Exhibit A hereto.
(v) The agreement of each director and executive
officer of the Company that each such person will not sell, offer to sell,
contract to sell, pledge or otherwise dispose of or transfer, directly or
indirectly, any shares of Common Stock, or any securities convertible into or
exchangeable for, or any rights to purchase or acquire, shares of Common Stock
for a period of 180 days commencing on the date of the Prospectus without the
prior written consent of Oppenheimer & Co., Inc. has been duly and validly
delivered by each such person and constitutes the legal, valid and binding
obligation of each such person enforceable against each such person in
accordance with its terms, except as the enforceability thereof may
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<PAGE> 16
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
(vi) All necessary action has been duly and validly
taken by the Company and the LLC to authorize the execution, delivery and
performance of this Agreement and the issuance and sale of the Shares. This
Agreement has been duly and validly authorized, executed and delivered by the
Company and the LLC and this Agreement constitutes the legal, valid and binding
obligation of each of the Company and the LLC enforceable against the Company
and the LLC in accordance with its terms, except (A) as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles and (B) to the extent that rights to indemnity
or contribution under this Agreement may be limited by Federal or state
securities laws or the public policy underlying such laws.
(vii) Neither the execution, delivery and performance
of this Agreement by the Company or the LLC nor the consummation of any of the
transactions contemplated hereby (including, without limitation, the issuance
and sale by the Company of the Shares) will give rise to a right to terminate or
accelerate the due date of any payment due under, or conflict with or result in
the breach of any term or provision of, or constitute a default (or any event
which with notice or lapse of time, or both, would constitute a default) under,
or require consent or waiver under, or result in the execution or imposition of
any lien, charge or encumbrance upon any properties or assets of the Company or
any Subsidiary pursuant to the terms of any indenture, mortgage, deed trust,
note or other agreement or instrument of which such counsel is aware and to
which the Company or any Subsidiary is a party or by which it or any of its
properties or businesses is bound, or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation of which such counsel is aware or
violate any provision of the charter or bylaws of the Company or any Subsidiary,
where the consequences of such termination, acceleration, conflict, breach or
default would have a material and adverse effect on the assets, properties,
business, results of operations, prospects or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole.
(viii) To the best of such counsel's knowledge, no
default exists, and no event has occurred which with notice or lapse of time, or
both, would constitute a default, in the due performance and observance of any
term, covenant or condition by the Company or any Subsidiary of any indenture,
mortgage, deed of trust, note or any other agreement or instrument to which the
Company or any Subsidiary is a party or by which it or any of its assets or
properties or businesses may be bound or affected, where the consequences of
such default would have a material and adverse effect on the assets, properties,
business, results of operations, prospects or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole.
(ix) To the best of such counsel's knowledge, neither
the Company nor any Subsidiary is in violation of any term or provision of its
charter or bylaws or any franchise, license, permit, judgment, decree, order,
statute, rule or regulation, where the consequences of such violation would have
a material and adverse effect on the assets or
16
<PAGE> 17
properties, businesses, results of operations, prospects or condition (financial
or otherwise) of the Company and its Subsidiaries, taken as a whole.
(x) No consent, approval, authorization or order of
any court or governmental agency or body is required for the performance of this
Agreement by the Company or the consummation of the transactions contemplated
hereby or thereby, except such as have been obtained under the Securities Act
and such as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the several
Underwriters.
(xi) To the best of such counsel's knowledge, except
as disclosed in the Registration Statement and the Prospectus, there is no
litigation or governmental or other proceeding or investigation, before any
court or before or by any public body or board pending or threatened against, or
involving the assets, properties or businesses of, the Company or any Subsidiary
which would have a material adverse effect upon the assets or properties,
business, results of operations, prospects or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole.
(xii) The statements in the Prospectus under the
captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," "Management --
Benefit Plans," "-- Exeuctive Compensation," "Certain Transactions," "Principal
and Selling Shareholders," "Description of Capital Stock" and "Shares Eligible
for Future Sale," insofar as such statements constitute a summary of documents
referred to therein or matters of law, are fair summaries in all material
respects and fairly present the information called for with respect to such
documents and matters. All contracts and other documents required to be filed as
exhibits to, or described in, the Registration Statement have been so filed with
the Commission or are fairly described in the Registration Statement, as the
case may be.
(xiii) The Registration Statement, all preliminary
prospectuses and the Prospectus and each amendment or supplement thereto (except
for the financial statements and other financial and statistical data included
therein, as to which such counsel expresses no opinion) comply as to form in all
material respects with the requirements of the Securities Act and the Rules.
(xiv) To the best of such counsel's knowledge, the
Registration Statement has become effective under the Securities Act, and no
stop order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
threatened, pending or contemplated.
(xv) To the best of such counsel's knowledge, the
registration statement filed by the Company pursuant to Section 12(g) of the
Exchange Act has become effective under the Exchange Act and no stop order
suspending the effectiveness of such registration statement has been issued and
no proceedings for that purpose have been instituted or are threatened, pending
or contemplated.
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<PAGE> 18
(xvi) To the best of such counsel's knowledge, the
Shares have been duly authorized for quotation on the Nasdaq Stock Market's
National Market System.
(xvii) Neither the Company nor any Subsidiary is, nor
will the Company or any Subsidiary become upon the issuance and sale of the
Shares as herein contemplated and the application of the net proceeds therefrom
as described in the Prospectus under the caption "Use of Proceeds," and
"investment company or an entity "controlled" by and an "investment company" as
such terms are defined in the 1940 Act.
(xviii) Each Selling Shareholder has all requisite power
and authority and all necessary authorizations, approvals, consents, orders,
licenses, certificates and permits to enter into, deliver and perform this
Agreement, the Custody Agreement and Power of Attorney and to issue and sell the
Firm Shares, other than those required under the Securities Act and state and
foreign Blue Sky laws. To the best of such counsel's knowledge, upon the sale
and delivery of, and payment for, such Firm Shares, as provided herein, each
Selling Shareholder will convey good and marketable title to such Firm Shares,
free and clear of any security interests, liens, encumbrances, equities, claims,
options, rights of third parties or other interests.
(xix) The agreement of each Selling Shareholder that
such person will not sell, offer to sell, contract to sell, pledge or otherwise
dispose of or transfer, directly or indirectly, any shares of Common Stock, or
any securities convertible into or exchangeable for, or any rights to purchase
or acquire, shares of Common Stock, for a period of 180 days commencing on the
date of the Prospectus without the prior written consent of Oppenheimer & Co.,
Inc. have been duly and validly executed and delivered by such each such person
and constitute the legal, valid and binding obligation of each such person
enforceable against each such person in accordance with its terms, except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(xx) This Agreement, the Custody Agreement and the
Power of Attorney have been duly and validly authorized, executed and delivered
by each Selling Shareholder and constitute the legal, valid and binding
obligations of each Selling Shareholder enforceable against such person in
accordance with their respective terms, except (A) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles and (B) to the extent that rights to indemnity
or contribution under this Agreement may be limited by Federal or state
securities laws or the public policy underlying such laws.
To the extent deemed advisable by such counsel, it may rely as to
matters of fact on certificates of responsible officers of the Company or of
Selling Shareholders and public officials and on the opinions of other counsel
satisfactory to the Representative as to matters which are governed by laws
other than the laws of the States of Washington and the
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Federal laws of the United States; provided that such counsel shall state that
in its opinion the Underwriters and such counsel are justified in relying on
such other opinions. Copies of such certificates and other opinions shall be
furnished to the Representative and counsel for the Underwriters.
In addition, such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Company,
representatives of the Representative and representatives of the independent
certified public accountants of the Company, at which conferences the contents
of the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus (except as specified
in the foregoing opinion), on the basis of the foregoing, no facts have come to
the attention of such counsel which lead such counsel to believe that the
Registration Statement at the time it became effective (except with respect to
the financial statements and notes thereto and other financial data, as to which
such counsel need express no belief) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus as amended or supplemented (except with respect to the financial
statements and notes thereto and other financial data, as to which such counsel
need make no statement) on the date thereof and on the Closing Date contained
any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be reasonably
satisfactory in form and substance to the Representative and its counsel and the
Underwriters shall have received from Gibson, Dunn & Crutcher LLP a favorable
opinion, addressed to the Representative and dated such Closing Date, with
respect to the Shares, the Registration Statement and the Prospectus, and such
other related matters, as the Representative may reasonably request, and the
Company and the Selling Shareholders shall have furnished to Gibson, Dunn &
Crutcher LLP such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(h) The Representative shall have received no later than the
time this Agreement is executed, the enforceable written agreement of each
director and executive officer of the Company and each Selling Shareholder, in
form and substance reasonably satisfactory to the Representative and its
counsel, that each such person will not sell, offer to sell, contract to sell,
pledge or otherwise dispose of or transfer, directly or indirectly, any shares
of Common Stock, or any securities convertible into or exchangeable for, or any
rights to purchase or acquire, shares of Common Stock for a period of 180 days
commencing on the date of the Prospectus without the prior written consent of
Oppenheimer & Co., Inc.
(i) The Representative shall have received no later than the
time this Agreement is executed, duplicate originals of the Custody Agreement
and Power of Attorney
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<PAGE> 20
with respect to the Shares to be sold by the Selling Shareholders to the
Underwriters pursuant to this Agreement, duly executed on behalf of each Selling
Shareholder (and the Custodian in the case of the Custody Agreement), and each
Selling Shareholder shall have deposited with the Custodian under the Custody
Agreement the stock certificates representing such Shares, duly endorsed for
transfer or accompanied by a duly executed stock power.
(j) The Company and the Selling Shareholders shall have
furnished or caused to be furnished to the Representative such further
certificates and documents as the Representative shall have reasonably
requested.
7. Covenants of the Company.
(a) The Company covenants and agrees as follows:
(i) The Company shall prepare the Prospectus in a
form approved by the Representative and file such Prospectus pursuant to Rule
424(b) under the Securities Act not later than the Commission's close of
business on the second business day following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be required by Rule
430A(a)(3) under the Securities Act, and shall promptly advise the
Representative (A) when any amendment to the Registration Statement shall have
become effective, (B) of any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional information, (C)
of the prevention or suspension of the use of any preliminary prospectus or the
Prospectus or of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threatening of
any proceeding for that purpose and (D) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company shall not file any amendment of the Registration
Statement or supplement to the Prospectus unless the Company has furnished the
Representative a copy for its review prior to filing and shall not file any such
proposed amendment or supplement to which the Representative reasonably objects.
The Company shall use its best efforts to prevent the issuance of any such stop
order and, if issued, to obtain as soon as possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to
the Shares is required to be delivered under the Securities Act and the Rules,
any event occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, or if it shall be
necessary to amend or supplement the Prospectus to comply with the Securities
Act or the Rules, the Company promptly shall prepare and file with the
Commission, subject to the second sentence of paragraph (i) of this Section
7(a), an amendment or supplement which shall correct such statement or omission
or an amendment which shall effect such compliance. The Company shall furnish
without charge to each Underwriter and to any dealer in securities as many
copies
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<PAGE> 21
as the Representative may from time to time reasonably request of such amendment
or supplement.
(iii) The Company shall make generally available to
its security holders and to the Representative as soon as practicable, but not
later than 45 days after the end of the 12-month period beginning at the end of
the fiscal quarter of the Company during which the Effective Date occurs (or 90
days if such 12-month period coincides with the Company's fiscal year), an
earning statement (which need not be audited) of the Company, covering such
12-month period, which shall satisfy the provisions of Section 11(a) of the
Securities Act or Rule 158 of the Rules.
(iv) The Company shall furnish to the Representative
and counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including all exhibits thereto and amendments thereof)
and to each other Underwriter a copy of the Registration Statement (without
exhibits thereto) and all amendments thereof and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Securities Act or
the Rules, as many copies of any preliminary prospectus and the Prospectus and
any amendments thereof and supplements thereto as the Representative may
reasonably request.
(v) The Company shall cooperate with the
Representative and its counsel in endeavoring to qualify the Shares for offer
and sale under the laws of such jurisdictions as the Representative may
designate and shall maintain such qualifications in effect so long as required
for the distribution of the Shares; provided, however, that the Company shall
not be required in connection therewith, as a condition thereof, to qualify as a
foreign corporation or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation as doing business in any
jurisdiction.
(vi) For a period of five years after the date of
this Agreement, the Company shall supply to the Representative, and to each
other Underwriter who may so request in writing, copies of such financial
statements and other periodic and special reports as the Company may from time
to time distribute generally to the holders of any class of its capital stock
and to furnish to the Representative a copy of each annual or other report it
shall be required to file with the Commission (including the Report on Form SR
required by Rule 463 of the Rules).
(vii) Without the prior written consent of Oppenheimer
& Co., Inc., for a period of 180 days after the date of this Agreement, the
Company shall not issue, sell, offer to sell, contract to sell, pledge or
otherwise dispose of or transfer, directly or indirectly, any equity securities
of the Company, or any securities convertible into or exercisable or
exchangeable for, or any rights to purchase or acquire, equity securities of the
Company, other than the sale of the Shares by the Company pursuant to this
Agreement and the issuance by the Company of: (i) options to purchase shares of
Common Stock (and shares of Common Stock issuable upon the exercise of such
options) in connection with the Company's 1997 Stock Option plan; (ii) shares of
Common Stock in connection with the Company's 1997 Employee Stock Purchase Plan;
(iii) shares of Common Stock in connection with the Company's
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<PAGE> 22
1997 Director Stock Grant Plan; and (iv) 13,700 shares of Common Stock to be
awarded to certain employees of the Company.
(viii) On or before completion of this offering, the
Company shall make all filings required under applicable securities laws and by
the Nasdaq Stock Market's National Market System (including any required
registration under the Exchange Act).
(ix) Prior to the Closing Date, the Company will not
issue, directly or indirectly, without the Representative's prior written
consent, which shall not be unreasonably withheld, any press release or other
communication or hold any press conference with respect to the Company or its
activities or this offering, other than trade releases issued in the ordinary
course of the Company's business with respect to the Company's operations or as
required by law.
(x) On the Closing Date, the Company will contribute to
the LLC the net proceeds from the sale of the Shares to be sold by the Company
pursuant to this Agreement and the LLC shall issue to each of the Company and
T&W Funding Company VI, LLC membership interests in accordance with the terms of
the Restructuring Agreement.
(b) The Company agrees to pay, or reimburse if paid by the
Representative, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the public offering of the Shares and the performance of the obligations of the
Company and the Selling Shareholders under this Agreement including those
relating to: (i) the preparation, printing, filing and distribution of the
Registration Statement including all exhibits thereto, each preliminary
prospectus, the Prospectus, all amendments and supplements to the Registration
Statement and the Prospectus, and the printing, filing and distribution of this
Agreement; (ii) the preparation and delivery of certificates for the Shares to
the Underwriters; (iii) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the various
jurisdictions referred to in Section 7(a)(v), including the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
registration and qualification and the preparation, printing, distribution and
shipment of preliminary and supplementary Blue Sky memoranda; (iv) the
furnishing (including costs of shipping and mailing) to the Representative and
to the Underwriters of copies of each preliminary prospectus, the Prospectus and
all amendments or supplements to the Prospectus, and of the several documents
required by this Section to be so furnished, as may be reasonably requested for
use in connection with the offering and sale of the Shares by the Underwriters
or by dealers to whom Shares may be sold; (v) the filing fees of the National
Association of Securities Dealers, Inc. in connection with its review of the
terms of the public offering; (vi) the furnishing (including costs of shipping
and mailing) to the Representative and to the Underwriters of copies of all
reports and information required by Section 7(a)(vi); (vii) inclusion of the
Shares for quotation on the Nasdaq Stock Market's National Market System; and
(viii) all transfer taxes, if any, with respect to the sale and delivery of the
Shares by the Company and the Selling Shareholders to the Underwriters. Subject
to the provisions of Section 10, the Underwriters agree to pay, whether or not
the transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of the
obligations of the Underwriters under this Agreement not payable by the
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<PAGE> 23
Company pursuant to the preceding sentence, including, without limitation, the
fees and disbursements of counsel for the Underwriters (other than as referred
to in subsection (iii) above).
8. Indemnification.
(a) The Company and the LLC (together, the "Company
Indemnitors"), jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
against any and all losses, claims, damages and liabilities, joint or several
(including any reasonable investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they, or any of them, may become
subject under the Securities Act, the Exchange Act or other Federal or state law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon: (i) any untrue statement
or alleged untrue statement of a material fact contained in any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto, or arise out of or are based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; (ii) any breach of
the representations and warranties of the Company Indemnitors contained herein;
or (iii) any failure of the Company Indemnitors to satisfy the covenants or
perform the obligations of the Company Indemnitors hereunder; provided, however,
that such indemnity shall not inure to the benefit of any Underwriter (or any
person controlling such Underwriter) on account of any losses, claims, damages
or liabilities arising from the sale of the Shares to any person by such
Underwriter if such untrue statement or omission or alleged untrue statement or
omission was made in such preliminary prospectus, the Registration Statement or
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with information furnished in writing to the Company by the
Representative for inclusion in the last paragraph on the cover page of the
Prospectus, the legend relating to stabilization on the inside front cover page
of the Prospectus or in the statements under the caption "Underwriting" in the
Prospectus; This indemnity agreement will be in addition to any liability which
the Company Indemnitors may otherwise have.
(b) Each Selling Shareholder, severally and not jointly,
agrees to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act against any and all losses, claims,
damages and liabilities, joint or several (including any reasonable
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other Federal or state law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact with respect to such Selling Shareholder contained
in any preliminary prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto, or arise out of or are based upon
any omission or alleged omission to
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<PAGE> 24
state therein a material fact with respect to such Selling Shareholder required
to be stated therein or necessary to make the statements therein with respect to
such Selling Shareholder not misleading; (ii) any breach of the representations
and warranties of such Selling Shareholder contained herein; or (iii) any
failure of such Selling Shareholder to satisfy the covenants or perform the
obligations of such Selling Shareholder hereunder; provided, however, that such
indemnity shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) on account of any losses, claims, damages or
liabilities arising from the sale of the Shares to any person by such
Underwriter if such untrue statement or omission or alleged untrue statement or
omission was made in such preliminary prospectus, the Registration Statement or
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with information furnished in writing to the Company by the
Representative for inclusion in the last paragraph on the cover page of the
Prospectus, the legend relating to stabilization on the inside front cover page
of the Prospectus or in the statements under the caption "Underwriting" in the
Prospectus; and provided further, that the obligation of such Selling
Shareholder to indemnify any Underwriter (including any person controlling such
Underwriter) shall be limited to the net proceeds received by such Selling
Shareholder from such Underwriter.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, each director of the Company, each officer of the Company who
signs the Registration Statement and the Selling Shareholders against any and
all losses, claims, damages and liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other Federal or state law or regulation, at
common law or otherwise, but only insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which was made in any preliminary
prospectus, the Registration Statement or the Prospectus, or any amendment
thereof or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Company by the Representative for
inclusion in the last paragraph on the cover page of the Prospectus, the legend
relating to stabilization on the inside front cover page of the Prospectus or in
the statements under the caption "Underwriting" in the Prospectus; provided,
however, that the obligation of each Underwriter to indemnify the Company
(including any controlling person, director or officer thereof) and any Selling
Shareholder shall be limited to the net proceeds received by the Company or such
Selling Shareholder from such Underwriter.
(d) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such action,
suit or proceeding, enclosing a copy of all papers served. No indemnification
provided for in Section 8(a), 8(b) or 8(c) shall be available to any party who
shall fail to give notice as provided in this Section 8(d) if the party to whom
notice was not given was unaware of
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<PAGE> 25
the proceeding to which such notice would have related and was prejudiced by the
failure to give such notice but the omission so to notify such indemnifying
party of any such action, suit or proceeding shall not relieve it from any
liability that it may have to any indemnified party for contribution or
otherwise than under this Section. In case any such action, suit or proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and the approval by the indemnified party of such
counsel, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses, except as provided below and except for the
reasonable costs of investigation subsequently incurred by such indemnified
party in connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized in writing
by the indemnifying parties, (ii) the indemnified party shall have reasonably
concluded that there may be a conflict of interest between the indemnifying
parties and the indemnified party in the conduct of the defense of such action
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party) or (iii) the
indemnifying parties shall not have employed counsel to assume the defense of
such action within a reasonable time after notice of the commencement thereof,
in each of which cases the fees and expenses of counsel shall be at the expense
of the indemnifying parties. An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without its written
consent.
9. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 8 is due in accordance with its terms but for any reason is held to be
unavailable from the Company Indemnitors or the Selling Shareholders, the
Company Indemnitors, the Selling Shareholders and the Underwriters shall
contribute to the aggregate losses, claims, damages and liabilities (including
any investigation, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claims asserted, but after deducting any contribution received by the
Company Indemnitors or the Selling Shareholders from persons other than the
Underwriters, such as persons who control the Company within the meaning of the
Securities Act, officers of the Company who signed the Registration Statement
and directors of the Company, who may also be liable for contribution) to which
the Company Indemnitors, the Selling Shareholders and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Shareholders on the
one hand and the Underwriters on the other hand from the offering of the Shares
or, if such allocation is not permitted by applicable law or indemnification is
not available as a result of the indemnifying party not having received notice
as provided in Section 8 hereof, in such proportion as is appropriate to reflect
not only the relative benefits referred to above but also the relative fault of
the Company Indemnitors and the Selling Shareholders on the one hand and the
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other
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<PAGE> 26
relevant equitable considerations. The relative benefits received by the Company
and the Underwriters shall be deemed to be in the same proportion as (x) the
total proceeds from the offering (net of underwriting discounts but before
deducting expenses) received by the Company and the Selling Shareholders, as set
forth in the table on the cover page of the Prospectus, bear to (y) the
underwriting discounts received by the Underwriters, as set forth in the table
on the cover page of the Prospectus. The relative fault of the Company
Indemnitors and the Selling Shareholders or the Underwriters shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact related to information supplied by the Company and
the Selling Shareholders or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company Indemnitors, the Selling Shareholders and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this Section 9, (i) in no
case shall any Underwriter (except as may be provided in the Agreement Among
Underwriters) be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder, and (ii) the Company Indemnitors and the Selling Shareholders shall
be liable and responsible for any amount in excess of such underwriting
discount; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as such Underwriter, and each person, if any, who controls the
Company within the meaning of the Section 15 of the Securities Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clauses (i) and
(ii) in the immediately preceding sentence of this Section 9. Any party entitled
to contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent. The Underwriter's
obligations to contribute pursuant to this Section 9 are several in proportion
to their respective underwriting commitments and not joint.
10. Termination. This Agreement may be terminated with respect to
the Shares to be purchased on a Closing Date by the Representative by notifying
the Company at any time:
(a) in the absolute discretion of the Representative at or
before any Closing Date: (i) if on or prior to such date, any domestic or
international event or act or
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<PAGE> 27
occurrence has materially disrupted, or in the opinion of the Representative
will in the near future materially disrupt, the securities markets; (ii) if
there has occurred any new outbreak or material escalation of hostilities or
other calamity or crisis the effect of which on the financial markets of the
United States is such as to make it, in the reasonable judgment of the
Representative, inadvisable to proceed with the offering; (iii) if there shall
be such a material adverse change in general financial, political or economic
conditions or the effect of international conditions on the financial markets in
the United States is such as to make it, in the reasonable judgment of the
Representative, inadvisable or impracticable to market the Shares; (iv) if
trading in the Shares has been suspended by the Commission or trading generally
on the New York Stock Exchange, Inc. or the over the counter market has been
suspended or limited, or minimum or maximum ranges for prices for securities
shall have been fixed, or maximum ranges for prices for securities have been
required, by said exchange or by order of the Commission, the National
Association of Securities Dealers, Inc., or any other governmental or regulatory
authority; (v) if a banking moratorium has been declared by any state or Federal
authority; or (vi) if there has been, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
material adverse change in the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
its subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business; or
(b) at or before any Closing Date, that any of the
conditions specified in Section 6 shall not have been fulfilled when and as
required by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, the
Company and the Selling Shareholders shall not be under any liability to any
Underwriter, and no Underwriter shall be under any liability to the Company or
the Selling Shareholders, except that (y) if this Agreement is terminated by the
Representative or the Underwriters because of any failure, refusal or inability
on the part of the Company or the Selling Shareholders to comply with the terms
or to fulfill any of the conditions of this Agreement, the Company will
reimburse the Underwriters for all out-of-pocket expenses (including the
reasonable fees and disbursements of their counsel) incurred by them in
connection with the proposed purchase and sale of the Shares or in contemplation
of performing their obligations hereunder and (z) no Underwriter who shall have
failed or refused to purchase the Shares agreed to be purchased by it under this
Agreement, without some reason (such reason being the occurrence of one of the
events set forth in Section 10(a)) sufficient to justify cancellation or
termination of its obligations under this Agreement, shall be relieved of
liability to the Company, the Selling Shareholders or the other Underwriters for
damages occasioned by its failure or refusal.
11. Substitution of Underwriters. If one or more of the Underwriters
shall fail, other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 10, to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representative may find one or more substitute underwriters to
purchase such Shares or make such other arrangements as the Representative may
deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
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<PAGE> 28
Representative, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date:
(a) if the number of Shares to be purchased by the
defaulting Underwriters on such Closing Date shall not exceed 10% of the Shares
that all the Underwriters are obligated to purchase on such Closing Date, then
each of the nondefaulting Underwriters shall be obligated to purchase such
Shares on the terms herein set forth in proportion to their respective
obligations hereunder; provided, that in no event shall the maximum number of
Shares that any Underwriter has agreed to purchase pursuant to Section 1 be
increased pursuant to this Section 11 by more than one-ninth of such number of
Shares without the written consent of such Underwriter; or
(b) if the number of Shares to be purchased by the
defaulting Underwriters on such Closing Date shall exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date, then the
Company shall be entitled to an additional business day within which it may, but
is not obligated to, find one or more substitute underwriters reasonably
satisfactory to the Representative to purchase such Shares upon the terms set
forth in this Agreement.
In any such case, either the Representative or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
five business days in order that necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus) may be effected by the Representative and the Company. If the number
of Shares to be purchased on such Closing Date by such defaulting Underwriter or
Underwriters shall exceed 10% of the Shares that all the Underwriters are
obligated to purchase on such Closing Date, and none of the nondefaulting
Underwriters or the Company shall make arrangements pursuant to this Section
within the period stated for the purchase of the Shares that the defaulting
Underwriters agreed to purchase, this Agreement shall terminate with respect to
the Shares to be purchased on such Closing Date without liability on the part of
any nondefaulting Underwriter to the Company or the Selling Shareholders and
without liability on the part of the Company Indemnitors and the Selling
Shareholders, except in both cases as provided in Sections 7(b), 8, 9 and 10.
The provisions of this Section shall not in any way affect the liability of any
defaulting Underwriter to the Company, the Selling Shareholders or the
nondefaulting Underwriters arising out of such default. A substitute underwriter
hereunder shall become an Underwriter for all purposes of this Agreement.
12. Miscellaneous. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers, the
LLC, the Selling Shareholders and the Underwriters set forth in or made pursuant
to this Agreement shall remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company, the
Selling Shareholders or any of the officers, directors or controlling persons
referred to in Sections 8 and 9 hereof, and shall survive delivery of and
payment for the Shares. The provisions of Sections 7(b), 8, 9 and 10 shall
survive the termination or cancellation of this Agreement.
28
<PAGE> 29
This Agreement has been and is made for the benefit of the Underwriters,
the Company, the Selling Shareholders and their respective successors and
assigns, and, to the extent expressed herein, for the benefit of persons
controlling any of the Underwriters, or the Company, and directors and officers
of the Company, and their respective successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser of Shares from any
Underwriter merely because of such purchase.
All notices and communications hereunder shall be in writing and mailed
or delivered or by telephone or telegraph if subsequently confirmed in writing,
(a) if to the Representative, Oppenheimer & Co., Inc., Oppenheimer Tower, World
Financial Center, New York, New York 10281 Attention: Mark C. Biderman, and (b)
if to the Company, to its agent for service as such agent's address appears on
the cover page of the Registration Statement.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflict of laws.
29
<PAGE> 30
This Agreement 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 instrument. Please confirm that the foregoing correctly sets
forth the agreement among us.
Very truly yours,
T&W FINANCIAL CORPORATION
By:______________________________________
Michael A. Price, Chief Executive Officer
T&W FINANCIAL SERVICES COMPANY L.L.C.
By:______________________________________
-----------------------------------------
, Managing Member
-----------------------------------------
Michael A. Price
-----------------------------------------
Thomas W. Price
-----------------------------------------
Kenneth W. McCarthy, Jr.
-----------------------------------------
Paul B. Luke
Confirmed:
OPPENHEIMER & CO., INC.
Acting on behalf of itself and as representative of
the several Underwriters named in Schedule II annexed hereto.
OPPENHEIMER & CO., INC.
By: ________________________________________
Mark C. Biderman, Managing Director
30
<PAGE> 31
EXHIBIT A
Subsidiaries
T&W Leasing, Inc., a Washington corporation
T&W Financial Services Company L.L.C., a Washington limited liability company
T&W Finance Corp. II, a Delaware corporation
T&W Finance Corp. III, a Delaware corporation
T&W Funding Company I, LLC, a Delaware limited liability company
T&W Funding Company IV, LLC, a Delaware limited liability company
T&W Funding Company V, LLC, a Delaware limited liability company
31
<PAGE> 32
GDC DRAFT Dated August 20, 1997
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Firm Shares
Name to Be Sold
- ---- ----------
<S> <C>
T&W Financial Corporation 2,200,000
Michael A. Price 166,000
Thomas W. Price 80,000
Kenneth W. McCarthy, Jr 57,000
Paul B. Luke 57,000
Total
---------
2,560,000
</TABLE>
<PAGE> 33
GDC DRAFT Dated August 20, 1997
SCHEDULE II
<TABLE>
<CAPTION>
Number of
Firm Shares to
Name Be Purchased
- ---- --------------
<S> <C>
Oppenheimer & Co., Inc.
Total
---------
</TABLE>
<PAGE> 1
EXHIBIT 2.1
RESTRUCTURING AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. THE RESTRUCTURING.................................................. 2
-----------------
1.1 Contributions by Shareholders of Old T&W................ 2
----------------------------------------
1.2 Contributions by Member of Funding I......................3
------------------------------------
1.3 Contributions by Member of Funding IV................... 3
-------------------------------------
1.4 Contributions by Members of Funding V................... 3
-------------------------------------
1.5 Contributions by Members of Finance II.................. 4
--------------------------------------
1.6 Contributions by Members of Finance III................. 4
---------------------------------------
1.7 Number of Shares and Percentage Interest................ 5
----------------------------------------
2. CLOSING ........................................................ 5
-------
2.1 Closing................................................. 5
-------
2.2 Actions Taken at Closing................................ 5
------------------------
2.3 Deliveries at Closing................................... 6
---------------------
3. MISCELLANEOUS....................................................... 6
-------------
3.1 Amendment................................................ 6
---------
3.2 Further Assurances....................................... 6
------------------
3.3 Binding Effect........................................... 6
--------------
3.4 Captions................................................. 6
--------
3.5 No Inconsistent Agreements............................... 6
--------------------------
3.6 Severability..............................................6
------------
3.7 Integration.............................................. 6
-----------
3.8 Governing Law.............................................6
-------------
3.9 Execution in Counterparts................................ 6
-------------------------
</TABLE>
SCHEDULE TO RESTRUCTURING AGREEMENT
Schedule 1.4 Ownership of New T&W Shares & Percentage Interest
i
<PAGE> 3
RESTRUCTURING AGREEMENT
THIS RESTRUCTURING AGREEMENT, dated as of _____________, 1997 is entered
into among T & W FINANCIAL CORPORATION, a Washington corporation ("New T&W"), T
& W LEASING, INC., a Washington corporation ("Old T&W"), T & W FUNDING COMPANY
I, L.L.C., a Delaware limited liability company ("Funding I"), T & W FUNDING
COMPANY IV, L.L.C., a Delaware limited liability company ("Funding IV"), T & W
FUNDING COMPANY V, L.L.C., a Delaware limited liability company ("Funding V"), T
& W FUNDING COMPANY VI, L.L.C., a Delaware limited liability company ("Funding
VI"), T & W FINANCE CORP. II, a Delaware corporation ("Finance II"), T & W
FINANCE CORP. III, a Delaware corporation ("Finance III"), MICHAEL A. PRICE,
Trustee of the PRICE GRANTOR RETAINED ANNUITY TRUSTS ("Price GRATs"), MICHAEL A.
PRICE, individually ("M. Price"), THOMAS W. PRICE ("T. Price"), P.L.M.
CONSULTING GROUP, L.L.C., a Nevada limited liability company ("PLM"), KENNETH W.
McCARTHY, Jr. ("McCarthy") and PAUL B. LUKE ("Luke").
BACKGROUND
WHEREAS, Michael A. Price has transferred substantially all of his stock
in Old T&W and all of his interests in Funding V, Funding VI, Finance II and
Finance III to the Price GRATs. The Price GRATs are irrevocable trusts with
fixed terms during which Michael A. Price and Katherine M. Price are the sole
beneficiaries. Michael A. Price serves as Trustee of the Price GRATs, and as
such, will have the ability to exercise the voting rights with respect to the
shares of New T&W.
WHEREAS, the Price GRATs own 45% of the member interests of Funding VI.
The remaining member interests in Funding VI are owned 50% by PLM and 5% by T.
Price.
WHEREAS, Michael A. Price, T. Price, McCarthy and Luke each own 25% of
the member interests of PLM.
WHEREAS, the shareholders and members of Old T&W, Funding I, Funding IV,
Funding V, Funding VI, Finance II and Finance III desire to enter into a
restructuring transaction (the "Restructuring") pursuant to which the
shareholders and members shall transfer their shares and member interests in the
aforementioned entities through a series of capital contributions to New T&W in
exchange for common stock. The parties contemplate that the Restructuring will
be accomplished as follows:
(1) New T&W has been formed as a Washington corporation.
(2) All shareholders of Old T&W will transfer all of their stock
to New
1
<PAGE> 4
T&W in exchange for common stock of New T&W. Old T&W will be maintained
as a wholly-owned subsidiary of New T&W.
(3) Funding VI will transfer all of its interest in Funding I to
New T&W in exchange for common stock of New T&W.
(4) Funding VI will transfer all of its interest in Funding IV
to New T&W in exchange for common stock of New T&W.
(5) All of the members of Funding V will transfer all of their
interests to New T&W in exchange for common stock of New T&W. New T&W
will then own 100% of the interests of Funding V.
(6) All shareholders of Finance II will transfer all of their
stock in Finance II to New T&W in exchange for common stock of New T&W.
New T&W will then own 100% of stock of Finance II.
(7) All shareholders of Finance III will transfer all of their
stock in Finance III to New T&W in exchange for common stock of New T&W.
New T&W will then own 100% of the stock of Finance III.
WHEREAS, the parties hereto intend that in connection with the
Restructuring New T&W and Funding VI will form a new LLC to be known as "T&W
Financial Services Company L.L.C." ("T&W FSC"). New T&W will contribute to T&W
FSC the net cash proceeds received from New T&W's initial public offering and
all of its interests in Funding I, Funding IV and Funding V. Funding VI will
contribute to T&W FSC substantially all of its assets which include the assets
acquired from Commercial Capital Corporation. Funding VI will not contribute to
T&W FSC the New T&W common stock received in the Restructuring. Funding VI
and/or its owners will be liable for or guarantee various obligations of T&W FSC
and various obligations to which T&W FSC's properties will be subject.
WHEREAS, the parties hereto deem it to be in their best interests to
enter into an agreement to provide for the Restructuring and to establish
certain rights and obligations in connection therewith.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, the parties hereto agree as follows:
ARTICLE 1
THE RESTRUCTURING
2
<PAGE> 5
1.1 Contributions by Shareholders of Old T&W.
(a) Upon the terms set forth herein, at the Closing (as defined
in Section 2.1) and simultaneously with the other contributions
described in this Article 1, each of the Price GRATs shall assign,
transfer, deliver and convey to New T&W, as a contribution to capital,
all of its right, title and interest in and to all shares of Old T&W
common stock held by it free and clear of all liens, security interest
or other encumbrances (collectively, "Encumbrances"). Collectively, the
Price GRATs own 435 shares of the common stock of Old T&W. New T&W shall
issue common stock to the Price GRATs in exchange therefor.
(b) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
M. Price shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of his right, title and interest in and to
the 15 shares of Old T&W common stock held by him free and clear of all
Encumbrances and New T&W shall issue common stock to M. Price in
exchange therefor.
(c) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
T. Price shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of his right, title and interest in and to
the 50 shares of Old T&W common stock held by him free and clear of all
Encumbrances and New T&W shall issue common stock to T. Price in
exchange therefor.
(d) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
McCarthy shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of his right, title and interest in and to
the 13.5 shares of Old T&W common stock held by him free and clear of
all Encumbrances and New T&W shall issue common stock to McCarthy in
exchange therefor.
(e) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
Luke shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of his right, title and interest in and to
the 13.5 shares of Old T&W common stock held by him free and clear of
all Encumbrances and New T&W shall issue common stock to Luke in
exchange therefor.
1.2 Contribution by Member of Funding I.
Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
Funding VI shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of its right, title and
3
<PAGE> 6
interest in and to the 79.98% membership interest of Funding I held by
it free and clear of all Encumbrances and New T&W shall issue common
stock to Funding VI in exchange therefor.
1.3 Contribution by Member of Funding IV.
Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
Funding VI shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of its right, title and interest in and to
the 70.0% membership interest of Funding IV held by it free and clear of
all Encumbrances and New T&W shall issue common stock to Funding VI in
exchange therefor.
1.4 Contributions by Members of Funding V.
(a) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
each of the Price GRATs shall assign, transfer, deliver and convey to
New T&W, as a contribution to capital, all of its respective right,
title and interest in and to the 45.0% interest of Funding V held by it
free and clear of all Encumbrances. Collectively, the Price GRATs own
90% of the interests in Funding V. New T&W shall issue common stock to
the Price GRATs in exchange therefor.
(b) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
T. Price shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of his right, title and interest in and to
the 9.0% membership interest of Funding V held by him free and clear of
all Encumbrances and New T&W shall issue common stock to T. Price in
exchange therefor.
(c) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
Funding VI shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of its right, title and interest in and to
the 1.0% membership interest of Funding V held by it free and clear of
all Encumbrances and New T&W shall issue common stock to Funding VI in
exchange therefor.
1.5 Contributions by Shareholders of Finance II.
(a) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
each of the Price GRATs shall assign, transfer, deliver and convey to
New T&W, as a contribution to capital, all of its right, title and
interest in and to the 45 shares of common stock of Finance II held
4
<PAGE> 7
by it free and clear of all Encumbrances. Collectively, the Price GRATs
own 90 shares of the common stock of Finance II. New T&W shall issue
common stock to the Price GRATs in exchange therefor.
(b) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
T. Price shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of his right, title and interest in and to
the 10 shares of common stock of Finance II held by him free and clear
of all Encumbrances and New T&W shall issue common stock to T. Price in
exchange therefor.
1.6 Contributions by Shareholders of Finance III.
(a) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
each of the Price GRATs shall assign, transfer, deliver and convey to
New T&W, as a contribution to capital, all of its right, title and
interest in and to the 45 shares of common stock of Finance III held by
it free and clear of all Encumbrances. Collectively, the Price GRATs own
90 shares of the common stock of Finance III. New T&W shall issue common
stock to the Price GRATs in exchange therefor.
(b) Upon the terms set forth herein, at the Closing and
simultaneously with the other contributions described in this Article 1,
T. Price shall assign, transfer, deliver and convey to New T&W, as a
contribution to capital, all of his right, title and interest in and to
the 10 shares of common stock of Finance III held by him free and clear
of all Encumbrances and New T&W shall issue common stock to T. Price in
exchange therefor.
1.7 Number of Shares and Percentage Interest Liabilities. The number of
shares and percentage interest owned by each shareholder of New T&W immediately
following the Closing is set forth on Schedule 1.4 hereof.
ARTICLE 2
CLOSING
2.1 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place simultaneously with the execution and delivery of
this Agreement at the Seattle office of Graham & James, L.L.P. on
________________, 1997 at 9:00 a.m. local time (the date and time of the
Closing, the "Closing Date").
2.2 Actions Taken Prior to the Closing. New T&W shall have been formed
prior to the execution and delivery of this Agreement.
5
<PAGE> 8
2.3 Deliveries at the Closing. At the Closing, the shareholders,
directors, officers and members of New T&W, Old T&W, Funding I, Funding IV,
Funding V, Funding VI, Finance II, Finance III, Price GRATs, M. Price, T. Price,
McCarthy and Luke shall each execute and deliver such stock certificates,
assignments and other documents as shall be necessary to effectuate and evidence
the transactions contemplated by Article 1 of this Agreement.
2.4 Indemnification.
The Price GRATS, Funding VI, M. Price, T. Price, McCarthy and Luke,
severally and not jointly, agree to indemnify, hold harmless and defend New T&W
and each Affiliate from and against all liabilities, claims and expenses which
New T&W or any Affiliate may sustain or incur by reason of any claims made
against New T&W or such Affiliate for payment of Taxes relating to periods
preceding the Closing Date. The maximum liability of each of the Price GRATS,
Funding VI, M. Price, T. Price, McCarthy and Luke (each is referred to as an
indemnifying party) shall not exceed the amount equal to the product of (a) the
amount of such liabilities, claims and expenses referred to in the preceding
sentence and (b) the indemnifying party's ownership percentage interest in New
T&W as of the Closing Date. The term "Affiliate" means Old T&W, T&W FSC, Funding
Company I, Funding Company IV, Funding Company V, T&W Finance Corp. I, Finance
II, Finance III and T&W Finance Corp. IV. The term "Taxes" means all federal,
state, local or foreign income, payroll, employee withholding, unemployment
insurance, social security, sales, use, service use, leasing use, excise,
franchise, gross receipts, value added, alternative or added-on minimum,
estimated occupation, real and personal property, stamp transfer, workers'
compensation, severance, windfall profits or other tax of the same or of a
similar nature, including any interest, penalty, or addition thereto, whether
disputed or not.
ARTICLE 3
MISCELLANEOUS
3.1 Amendment. This Agreement may only be amended or modified by a
further written agreement signed by all of the parties to this Agreement.
3.2 Further Assurances. At any time or from time to time after the date
hereof, the parties agree to cooperate with each other, and at the request of
any other party, to execute and deliver any further instruments or documents and
to take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder.
3.3 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
3.4 Captions and Cross References. The various captions in this
Agreement are provided solely for convenience of reference and shall not affect
the meaning or interpretation of any provisions of this Agreement.
3.5 No Inconsistent Agreements. No party hereto shall take any action or
enter into any agreement which is inconsistent with the rights of any party
hereunder or otherwise conflict with the provisions hereof.
3.6 Severability. Any provisions of this Agreement which are invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provision hereof.
3.7 Intent. The parties intend for each individual capital contribution
described herein and the overall Restructuring to be accomplished tax-free for
federal income tax purposes. The provisions of this Agreement shall be construed
and each respective capital contribution shall be accomplished solely in
accordance with this intention and in a manner consistent with section 351 of
the Internal Revenue Code of 1986, as amended and any Treasury Regulations
promulgated thereunder.
3.8 Governing Law. This agreement, including the rights and duties of
the parties
6
<PAGE> 9
hereto, shall be governed by, and construed in accordance with, the internal
laws of the state of Washington.
3.9 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement.
IN WITNESS WHEREOF, the parties have cause this Agreement to be
executed by their respective members and officers as of the date first above
written.
OLD T&W: T&W LEASING, INC.
By:_______________________
Name: Thomas W. Price
Title: President
NEW T&W: T&W FINANCIAL CORPORATION
By:_______________________
Name: Thomas W. Price
Title: President
FUNDING I: T & W FUNDING COMPANY I, L.L.C.
By T & W FUNDING COMPANY VI, L.L.C.
By P.L.M. CONSULTING GROUP, L.L.C.
By:____________________________
Name: Thomas W. Price
Title: Member
7
<PAGE> 10
FUNDING IV: T & W FUNDING COMPANY IV, L.L.C.
By T & W FUNDING COMPANY VI, L.L.C.
By P.L.M. CONSULTING GROUP, L.L.C.
By:____________________________
Name: Thomas W. Price
Title: Member
FUNDING V: T & W FUNDING COMPANY V, L.L.C.
By:____________________________
Name: Thomas W. Price
Title: Member
FUNDING VI: T & W FUNDING COMPANY VI, L.L.C.
By P.L.M. CONSULTING GROUP, L.L.C.
By:____________________________
Name: Thomas W. Price
Title: Member
FINANCE II: T & W FINANCE CORP. II
By:____________________________
Name: Thomas W. Price
Title: Vice-President
FINANCE III: T & W FINANCE CORP. III
By:____________________________
Name: Thomas W. Price
Title: Vice-President
8
<PAGE> 11
PRICE GRATS: PRICE GRANTOR RETAINED ANNUITY TRUSTS
By:____________________________
Name: Michael A. Price
Title: Trustee
T. PRICE: _______________________________
Thomas W. Price
PLM: P.L.M. CONSULTING GROUP, L.L.C.
By:____________________________
Name: Thomas W. Price
Title: Member
MCCARTHY: _______________________________
Kenneth W. McCarthy, Jr.
LUKE: _______________________________
Paul B. Luke
9
<PAGE> 12
SCHEDULE 1.4
Number of Shares and Percentage Interest Owned
of Common Stock of New T&W
<TABLE>
<CAPTION>
Shareholder Number of Shares Owned Percentage Interest
- ----------- ---------------------- -------------------
<S> <C> <C>
Price GRATs 3,411,730 58.83%
T&W Funding Company
VI, L.L.C.1 1,486,134 25.62%
Michael A. Price 166,000 2.86%
Thomas W. Price 440,336 7.59%
Kenneth W. McCarthy, Jr. 147,900 2.55%
Paul B. Luke 147,900 2.55%
Totals 5,800,000 100.00%
</TABLE>
- ----------
1 The beneficial interest is allocated as follows: Price GRATs - 1,337,521
shares and T. Price - 148,613 shares
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
T & W FINANCIAL CORPORATION
ARTICLE 1
NAME
The name of this corporation is: T & W FINANCIAL CORPORATION
ARTICLE 2
CLASSES OF STOCK
Section 2.1 Classes. The total number of shares of all classes of
stock which this corporation shall have authority to issue is fifty million
(50,000,000), consisting of:
(a) Forty million (40,000,000) shares of common stock, the par
value of each of which is $0.01.
(b) Ten million (10,000,000) shares of preferred stock, the
par value of each of which is $0.01 (the "Preferred Stock").
Section 2.2 Preferred Stock. The preferences, limitations and
relative rights of the Preferred Stock are undesignated. The Board of Directors
is authorized to designate one or more series within the Preferred Stock, and
the designation and number of shares within each series, and shall determine
the preferences, limitations, and relative rights of any shares of Preferred
Stock, or of any series of Preferred Stock, before issuance of any shares of
that class or series. The Board of Directors is authorized to amend these
Articles as provided in RCW 23B.06.020 to effect the designation of rights of
any series of Preferred Stock.
ARTICLE 3
NO PREEEMPTIVE RIGHTS
Section 3.1 No Preemptive Rights. The shareholders of this corporation
have no preemptive rights to acquire additional shares of this corporation.
Section 3.2 No Cumulative Voting. The right to cumulate votes in the
election of directors shall not exist with respect to shares of stock of this
corporation.
Articles of Incorporation Page 1
<PAGE> 2
Section 3.3 Special Meetings of Shareholders. At any time when this
corporation is subject to the reporting requirements of Section 13 or Section
15(d) of the Securities Exchange Act of 1934, as amended, special meetings of
the shareholders of this corporation for any purpose or purposes may only be
called by a majority of the Board of Directors or the President of this
corporation. At such time when this corporation is a public company, the
shareholders of this corporation shall have no right to call a special meeting
of the shareholders of this corporation for any purpose.
Section 3.4 Quorum at Shareholder Meetings. For all meetings of
shareholders, a majority of the votes entitled to be cast by each voting group
with respect to a matter shall constitute a quorum of that voting group for
action on that matter.
ARTICLE 4
DIRECTORS
The number of directors which shall constitute the whole board of
directors of this corporation shall be fixed by, or in the manner provided in,
the bylaws of this corporation, as the same may be amended from time to time.
ARTICLE 5
LIMITATION OF DIRECTORS' LIABILITY
A director of this corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for conduct as a director,
except for liability of the director (i) for acts or omissions that involve
intentional misconduct by the director or a knowing violation of law by the
director, (ii) for conduct violating RCW 23B.08.310 of the Washington Business
Corporation Act or (iii) for any transaction from which the director will
personally receive a benefit in money, property or services to which the
director is not legally entitled. If the Washington Business Corporation Act is
amended in the future to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of this corporation shall be eliminated or limited to the full extent permitted
by the Washington Business Corporation Act, as so amended, without any
requirement of further action by the shareholders.
ARTICLE 6
INDEMNIFICATION
The corporation shall indemnify any individual made a party to a
proceeding because that individual is or was a director or officer of the
corporation and shall advance or reimburse the reasonable expenses incurred by
such individual in advance of final disposition of the
Articles of Incorporation Page 2
<PAGE> 3
proceeding, without regard to the limitations in RCW 23B.08.510 and 23B.08.550
of the Washington Business Corporation Act, or any other limitation which may
hereafter be enacted to the extent such limitation may be disregarded if
authorized by the Articles of Incorporation, to the full extent and under all
circumstances permitted by applicable law.
Any repeal or modification of this Article by the shareholders of this
corporation shall not adversely affect any right of any individual who is or
was a director or officer of the corporation which existed at the time of such
repeal or modification.
ARTICLE 7
MERGERS, SHARE EXCHANGES AND SALE OF ASSETS
The approval of any plan of merger, plan of share exchange, sale of
all, or substantially all, the Corporation's assets otherwise than in the usual
and regular course of business shall require the affirmative vote of the holders
of not less than majority of all the votes entitled to be cast by each voting
group entitled to vote on such matter.
ARTICLE 8
REGISTERED AGENT AND ADDRESS
The street address of the registered office of this corporation is:
6416 Pacific Highway East
Tacoma, Washington 98424
and the name of its registered agent at that address is:
Kenneth W. McCarthy, Jr.
ARTICLE 9
INCORPORATOR
The name and address of the incorporator is Kenneth W. McCarthy, Jr. as
follows:
Name Address
---- -------
Kenneth W. McCarthy, Jr. 6416 Pacific Highway East
Tacoma, WA 98424
Articles of Incorporation Page 3
<PAGE> 4
The undersigned person being of the age of eighteen (18) years or more,
as incorporator of this corporation under the Washington Business Corporation
Act, adopts these Articles of Incorporation.
EXECUTED this 6th day of August, 1997.
/s/ KENNETH W. McCARTHY, JR.
-------------------------------------
Kenneth W. McCarthy Jr., Incorporator
Articles of Incorporation Page 4
<PAGE> 5
CONSENT TO SERVE AS REGISTERED AGENT
I, KENNETH W. McCARTHY, Jr., hereby consent to serve as Registered
Agent, in the State of Washington, for the following corporation: T & W
FINANCIAL CORPORATION. I understand that as agent for said corporation, it will
be my responsibility to receive service of process in the name of the
corporation; to forward all mail to the corporation; and to immediately notify
the office of the Secretary of State in the event of my resignation, or of any
changes in the registered office address of the corporation for which I am
agent.
Date: 8-6-97 /s/ KENNETH W. MCCARTHY, JR.
----------------- --------------------------------------
Kenneth W. McCarthy, Jr., Registered Agent
Registered Office Address:
6416 Pacific Highway East
Tacoma, WA 98424
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
T&W FINANCIAL CORPORATION
<PAGE> 2
AMENDMENTS
Date of
Article/Section Effect of Amendment Amendment
- --------------- ------------------- ---------
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<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I OFFICES .............................................. 1
ARTICLE II NUMBER OF DIRECTORS .................................. 1
ARTICLE III SHAREHOLDERS ......................................... 1
Section 3.1 Annual Meeting ................................. 1
Section 3.2 Special Meeting ................................ 1
Section 3.3 Place of Meetings .............................. 2
Section 3.4 Fixing of Record Date .......................... 2
Section 3.5 Voting Lists ................................... 2
Section 3.6 Notice of Meetings ............................. 2
Section 3.7 Waiver of Notice ............................... 3
Section 3.8 Manner of Acting; Proxies ...................... 3
Section 3.9 Participation by Conference Telephone .......... 4
Section 3.10 Quorum ......................................... 4
Section 3.11 Voting of Shares ............................... 4
Section 3.12 Voting of Shares by Certain Holders ............ 4
Section 3.13 Action by Shareholders Without a Meeting ....... 5
ARTICLE IV BOARD OF DIRECTORS ................................... 5
Section 4.1 General Powers ................................. 5
Section 4.2 Number, Tenure and Qualification ............... 5
Section 4.3 Annual and Other Regular Meetings .............. 6
Section 4.4 Special Meetings ............................... 6
Section 4.5 Quorum ......................................... 7
Section 4.6 Manner of Acting ............................... 7
Section 4.7 Participation by Conference Telephone .......... 7
Section 4.8 Presumption of Assent .......................... 7
Section 4.9 Action by Board Without a Meeting .............. 7
Section 4.10 Board Committees ............................... 7
Section 4.11 Resignation .................................... 8
Section 4.12 Removal ........................................ 8
Section 4.13 Vacancies ...................................... 8
Section 4.14 Compensation ................................... 8
ARTICLE V OFFICERS ............................................. 8
Section 5.1 Number ......................................... 8
Section 5.2 Appointment and Term of Office ................. 9
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 5.3 Resignation...........................................9
Section 5.4 Removal...............................................9
Section 5.5 Chairman and Vice-Chairmen of the Board...............9
Section 5.6 Chief Executive Officer...............................9
Section 5.7 President............................................10
Section 5.8 Vice-President.......................................10
Section 5.9 Secretary............................................10
Section 5.10 Treasurer............................................11
Section 5.11 Assistant Officers...................................11
Section 5.12 Compensation of Officers and Employees...............11
ARTICLE VI CONTRACTS..............................................11
ARTICLE VII SHARES.................................................12
Section 7.1 Certificates for Shares..............................12
Section 7.2 Issuance of Shares...................................12
Section 7.3 Beneficial Ownership.................................12
Section 7.4 Transfer of Shares...................................12
Section 7.5 Lost or Destroyed Certificates.......................13
Section 7.6 Stock Transfer Records...............................13
ARTICLE VIII INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS...................................13
Section 8.1 Power to Indemnify...................................13
Section 8.2 Indemnification of Directors, Officers,
Employees and Agents.................................14
Section 8.3 Insurance............................................15
Section 8.4 Survival of Benefits.................................15
Section 8.5 Severability.........................................15
Section 8.6 Applicable Law.......................................16
ARTICLE IX BOOKS AND RECORDS......................................16
ARTICLE X FISCAL YEAR............................................16
ARTICLE XI VOTING OF SHARES OF ANOTHER CORPORATION................16
ARTICLE XII AMENDMENTS TO BYLAWS...................................17
</TABLE>
iii
<PAGE> 5
BYLAWS
OF
T&W FINANCIAL CORPORATION
ARTICLE I
OFFICES
The principal office and place of business of the corporation in the state
of Washington shall be located at 6416 Pacific Highway East, Tacoma, Washington
98424.
The corporation may have such other offices within or without the state of
Washington as the board of directors may designate or the business of the
corporation may require from time to time.
ARTICLE II
NUMBER OF DIRECTORS
The board of directors of this corporation shall consist of not less than
three (3) and not more than nine (9) directors.
ARTICLE III
SHAREHOLDERS
SECTION 3.1 ANNUAL MEETING. The annual meeting of the shareholders shall
be held each year at a place, day and time as may be determined by the board of
directors. The annual meeting shall be for the purpose of electing directors and
for the transaction of such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday in the state of
Washington, the meeting shall be held on the next succeeding business day. If
the election of directors is not held on the day designated herein for any
annual meeting of the shareholders or at any adjournment thereof, the board of
directors shall cause the election to be held at a meeting of the shareholders
as soon thereafter as may be convenient.
SECTION 3.2 SPECIAL MEETING. Special meetings of shareholders of this
corporation may only be called by those persons specified in the Articles of
Incorporation.
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SECTION 3.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held
at either the principal office of the corporation or at such other place within
or without the state of Washington as the board of directors or the president
may designate.
SECTION 3.4 FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors may fix in advance a date as the record
date for any such determination of shareholders, which date in any case shall
not be more than seventy (70) days prior to the date on which the particular
action requiring such determination of shareholders is to be taken. If no record
date is fixed for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders, or shareholders entitled to receive payment
of a dividend or distribution, the day before the first notice of a meeting is
dispatched to shareholders or the date on which the resolution of the board of
directors authorizing such dividend or distribution is adopted, as the case may
be, shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to notice of or to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof unless the board of directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
one hundred twenty (120) days after the date fixed for the original meeting.
SECTION 3.5 VOTING LISTS. At least ten (10) days before each meeting of
the shareholders, the officer or agent having charge of the stock transfer books
for shares of the corporation shall prepare an alphabetical list of all its
shareholders on the record date who are entitled to vote at the meeting or any
adjournment thereof, arranged by voting group, and within each voting group by
class or series of shares, with the address of and the number of shares held by
each, which record for a period of ten (10) days prior to the meeting shall be
kept on file at the principal office of the corporation or at a place identified
in the meeting notice in the city where the meeting will be held. Such record
shall be produced and kept open at the time and place of the meeting shall be
subject to the inspection of any shareholder, shareholder's agent or
shareholder's attorney at any time during the meeting or any adjournment
thereof. Failure to comply with the requirements of this bylaw shall not affect
the validity of any action taken at the meeting.
SECTION 3.6 NOTICE OF MEETINGS. Written or printed notice stating the
date, time and place of a meeting of shareholders and, in the case of a special
meeting of shareholders, the purpose or purposes for which the meting is called,
shall be given by or at the direction of the president, the secretary or the
officer
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or persons calling the meeting to each shareholder of record entitled to vote at
such meeting (unless required by law to send notice to all shareholders
regardless of whether or not such shareholders are entitled to vote), not less
than ten (10) days and not more than sixty (60) days before the meeting, except
that notice of a meeting to act on an amendment to the Articles of
Incorporation, a plan of merger or share exchange, a proposed sale, lease,
exchange or other disposition of all or substantially all of the assets of the
corporation other than in the usual course of business, or the dissolution of
the corporation shall be given not less than twenty (20) days and not more than
sixty (60) days before the meeting. Written notice may be transmitted by: mail,
private carrier or personal delivery; telegraph or teletype; or telephone, wire
or wireless equipment which transmits facsimile of the notice. Such notice shall
be effective upon dispatch if sent to the shareholder's address, telephone
number, or other number appearing on the records of the corporation.
If an annual or special shareholders' meeting is adjourned to a different
date, time or place, notice need not be given of the new date, time or place if
the new date, time or place is announced at the meeting before adjournment
unless a new record date is or must be fixed. If a new record date for the
adjourned meeting is or must be fixed however, notice of the adjourned meeting
must be given to persons who are shareholders as of the new record date.
SECTION 3.7 WAIVER OF NOTICE. A shareholder may waive any notice required
to be given under the provisions of these bylaws, the Articles of Incorporation
or by applicable law, whether before or after the date and time stated therein.
A valid waiver is created by any of the following three methods: (a) in writing
signed by the shareholder entitled to the notice and delivered to the
corporation for inclusion in its corporate records; (b) by attendance at the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting; or (c) by failure to
object at the time of presentation of a matter not within the purpose or
purposes described in the meeting notice.
SECTION 3.8 MANNER OF ACTING; PROXIES. A shareholder may vote either in
person or by proxy. A shareholder may vote by proxy by means of a proxy
appointment form which is executed in writing by the shareholder, his agent, or
by his duly authorized attorney-in-fact. All proxy appointment forms shall be
filed with the secretary of the corporation before or at the commencement of
meetings. No unrevoked proxy appointment form shall be valid after eleven (11)
months from the date of its execution unless otherwise expressly provided in the
appointment form. No proxy appointment may be effectively revoked until notice
in writing of such revocation has been given to the secretary of the corporation
by the shareholder appointing the proxy.
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<PAGE> 8
SECTION 3.9 PARTICIPATION BY CONFERENCE TELEPHONE. At the discretion of
the board of directors, shareholders or proxies may participate in a meeting of
the shareholders by any means of communication by which all persons
participating in the meeting can hear each other during the meeting, and
participation by such means shall constitute presence in person at the meeting.
SECTION 3.10 QUORUM. At any meeting of the shareholders a majority of all
the shares entitled to vote on a matter, represented by shareholders of record,
shall constitute a quorum of that voting group for action on that matter. Once a
share is represented at a meeting, other than to object to holding the meeting
or transacting business, it is deemed to be present for purposes of a quorum for
the remainder of the meeting and for any adjournment of that meeting unless a
new record date is or must be fixed for the adjourned meeting. At such
reconvened meeting, any business may be transacted which might have been
transaction at the adjourned meeting. If a quorum exists, action on a matter is
approved by a voting group if the votes cast within the voting group favoring
the action exceed the votes cast within the voting group opposing the action,
unless the question is one upon which a different vote is required by express
provision of law or of the Articles of Incorporation or of these bylaws.
SECTION 3.11 VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders, except as may be otherwise provided in the Articles of
Incorporation.
SECTION 3.12 VOTING OF SHARES BY CERTAIN HOLDERS.
3.12.1 Shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent or proxy as the board of
directors of such corporation may determine. A certified copy of a resolution
adopted by such directors shall be conclusive as to their determination.
3.12.2 Shares held by a personal representative, administrator,
executor, guardian or conservator may be voted by such administrator, executor,
guardian or conservator, without a transfer of such shares into the name of such
personal representative, administrator, executor, guardian or conservator.
Shares standing in the name of a trustee may be voted by such trustee, but no
trustee shall be entitled to vote shares held in trust without a transfer of
such shares into the name of the trustee.
3.12.3 Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver may be
voted by the receiver without the transfer thereof into his name if authority so
to
4
<PAGE> 9
do is contained in an appropriate order of the court by which such receiver was
appointed.
3.12.4 If shares are held jointly by three or more fiduciaries, the
will of the majority of the fiduciaries shall control the manner of voting or
appointment of a proxy, unless the instrument or order appointing such
fiduciaries otherwise directs.
3.12.5 Unless the pledge agreement expressly provides otherwise, a
shareholder whose shares are pledged shall be entitled to vote such shares until
the shares have been transferred into the name of the pledgee, and thereafter
the pledgee shall be entitled to vote the shares so transferred.
3.12.6 Shares held by another corporation shall not be voted at any
meeting or counted in determining the total number of outstanding shares
entitled to vote at any given time if a majority of the shares entitled to vote
for the election of directors of such other corporation is held by this
corporation.
3.12.7 On and after the date on which written notice of redemption
of redeemable shares has been dispatched to the holders thereof and a sum
sufficient to redeem such shares has been deposited with a bank or trust company
with irrevocable instruction and authority to pay the redemption price to the
holders thereof upon surrender of certificate therefor, such shares shall not be
entitled to vote on any matter and shall be deemed to be not outstanding shares.
SECTION 3.13 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action which
may be required to be taken at a meeting of the shareholders may be taken
without a meeting if one or more written consents setting forth the action so
taken shall be signed, either before or after the action taken, by all the
shareholders entitled to vote with respect to the subject matter thereof. Action
taken by written consent of the shareholders is effective when all consents are
in possession of the corporation, unless the consent specifies a later effective
date. Whenever any notice is required to be given to any shareholder of the
corporation pursuant to applicable law, a waiver thereof in writing, signed by
the person or person entitled to notice, shall be deemed equivalent to the
giving of notice.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 4.1 GENERAL POWERS. The business and affairs of the corporation
shall be managed by its board of directors.
SECTION 4.2 NUMBER, TENURE AND QUALIFICATION. The number of directors set
forth in Article 11 of these bylaws may be increased or decreased from
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<PAGE> 10
time to time by amendment to or in the manner provided in these bylaws. No
decrease, however, shall have the effect of shortening the term of any incumbent
director unless such director resigns or is removed in accordance with the
provisions of these bylaws. The classification of directors as set forth in the
Articles of Incorporation of this corporation may be altered or eliminated only
in the manner provided in the Articles of Incorporation. Except as
classification of directors may be specified by the Articles of Incorporation
and unless removed in accordance with these bylaws, each director shall hold
office until the next annual meeting of the shareholders and until a successor
shall have been elected and qualified. Directors need not be residents of the
state of Washington or shareholders of the corporation.
SECTION 4.3 ANNUAL AND OTHER REGULAR MEETINGS. An annual meeting of the
board of directors shall be held without other notice than this bylaw,
immediately after and at the same place as the annual meeting of shareholders.
The board of directors may specify by resolution the time and place, either
within or without the state of Washington, for holding any other regular
meetings of the board of directors.
SECTION 4.4 SPECIAL MEETINGS. Special meeting of the board of directors
may be called by the board of directors, the chairman of the board, the
president, the secretary or any director. Notice of special meetings of the
board of directors stating the date, time and place thereof shall be given at
least two (2) day prior to the date set for such meeting by the person or
persons authorized to call such meeting. The notice may be oral or written. Oral
notice may be communicated in person or by telephone, wire or wireless
equipment, which does not transmit a facsimile of the notice. Oral notice is
effective when communicated. Written notice may be transmitted by mail, private
carrier, personal delivery or electronic delivery; telegraph or teletype; or
telephone, wire, or wireless equipment which transmits a facsimile of the
notice. Written notice is effective upon dispatch if such notice is sent to the
director's address, telephone number, or other number appearing on the records
of the corporation. If not place for such meeting is designated in the notice
thereof, the meeting shall be held at the principal office of the corporation.
Any director may waive notice of any meeting at any time. Whenever any notice is
required to be given to any director of the corporation pursuant to applicable
law, a waiver thereof in writing signed by the director, entitled to notice,
shall be deemed equivalent to the giving of notice. The attendance of a director
at a meeting constitutes a waiver of notice of the meeting except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully convened. Unless
otherwise required by law, neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
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SECTION 4.5 QUORUM. A majority of the number of directors specified in or
fixed in accordance with these bylaws shall constitute a quorum for the
transaction of any business at any meeting of directors. If less than a quorum
shall attend a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice, and a quorum present at such
adjourned meeting may transact business.
SECTION 4.6 MANNER OF ACTING. If a quorum is present when a vote is taken,
the affirmative vote of a majority of directors present is the act of the board
of directors.
SECTION 4.7 PARTICIPATION BY CONFERENCE TELEPHONE. Directors may
participate in a regular or special meeting of the board by, or conduct the
meting through the use of, any means of communication by which all directors
participating can hear each other during the meeting and participation by such
means shall constitute presence in person at the meeting.
SECTION 4.8 PRESUMPTION OF ASSENT. A director who is present at a meeting
of the board of directors at which action is taken shall be presumed to have
assented to the action taken unless such director's dissent shall be entered in
the minutes of the meeting or unless such director shall file his written
dissent to such action with the person acting as secretary of the meeting before
the adjournment thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after adjournment of the meeting. Such
right to dissent shall not apply to a director who voted in favor of such
action.
SECTION 4.9 ACTION BY BOARD WITHOUT A MEETING. Any action permitted or
required to be taken at a meeting of the board of directors may be taken without
a meeting if one or more written consents setting forth the action so taken,
shall be signed, either before or after the action taken, by all the directors.
Action taken by written consent is effective when the last director signs the
consent, unless the consent specifies a later effective date.
SECTION 4.10 BOARD COMMITTEES. The board of directors may by resolution
designate from among its members an executive committee and one or more other
committees, each of which must have two (2) or more members and shall be
governed by the same rules regarding meetings, action without meetings, notice,
waiver of notice, and quorum and voting requirements as applied to the board of
directors. To the extent provided in such resolutions, each such committee shall
have and may exercise the authority of the board of directors, except as limited
by applicable law. The designation of any such committee and the delegation
thereto of authority shall not relieve the board of directors, or any members
thereof, of any responsibility imposed by law.
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SECTION 4.11 RESIGNATION. Any director may resign at any time by
delivering written notice to the chairman of the board, the president, the
secretary, or the registered office of the corporation, or by giving oral notice
at any meeting of the directors or shareholders. Any such resignation shall take
effect at any subsequent time specified therein, or if the time is not
specified, upon delivery thereof and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.12 REMOVAL. One or more members of the Board of Directors
(including the entire Board) may be removed, with or without cause, at a special
meeting of shareholders called expressly for that purpose. A director (or the
entire Board) may be removed if the number of votes cast in favor of removing
such director (or the entire Board) exceeds the number of votes cast against
removal.
SECTION 4.13 VACANCIES. A vacancy on the board of directors may occur by
the resignation, removal or death of an existing director, or by reason of
increasing the number of directors on the board of directors as provided in
these bylaws. Except as may be limited by the Articles of Incorporation, any
vacancy occurring in the board of directors may be filled by the affirmative
vote of a majority of the remaining directors through less than a quorum. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office, except that a vacancy to be billed by reason of an
increase in the number of directors shall be filled by the board of directors
for a term of office continuing only until the next election of directors by
shareholders.
If the vacant office was held by a director elected by holders of
one or more authorized classes or series of shares, only the holders of those
classes or series of shares are entitled to vote to fill the vacancy.
SECTION 4.14 COMPENSATION. By resolution of the board of directors, the
directors may be paid a fixed sum plus their expenses, if any, for attendance at
meetings of the board of directors or committee thereof, or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
ARTICLE V
OFFICERS
SECTION 5.1 NUMBER. The corporation shall have a president, and may have
one or more vice-presidents, a secretary and a treasurer, each of whom shall be
appointed by the board of directors. Such other officers and assistant officers,
including a chairman of the board, as may be deemed necessary or appropriate may
be appointed by the board of directors. By resolution, the board
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of directors may designate any officer as chief executive officers, chief
operating officer, chief financial officer, or any similar designation. Any two
or more offices may be held by the same person.
SECTION 5.2 APPOINTMENT AND TERM OF OFFICE. The officers of the
corporation shall be appointed by the board of directors for such term as the
board may deem advisable or may be appointed to serve for an indefinite term at
the pleasure of the board. Each officer shall hold office until a successor
shall have been appointed regardless of such officer's term of office, except in
the event of such officer's termination of an indefinite term at the please of
the board or such officer's removal in the manner herein provided.
SECTION 5.3 RESIGNATION. Any officer may resign at any time by delivering
written notice to the chairman of the board, the president, a vice-president,
the secretary or the board of directors, or by giving oral notice at any meeting
of the board. Any such resignation shall take effect at any subsequent time
specified therein, or if the time is not specified, upon delivery thereof and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 5.4 REMOVAL. Any officer appointed by the board of directors may
be removed by the board of directors with or without cause. The removal shall be
without prejudice to the contract rights, if any, of the person so removed.
SECTION 5.5 CHAIRMAN AND VICE-CHAIRMEN OF THE BOARD. The chairman of the
board, if there be such an office, shall, if present, preside at all meeting of
the board of directors, and exercise and perform such other powers and duties as
may be determined from time to time by resolution of the board of directors. The
vice-chairman of the board, if there be such an office, or in the event there
shall be more than one vice-chairman, the one designated more senior at the time
of election, shall perform the duties of the chairman of the board in the
chairman's absence, or in the event of the chairman's death, disability or
refusal to act. The vice-chairman of the board shall exercise and perform such
other powers and duties as may be determined form time to time by resolution of
the board of directors.
SECTION 5.6 CHIEF EXECUTIVE OFFICER. The chief executive officer shall be
the senior executive officer of the corporation and, subject to the control of
the board of directors, shall generally supervise and control the business and
affairs of the corporation. When present the chief executive officer shall
preside at all meeting of the shareholders and in the absence of the chairman of
the board, or if there be none, at all meetings of the board of directors. The
chief executive officer may sign with the secretary or any other proper officer
of the corporation
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thereunto authorized by law if such additional signature is necessary,
certificates for shares of the corporation, and may sign deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
bylaws to some other officer or agent of the corporation or shall be required by
law to be otherwise signed or executed. In general, the chief executive officer
shall perform all duties incident to the office of the principal executive of
the corporation and such other duties as may be prescribed by resolution of the
board of directors from time to time.
SECTION 5.7 PRESIDENT. The president shall be the senior officer of the
corporation after the chief executive officer and, subject to the control of the
board of directors and the chief executive officer, shall generally supervisor
and control the business and affairs of the corporation. When present and in the
absence of the chairman of the board of the chief executive officer, the
president shall preside at all meetings of the shareholders and board of
directors. The president may sign with the secretary or any other proper officer
of the corporation thereunto authorized by law if such additional signature is
necessary, certificates for shares of the corporation, and may sign deeds,
mortgages, bonds, contracts, or other instruments which the board of directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
bylaws to some other officer or agent of the corporation or shall be required by
law to be otherwise signed or executed. In general, the president shall perform
all duties as may be prescribed by the chief executive officer or by resolution
of the board of directors from time to time.
SECTION 5.8 VICE-PRESIDENT. In the absence of the chief executive officer
or president or in the event of their death, disability or refusal to act, the
vice-president, or in the event there shall be more than one vice-president, the
vice-presidents in the order designated at the time of their election, or in the
absence of any designation then in the order of their election, if any, shall
perform the duties of the president. When so acting the vice-president shall
have all the powers of and be subject to all the restrictions upon the president
and shall perform such other duties as from time to time may be assigned to the
vice-president by resolution of the board of directors.
SECTION 5.9 SECRETARY. The secretary shall keep the minutes of the
proceedings of the shareholders and board of directors, shall give notices in
accordance with the provisions of these bylaws and as required by law, shall be
custodian of the corporate records of the corporation, shall keep a record of
the names and addresses of all shareholders and the number and class of shares
held by each, have general charge of the stock transfer books of the
corporation, may if necessary sign with the president, or a vice-president,
certificates for shares of the
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corporation, deeds, mortgages, bonds, contracts, or other instruments which
shall have been authorized by resolution of the board of directors, and in
general shall perform all duties incident to the office of secretary and such
other duties as from time to time may be assigned to the secretary by resolution
of the board of directors.
SECTION 5.10 TREASURER. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties, in such
sum and with such surety or sureties as the board of directors shall determine.
The treasurer shall have charge and custody of and be responsible for keeping
correct and complete books and records of account, for all funds and securities
of the corporation, receive and give receipts for moneys due and payable to the
corporation from any source whatsoever, deposit all such moneys in the name of
the corporation in the banks, trust companies or other depositories as shall be
selected in accordance with the provisions of these bylaws, and in general
perform all of the duties incident to the office of treasurer and such other
duties as from time to time may be assigned to the treasurer by resolution of
the board of directors.
SECTION 5.11 ASSISTANT OFFICERS. The assistant officers in general shall
perform such duties as are customary or as shall be assigned to them by
resolution of the board of directors. If required by the board of directors, the
assistant treasurers shall respectively give bonds for the faithful discharge of
their duties in such sums and with such sureties as the board of directors shall
determine.
SECTION 5.12 COMPENSATION OF OFFICERS AND EMPLOYEES. The board of
directors shall fix compensation of officers and may fix compensation of other
employees from time to time. No officer shall be prevented from receiving a
salary by reason of the fact that such officer is also a director of the
corporation.
ARTICLE VI
CONTRACTS
SECTION 6.1 CONTRACTS WITH OR LOANS TO DIRECTORS AND OFFICERS. The
corporation may enter into contracts and otherwise transact business as vendor,
purchaser, or otherwise, with its directors, officers, and shareholders and with
corporations, associations, firms, and entities in which they are or may become
interested as directors, officers, shareholders, members, or otherwise, as
freely as though such interest did not exist, as permitted by applicable law. In
the absence of fraud the fact that any director, officer, shareholder, or any
corporation, association, firm or other entity of which any director, officer,
or shareholder is interested, is in any way interested in any transaction or
contract shall not make
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the transaction or contract void or voidable, or require the director, officer,
or shareholder to account to this corporation for any profits therefrom if the
transaction or contract is or shall be authorized, ratified, or approved by (a)
vote of a majority of a quorum of the board of directors excluding any
interested director or directors, (b) the written consent of the holders of a
majority of the shares entitled to vote or (c) a general resolution approving
the acts of the directors and officers adopted at a shareholders meeting by vote
of the holders of the majority of the shares entitled to vote. Nothing herein
contained shall create or imply any liability in the circumstances above
described or prevent the authorization, ratification or approval of such
transactions or contracts in any other manner.
ARTICLE VII
SHARES
SECTION 7.1 CERTIFICATES FOR SHARES. The shares of the corporation may be
represented by certificates in such form as prescribed by the board of
directors. Signatures of the corporate officers on the certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer agent,
or registered by a registrar, other than the corporation itself or an employee
of the corporation. All certificates shall be consecutively numbered or
otherwise identified. All certificates shall bear such legend or legends as
prescribed by the board of directors or these bylaws.
SECTION 7.2 ISSUANCE OF SHARES. Shares of the corporation shall be issued
only when authorized by the board of directors, which authorization shall
include the consideration to be received for each share.
SECTION 7.3 BENEFICIAL OWNERSHIP. Except as otherwise permitted by these
bylaws, the person in whose name shares stand on the books of the corporation
shall be deemed by the corporation to be the owner thereof for all purposes. The
board of directors may adopt by resolution a procedure whereby a shareholder of
the corporation may certify in writing to the corporation that all or a portion
of the shares registered in the name of such shareholder are held for the
account of a specified person or persons. Upon receipt by the corporation of a
certification complying with such procedure, the persons specified in the
certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the holders of record of the number of shares specified in
place of the shareholder making the certification.
SECTION 7.4 TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power
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<PAGE> 17
of attorney duly executed and filed with the secretary of the corporation, on
surrender for cancellation of the certificate for the shares. All certificates
surrendered to the corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled.
SECTION 7.5 LOST OR DESTROYED CERTIFICATES. In the case of a lost,
destroyed or mutilated certificate, a new certificate may be issued therefor
upon such terms and indemnity to the corporation as the board of directors may
prescribe.
SECTION 7.6 STOCK TRANSFER RECORDS. The stock transfer books shall be kept
at the principal office of the corporation or at the office of the corporation's
transfer agent or registrar. The name and address of the person to whom the
shares represented by any certificate, together with the class, number of shares
and date of issue, shall be entered on the stock transfer books of the
corporation. Except as provided in these bylaws, the person in whose name shares
stand on the books of the corporation shall be deemed by the corporation to be
the owner thereof for all purposes.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
SECTION 8.1 POWER TO INDEMNIFY.
8.1.1 POWER TO INDEMNIFY. The corporation may indemnify and hold
harmless to the full extent permitted by applicable law each person who was or
is made a party to or is threatened to be made a party to or is involved
(including, without limitation, as a witness) in any actual or threatened
action, suit or other proceeding, whether civil, criminal, administrative or
investigative, by reason of that fact that he or she is or was a director,
officer, employee or agent of the corporation or, being or having been such a
director, officer, employee or agent, he or she is or was serving at the request
of the corporation as a director, officer, employee or agent of the corporation
and shall inure to the benefit of his or her heirs and personal representatives.
8.1.2 POWER TO PAY EXPENSES IN ADVANCE OF FINAL DISPOSITION. The
corporation may pay expenses incurred in defending any such proceeding in
advance of the final disposition of any such proceeding; provided, however, that
the payment of such expenses in advance of the final disposition of a proceeding
shall be made to or on behalf of a director, officer, employee or agent only
upon delivery to the corporation of an undertaking, by or on behalf of such
director,
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<PAGE> 18
officer, employee or agent, to repay all amounts so advanced if it shall
ultimately be determined that such director, officer, employee or agent is not
entitled to be indemnified under this Article or otherwise, which undertaking
may be unsecured and may be accepted without reference to financial ability to
make repayment.
8.1.3 POWER TO ENTER INTO CONTRACTS. The corporation may enter into
contracts with any person who is or was a director, officer, employee and agent
of the corporation in furtherance of the provisions of this Article and may
create a trust fund, grant a security interest in property of the corporation,
or use other means (including, without limitation, a letter of credit) to ensure
the payment of such amounts as may be necessary to effect indemnification as
provided in this Article.
8.1.4 EXPANSION OF POWERS. If the Washington Business Corporation
Act is amended in the future to expand or increase the power of the corporation
to indemnify, to pay expenses in advance of final disposition, to enter into
contracts, or to expand or increase any similar or related power, then, without
any further requirement of action by the shareholders or directors of this
corporation, the powers described in this Article shall be expanded and
increased to the fullest extent permitted by the Washington Business Corporation
Act, as so amended.
8.1.5 LIMITATION ON POWERS. No indemnification shall be provided
under this Article to any such person if the corporation is prohibited by the
nonexclusive provisions of the Washington Business Corporation Act or other
applicable law as then in effect from paying such indemnification. For example,
no indemnification shall be provided to any director in respect of any
proceeding, whether or not involving action in his or her official capacity, in
which he or she shall have been finally adjudged to be liable on the basis of
intentional misconduct or knowing violation of law by the director, or from
conduct of the director in violation of RCW 23B.08.310, or that the director
personally received a benefit in money, property or services to which the
director was not legally entitled.
SECTION 8.2 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
8.2.1 DIRECTORS. The corporation shall indemnify and hold harmless
any person who is or was a director of this corporation, and pay expenses in
advance of final disposition of a proceeding, to the full extent to which the
corporation is empowered.
8.2.2 OFFICERS, EMPLOYEES, AND AGENTS. The corporation may, by
action of its Board of Directors from time to time, indemnify and hold harmless
any person who is or was an officer, employee or agent of the corporation, and
pay expenses in advance of final disposition of a proceeding, to the full extent
to
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<PAGE> 19
which the corporation is empowered, or to any lesser extent which the Board of
Directors may determine.
8.2.3 ENFORCEMENT. A director, officer, employee or agent
("claimant") shall be presumed to be entitled to indemnification and/or payment
of expenses under this Article upon submission of a written claim (and, in an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition, where the undertaking in
subsection 9.1.2 above has been delivered to the corporation) and therefore the
corporation shall have the burden of proof to overcome the presumption that the
claimant is so entitled.
If a claim under this Article is not paid in full by the
corporation within sixty (60) days after a written claim has been received by
the corporation, except in the case of a claim for expenses incurred in
defending a proceeding in advance of its final disposition, in which case the
applicable period shall be twenty (20) days, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid amount of
the claim and, to the extent successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. The failure
of the corporation (including its board of directors, its shareholders or
independent legal counsel) to have made a determination prior to the
commencement of such action that indemnification of or reimbursement or
advancement of expenses to the claimant is proper in the circumstances shall not
be a defense to the action or create a presumption that the claimant is not so
entitled.
8.2.4 RIGHTS NOT EXCLUSIVE. The right to indemnification and payment
of expenses in advance of final disposition of a proceeding conferred in this
Article shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Articles of Incorporation,
bylaws, agreement, vote of shareholders or disinterested directors or otherwise.
SECTION 8.3 INSURANCE. The corporation may purchase and maintain
insurance, at its expense, to protect itself and any director, officer,
employee, agent or trustee of the corporation or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under the
Washington Business Corporation Act.
SECTION 8.4 SURVIVAL OF BENEFITS. Any repeal or modification of this
Article shall not adversely affect any right of any person existing at the time
of such repeal or modification.
SECTION 8.5 SEVERABILITY. If any provision of this Article or any
application thereof shall be invalid, unenforceable or contrary to applicable
law, the
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remainder of this Article, or the application of such provision to persons or
circumstances other than those as to which it is held invalid, unenforceable or
contrary to applicable law, shall not be affected thereby and shall continue in
full force and effect.
SECTION 8.6 APPLICABLE LAW. For purposes of this Article, "applicable law"
shall at all times be construed as the applicable law in effect at the date
indemnification may be sought, or the law in effect at the date of the action,
omission or other event giving rise to the situation for which indemnification
may be sought, whichever is selected by the person seeking indemnification. As
of the date hereof, applicable law shall include RCW 23B.08.500 through .600, as
amended.
ARTICLE IX
BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its shareholders
and the board of directors and such other records as may be necessary or
advisable.
ARTICLE X
FISCAL YEAR
The fiscal year of the corporation shall be determined by resolution
adopted by the board of directors. In the absence of such a resolution, the
fiscal year shall be the calendar year.
ARTICLE XI
VOTING OF SHARES OF ANOTHER CORPORATION
Shares of another corporation held by this corporation may be voted by the
president or vice-president, or by proxy appointment form executed by either of
them, unless the directors by resolution shall designate some other person to
vote the shares.
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ARTICLE XII
AMENDMENTS TO BYLAWS
These bylaws may be altered, amended or repealed, and new bylaws may be
adopted, by a majority of the board of directors or by holders of at least
seventy-five percent of the voting stock of this corporation.
The undersigned, being the secretary of the corporation, hereby certifies
that these bylaws are the bylaws of T&W Financial Corporation, adopted by
resolution of the directors on July 22, 1997.
DATED this 22nd day of July, 1997.
--------------------------------------------
Kenneth W. McCarthy
Secretary
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<PAGE> 1
EXHIBIT 5.1
August 20, 1997
T&W Financial Corporation
6416 Pacific Highway East
Tacoma, Washington 98424
RE: 2,944,000 SHARES OF COMMON STOCK OF T&W FINANCIAL CORPORATION
Ladies and Gentlemen:
We have acted as counsel for T&W Financial Corporation (the "Company"), a
Washington corporation, in connection with the (i) authorization and issuance of
2,200,000 shares of common stock of the Company, $.01 par value per share (the
"Issuer Shares"), (ii) the sale of a total of 360,000 shares of common stock of
the Company by Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W.
McCarthy, Jr. (the "Selling Shareholder Shares"), (iii) the sale of up to an
additional 384,000 shares of common stock of the Company by the Company pursuant
to an over-allotment option granted to the underwriters (the "Option Shares")
and (iv) the preparation of a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act of 1933, as amended. We have
examined the Registration Statement and such other documents as we deem
necessary for the purpose of this opinion.
Based on the foregoing, we are of the opinion that:
1. Upon effectiveness of the Registration Statement, and the receipt by the
Company of the consideration from the sale of the Issuer Shares as
contemplated by the Registration Statement, the Issuer Shares will be
duly authorized, validly issued, fully paid and non-assessable.
2. The Selling Shareholder Shares are duly authorized, validly issued,
fully paid and non-assessable.
3. Upon effectiveness of the Registration Statement and the receipt by the
Company of the consideration from the sale of the Option Shares as
contemplated by the Registration Statement, the Option Shares will be
duly authorized, validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Registration
Statement under the caption "Legal Matters."
Very truly yours,
/s/ ALAN KOSLOW
- ---------------
Alan Koslow
for
GRAHAM & JAMES LLP
<PAGE> 1
EXHIBIT 10.1
================================================================================
TRUST AND SECURITY AGREEMENT
among
T & W FUNDING COMPANY I, l.L.C.
(the "Transferor")
T & W FINANCIAL CORPORATION
(the "Servicer")
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(the "Trustee" and "Back-up Servicer")
================================================================================
Dated as of February 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
Parties 1
Preliminary Statement...............................................................1
Trust Statement.....................................................................1
Conveyance Clause...................................................................1
ARTICLE ONE DEFINITIONS....................................................3
Section 1.01. Definitions..............................................3
ARTICLE TWO THE CERTIFICATES...............................................21
Section 2.01. Form Generally...........................................21
Section 2.02. Denomination.............................................21
Section 2.03. Execution, Authentication, Delivery and Dating...........21
Section 2.04. Temporary Certificates...................................22
Section 2.05. Registration, Registration of Transfer and Exchange......22
Section 2.06. Limitation on Transfer and Exchange......................23
Section 2.07. Mutilated, Destroyed, Lost or Stolen Certificate.........24
Section 2.08. Payment of Principal and Interest; Principal and Interest
Rights Preserved.........................................25
Section 2.09. Persons Deemed Owner.....................................27
Section 2.10. Cancellation.............................................27
Section 2.11. Intended Tax Characterization............................27
ARTICLE THREE FUNDINGS.......................................................28
Section 3.01. Fundings.................................................28
Section 3.02. Procedure for Fundings...................................28
Section 3.03. Fundings by Certificateholders...........................29
Section 3.04. Re-underwriting..........................................30
ARTICLE FOUR ISSUANCE OF CERTIFICATES; SUBSTITUTIONS OF COLLATERAL..........31
Section 4.01. Conditions to Issuance of Certificates...................31
</TABLE>
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<TABLE>
<S> <C> <C>
Section 4.02. Additional Fundings......................................33
Section 4.03. Perfection of Transfer...................................35
Section 4.04. Lease Receivables........................................36
Section 4.05. Releases.................................................38
Section 4.06. Trust Property...........................................39
Section 4.07. Notice of Release........................................39
Section 4.08. Nature of Transfer.......................................39
ARTICLE FIVE SATISFACTION AND DISCHARGE.....................................40
Section 5.01. Satisfaction and Discharge of Agreement..................40
Section 5.02. Application of Trust Money...............................40
ARTICLE SIX DEFAULTS AND REMEDIES..........................................42
Section 6.01. Events of Default........................................42
Section 6.02. Acceleration of Maturity; Rescission and Annulment.......42
Section 6.03. Collection of Indebtedness and Suits for Enforcement by
Trustee................................................. 44
Section 6.04. Remedies.................................................44
Section 6.05. Optional Preservation of Trust Property..................45
Section 6.06. Trustee May File Proofs of Claim.........................45
Section 6.07. Trustee May Enforce Claims Without Possession of
Certificates.............................................46
Section 6.08. Application of Money Collected...........................46
Section 6.09. Limitation on Suits......................................48
Section 6.10. Unconditional Right of Certificateholders to Receive
Principal and Interest...................................48
Section 6.11. Restoration of Rights and Remedies.......................48
Section 6.12. Rights and Remedies Cumulative...........................49
Section 6.13. Delay or Omission; Not Waiver............................49
Section 6.14. Control by Certificateholders............................49
Section 6.15. Waiver of Certain Events by Less than All
Certificateholders.......................................49
Section 6.16. Undertaking for Costs....................................50
Section 6.17. Waiver of Stay or Extension Laws.........................50
Section 6.18. Sale of Trust Property...................................50
Section 6.19. Action on Certificates...................................51
ARTICLE SEVEN THE TRUSTEE....................................................53
Section 7.01. Certain Duties and Responsibilities......................53
</TABLE>
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<TABLE>
<S> <C> <C>
Section 7.02. Notice of Default and Other Events.......................55
Section 7.03. Certain Rights of Trustee................................55
Section 7.04. Not Responsible for Recitals or Issuance of Certificates.56
Section 7.05. May Hold Certificates....................................57
Section 7.06. Money Held in Trust......................................57
Section 7.07. Compensation and Reimbursement...........................57
Section 7.08. Corporate Trustee Required; Eligibility..................58
Section 7.09. Resignation and Removal; Appointment of Successor........58
Section 7.10. Acceptance of Appointment by Successor...................59
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business of Trustee......................................60
Section 7.12. Co-Trustees and Separate Trustees........................60
Section 7.13. Rights with Respect to the Servicer......................61
Section 7.14. Appointment of Authenticating Agent......................61
Section 7.15. Trustee to Hold Lease Contracts..........................63
Section 7.16. Money for Certificate Payments to Be Held in Trust.......63
ARTICLE EIGHT THE POLICY.....................................................65
Section 8.01. Payments under the Policy................................65
ARTICLE NINE AMENDMENTS.....................................................66
Section 9.01. Amendments without Consent of Certificateholders.........66
Section 9.02. Amendments and Modifications to Agreement with Consent of
Certificateholders.......................................67
Section 9.03. Execution of Amendments..................................68
Section 9.04. Effect of Amendments.....................................68
Section 9.05. Reference in Certificates to Amendments..................68
Section 9.06. Amendment as to Registered Form..........................68
ARTICLE TEN REDEMPTION OF CERTIFICATES.....................................69
Section 10.01. Redemption at the Option of the Transferor; Election to
Redeem...................................................69
Section 10.02. Notice to Trustee; Deposit of Redemption Price...........69
Section 10.03. Notice of Redemption by the Transferor...................69
Section 10.04. Deposit of the Redemption Price..........................70
Section 10.05. Certificates Payable on Redemption Date..................70
Section 10.06. Release of Lease Contracts...............................70
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE ELEVEN REPRESENTATIONS, WARRANTIES AND COVENANTS......................71
Section 11.01. Representations and Warranties...........................71
Section 11.02. Covenants................................................73
Section 11.03. Other Matters as to the Transferor.......................79
ARTICLE TWELVE ACCOUNTS AND ACCOUNTINGS.......................................80
Section 12.01. Collection of Money......................................80
Section 12.02. Collection Account.......................................80
Section 12.03. Reports by Trustee to Certificateholders.................82
ARTICLE THIRTEEN PROVISIONS OF GENERAL APPLICATION..............................84
Section 13.01. General Provisions.......................................84
Section 13.02. Acts of Certificateholders...............................84
Section 13.03. Notices, etc., to Trustee, Bond Insurer, Transferor and
Servicer.................................................84
Section 13.04. Notices to Certificateholders; Waiver....................85
Section 13.05. Effect of Headings and Table of Contents.................86
Section 13.06. Successors and Assigns...................................86
Section 13.07. Separability.............................................86
Section 13.08. Benefits of Agreement....................................86
Section 13.09. Legal Holidays...........................................86
Section 13.10. Governing Law............................................86
Section 13.11. Counterparts.............................................86
Section 13.12. Corporate Obligation.....................................86
Section 13.13. Compliance Certificates and Opinions.....................87
Section 13.14. Bond Insurer Default.....................................87
Section 13.15. Third Party Beneficiary..................................87
</TABLE>
EXHIBITS
Exhibit A - Form of Investment Letter
Exhibit B - Form of Supplemental Grant of 5
Substitute Lease Contracts
Exhibit C - Form of Funding Report
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<PAGE> 6
Exhibit D - Form of Certificate
Exhibit E - Form of Transferor Officer's Certificate pursuant to Section
4.02(b)
Exhibit F - Form of Transferor Officer's Certificate pursuant to Section
4.02(d)
Exhibit G - Form of Servicer Officer's Certificate pursuant to Section
4.02(d)
Exhibit H - Form of Transferor Officer's Certificate pursuant to Section
4.02(g)
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<PAGE> 7
This TRUST AND SECURITY AGREEMENT (this "Agreement"), dated as of February
1, 1997, is by and among T & W Funding Company I, L.L.C. (the "Transferor"), T &
W Financial Corporation, as servicer (the "Servicer"), Norwest Bank Minnesota,
National Association, a national banking association, as trustee (the "Trustee")
and as back-up servicer (the "Back-up Servicer").
PRELIMINARY STATEMENT
The Transferor has duly authorized the execution and delivery of this
Agreement to provide for the issuance of the Certificates by the Trust (as
defined herein) 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. The Transferor,
the Servicer, the Trustee and the Back-up Servicer are entering into this
Agreement, and the Trustee is accepting the trusts 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.
TRUST STATEMENT
The Transferor does hereby create and establish, pursuant to the laws of
the State of New York and this Agreement, a trust, which for convenience shall
be known as "T & W Lease-Backed Trust."
CONVEYANCE CLAUSE
The Transferor does hereby transfer, assign, set over, and otherwise convey
to the Trustee, for the ratable benefit of the Holders of the Certificates and
the Bond Insurer, all of the Transferor's rights, title and interest in and to
the following and any and all benefits accruing to the Transferor from: (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 related
Cut-Off Date; (b) the Equipment and Leased Vehicles related to such Lease
Contracts that are owned by the Transferor and a perfected security interest of
the Transferor in any of the Equipment and Leased Vehicles that is not owned by
the Transferor; (c) any rights of the Transferor under each Insurance Policy
related to the Lease Contracts and Insurance Proceeds; (d) the Contribution
Agreement, and any other Transaction Documents to which the Transferor is a
party; (e) the Servicing Agreement; (f) all amounts from time to time on deposit
in the Collection Account
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<PAGE> 8
(including any Eligible Investments and other property in such accounts); (g)
the Lease Contract Files 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 (all of the foregoing being hereinafter
referred to as the "Trust Property"). 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 or any Certificateholder of any
obligation of the Transferor, the Company, the Servicer or any other Person in
connection with the Trust Property or under any agreement or instrument relating
thereto.
The Trustee acknowledges its acceptance on behalf of the Certificateholders
and the Bond Insurer of all right, title and interest previously held by the
Transferor in and to the Trust Property, 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 the Bond Insurer may be
adequately and effectively protected.
It is the intention of the Transferor and the Trustee that this assignment
and conveyance constitute a sale of the Trust Property (other than the Lease
Contracts, the Lease Contract Files, the Leased Vehicles and the Equipment)
conveying good title thereto, and a grant or assignment of a valid first
priority perfected security interest in the Lease Contracts, the Lease Contract
Files, the Leased Vehicles and the Equipment, free and clear of all Liens, from
the Transferor to the Trust, and that the Trust Property not be part of the
Transferor's estate in the event of the insolvency or bankruptcy of the
Transferor. However, in the event that, notwithstanding the intent of the
Transferor and the Trustee, the Trust Property is held to be property of the
Transferor's estate, or if for any reason this Agreement is held or deemed to
create a security interest in the Trust Property, then (x) this Agreement shall
also be deemed to be a security agreement with respect to the Trust Property
within the meaning of Article 8 and Article 9 of the Uniform Commercial Code as
in effect in the State of New York and (y) the conveyance provided for in this
Conveyance Clause shall be deemed to be a grant (or a complete and present
assignment) by the Transferor to the Trust of a valid first priority perfected
security interest in all of the Trust Property, including without limitation,
the Transferor's right, title and interest in and to the Lease Contracts, the
Lease Receivables, the Leased Vehicles owned by the Transferor and the Equipment
owned by the Transferor and all proceeds thereof.
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<PAGE> 9
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 Contribution Agreement.
"Act": With respect to any Certificateholder, the meaning specified in
Section 13.02 hereof.
"Accrual Date": With respect to the Certificates, the date upon which
interest begins accruing on such Certificates, as specified in such
Certificates.
"Accrual Interval": With respect to each Accrual Period other than the
Accrual Period relating to the Initial Payment Date, each period beginning on a
Payment Date (or with respect to any additional principal amounts due to a
Funding during such Accrual Period, the related Funding Date) and ending on the
day immediately prior to the earlier of the next Funding Date or Payment Date,
as appropriate. The Accrual Interval with respect to the Accrual Period relating
to the Initial Payment Date shall be the period beginning on the Accrual Date
(or with respect to any additional principal amounts due to a Funding during
such Accrual Period, the related Funding Date) and ending on the day immediately
prior to the earlier of the next Funding Date or the Initial Payment Date, as
appropriate. Each Accrual Period may consist of multiple Accrual Intervals.
"Accrual Period": The period beginning on the fifteenth day of each
month (or, in the case of the Accrual Period that is applicable to the Initial
Payment Date, beginning on the Accrual Date for such Certificates) and ending on
the fourteenth day of the immediately following month.
"Additional Lease Contract": Each Lease Contract acquired by the
Transferor and conveyed to the Trust on a Funding Date.
"Additional Servicer Fee": The amount, if any, of the fee payable in
accordance with Section 6.02(b) 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.
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"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" or "Aggregate Implicit Principal Balance": The
aggregate of the Implicit Principal Balances of all Lease Contracts outstanding
at any time.
"Agreement": This Agreement, as supplemented, 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 to 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 or any supplement.
"Annualized Default Rate": For any Due Period, (i) the sum of the
Implicit Principal Balances as of the Calculation Date occurring in such Due
Period of all Lease Contracts that became Defaulted Lease Contracts during such
Due Period (including any Lease Contracts that have been purchased or
substituted) (ii) minus the sum of Recoveries and Residual Proceeds received
during such Due Period, (iii) divided by the Aggregate Implicit Principal
Balance at the beginning of the Due Period, (iv) multiplied by twelve.
"Application for Certificate of Title": With regard to each Leased
Vehicle for which a Certificate of Title has not been issued, evidence that an
application for a Certificate of Title has been submitted with the appropriate
authority.
"Assignment and Assumption Agreement": An agreement between a
Contributor and the Transferor pursuant to which such Contributor transfers
Lease Assets to the Transferor in exchange for an ownership interest in the
Transferor and an assumption by the Transferor of certain indebtedness of such
Contributor.
"Available Cash" : With respect to each Payment Date, the amounts
available in the Collection Account after payment of all amount required by
clauses (i) through (v) of Section 12.02(d) hereof.
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"Authenticating Agent": Initially, the Trustee, and thereafter any
entity appointed by the Trustee pursuant to Section 7.14 hereof.
"Back-up Servicer": Initially, Norwest Bank Minnesota, National
Association, a national banking association, and its permitted successors and
assigns under the Servicing Agreement.
"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 the Servicing Agreement as Back-up Servicer, in an amount
equal to the product of (i) one-twelfth of the Back-up Servicer Fee Rate and
(ii) the Outstanding Principal Balance of the Certificates on the preceding
Payment Date after giving effect to distributions on such date.
"Back-up Servicer Fee Rate": For any Due Period in which the Aggregate
IPB is less than $50 million, a rate equal to four one-hundredths of one percent
(0.04%) per annum. For any Due Period in which the Aggregate IPB is greater than
or equal to $50 million, a rate equal to three one-hundredths of one percent
(0.03%) per annum; provided, however, with respect to the Discount Rate the
Back-up Servicer Fee Rate shall be equal to four one-hundredths of one percent
(0.04%) per annum.
"Benefit Plan Investor": The meaning set forth in 29 C.F.R. Section
2510.3-101.
"Board of Directors": Either the board of directors of the Transferor
or of the Servicer, 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.
"Bond Insurer": MBIA Insurance Corporation, and its permitted
successors and assigns under the Insurance Agreement.
"Bond Insurer Default": The occurrence and continuance of any of the
following events: (a) the failure by the Bond Insurer to make a payment under
the Insurance Agreement in accordance with its terms; or (b) an Insurer
Insolvency.
"Bond Insurer Premium": The meaning set forth in the Insurance
Agreement.
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"Bond Insurer Premium Rate": The meaning set forth in the Insurance
Agreement
"Business Day": Any day other than a Saturday, a Sunday or a day on
which the Bond Insurer or banking institutions in (a) New York City, or (b) the
city in which the Corporate Trust Office is located, are authorized or obligated
by law or executive order to close.
"Calculation Date": The last day of a Due Period, except that with
respect to the Initial Payment Date, the Calculation Date shall mean the related
Cut-Off Date.
"Certificate Interest Rate": Eight and two hundred seventy-five
one-thousandths percent (8.275%) per annum.
"Certificate of Title": With regard to each Leased Vehicle, the
original certificate of title relating thereto, which shall name the Transferor
as the owner of such Leased Vehicle and the Trustee as the secured party.
"Certificate Purchase Agreement": The Certificate Purchase Agreement
dated as of February 7, 1997 by and among the Company, the Transferor and Centre
Square Funding Corporation.
"Certificate Register": The meaning specified in Section 2.05 hereof.
"Certificateholder" or "Holder": The Person in whose name a Certificate
is registered in the Certificate Register.
"Certificates" or "Lease-Backed Certificates": The Certificates issued
under the terms of this Agreement on the Closing Date and which may vary in
principal amount as set forth herein.
"Closing Date": February 7, 1997.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateralization Percentage": As of any date of determination prior
to the end of the Funding Period, a percentage equal to the greatest of (A)
eight percent (8.0%), and (B) the product of (i) four and (ii) the concentration
percentage based on the aggregate Implicit Principal Balances of the Lease
Contracts with respect to the Customer with the largest concentration of Lease
Contracts. On and after such date, the "Collateralization Percentage" shall be
the Collateralization Percentage determined on the final day of the Funding
Period.
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"Collection Account": The trust account or accounts created and
maintained pursuant to Section 12.02 hereof.
"Company": T & W Financial Corporation, and all successors thereto in
accordance with the Contribution Agreement.
"Contributor": Each of T & W Funding Company V, L.L.C., a Delaware
limited liability company and T & W Funding Company VI, L.L.C., a Delaware
limited liability company.
"Contribution Agreement": The Contribution Agreement dated as of
February 1, 1997 by and among the Transferor, the Company and the Contributors.
"Corporate Trust Office": The principal corporate trust office of the
Trustee at the location identified in Section 13.03 herein or such other address
as the Trustee may designate from time to time in accordance with Section 13.03,
or the principal corporate trust office of any successor Trustee.
"Customer": The lessee under each related Lease Contract, including any
guarantor of such lessee and their respective successors and assigns.
"Cut-Off Date": For each Funding, the last Business Day of the month
preceding the related Funding Date, or such other Business Day agreed to by the
Transferor, the Servicer and the Bond Insurer and set forth on the related
Funding Report.
"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 the day (i) when any portion of such Lease
Contract is 180 days delinquent or (ii) the Servicer determines in accordance
with its customary practices that it shall not make a Servicer Advance or that a
prior Servicer Advance is unrecoverable.
"Defaulted Lease Purchase and Substitution Limit": $2,500,000.
"Delinquency Rate": For any Due Period, the sum of the Implicit
Principal Balances of all Lease Contracts as of the Calculation Date occurring
in such Due Period with respect to which a Customer has not made the Scheduled
Payment or any portion thereof due in the prior Due Period (including any such
Lease Contracts that have been purchased or substituted),
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divided by the Aggregate Implicit Principal Balance on such Calculation Date
(including any such Lease Contracts that have been purchased or substituted).
"Delinquent Lease Contract": For any Due Period, any Lease Contract (a)
with respect to which a Customer has not made any Scheduled Payment or any
portion thereof due in such Due Period and which remains unpaid as of the
Calculation Date at the end of such Due Period and (b) which is not a Defaulted
Lease Contract.
"Delinquent Lease Purchase and Substitution Limit": $7,500,000.
"Determination Date": The fifth Business Day preceding each Payment
Date.
"Discount Rate": For each Lease Contract, the rate equal to the sum of
(i) the Certificate Interest Rate, (ii) the Back-up Servicer Fee Rate, (iii) the
Bond Insurer Premium Rate and (iv) the Trustee Fee Rate.
"Dollar(s)": Lawful money of the United States of America.
"Due Date": With respect to each Scheduled Payment and each Lease
Receivable, the date of the month on which such Scheduled Payment is due
thereunder.
"Due Period": As to any Determination Date, Payment Date or Servicer
Remittance 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,
Payment Date or Servicer Remittance Date occurs.
"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" shall mean book-entry securities entered on the
books of the registrar of such security and held in the name or on behalf of the
Trustee or negotiable instruments or securities represented by instruments in
bearer form (and held in the possession of the Trustee or its agent) or
registered form (registered in the name of the Trustee or its nominee) that
constitute the following:
(i) 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;
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(ii) (A) 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 categories of each of the Rating Agencies and provided
that each such investment has an original maturity of no more than 365
days and (B) any other demand or time deposit or deposit which is fully
insured by the Federal Deposit Insurance Corporation;
(iii) repurchase obligations with a term not to exceed 30 days
with respect to any security described in clause (i) above and entered
into with a depository institution or trust company (acting as a
principal) rated in the highest short-term rating category by S&P and
by Moody's; provided, however, that collateral transferred pursuant to
such repurchase obligation must (A) be valued weekly at current market
price plus accrued interest, (B) pursuant to such valuation, equal, at
all times, to 105% of the cash transferred by the Trustee in exchange
for such collateral and (C) 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;
(iv) 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;
(v) a guaranteed investment contract approved by each of the
Rating Agencies and the Bond Insurer 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;
(vi) money market funds including money market funds managed
by the Trustee having ratings in the highest available long term rating
category of each of the Rating Agencies 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
(vii) any investment approved in writing by each of the Rating
Agencies and the Bond Insurer.
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"Enumerated States": As of any date of determination, the ten states
with the largest concentration of Lease Contracts based upon the aggregate
Implicit Principal Balances of such Lease Contracts.
"Equipment": The equipment leased to the Customers pursuant to the
Lease Contracts and described by general equipment type under the column heading
"equip" on the Lease Schedule.
"Existing Indebtedness": The meaning specified in Exhibit D of the
Contribution Agreement.
"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.
"Final Due Date": With respect to each Lease Receivable, the final Due
Date thereunder.
"Final Payment Date": With respect to the Certificates, the date on
which the final principal payment on such Certificates is made as therein or
herein provided, whether at the Stated Maturity, or by acceleration or
redemption.
"Funding": An additional purchase of Certificates by the
Certificateholders on a Funding Date, the result of which is an increase in the
Outstanding Principal Balance of the Certificates as of such Funding Date.
"Funding Amount": As of any Funding Date, an amount equal to (A) the
Funding IPB minus (B)(i) the Required Collateralization Amount (computed taking
into account the Aggregate Implicit Principal Balance including the related
Funding IPB) minus (ii) the Required Collateralization Amount (computed prior to
the related Funding); provided, however, that the Outstanding Principal Balance
of the Certificates shall not exceed the Maximum Outstanding Certificate Amount.
"Funding Date": After the Closing Date, any Business Day during the
Funding Period on which the Transferor desires to obtain a Funding in accordance
with the terms of this Agreement; provided, however, that (a) no Fundings shall
occur on any date between a Determination Date and the related Payment Date and
(b) Fundings shall not occur more than two times per month.
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"Funding IPB": The sum of the Implicit Principal Balances of the Lease
Contracts acquired by or on behalf of the Transferor and conveyed to the Trust
on any Funding Date.
"Funding Period": The period commencing on the Closing Date through and
including the earlier to occur of (i) a Funding Period Trigger Event, (ii)
January 31, 2000, unless extended by mutual agreement among the Transferor, the
Bond Insurer and the Certificateholders; provided that Moody's receives
notification of such extension, (iii) the date designated by the Transferor upon
five Business Days prior written notice to the Certificateholders and the Bond
Insurer or (iv) the date on which the Liquidity Facility is terminated.
"Funding Period Trigger Event": Any of the following events during the
Funding Period:
(1) With respect to the Reported Company, the Tangible Net
Worth Requirement is not met; or
(2) For any three consecutive Due Periods, the average of the
Annualized Default Rates for such consecutive Due Periods was greater
than 2.5%; or
(3) For any three consecutive Due Periods, the average of the
Delinquency Rates for such consecutive Due Periods was greater than
6.0%; or
(4) A payment has been made to the Trustee by the Bond Insurer
pursuant to the Policy; or
(5) A Trigger Event has occurred; or
(6) The Reported Company defaults on any payment obligations
under any agreement evidencing indebtedness;
(7) Anytime after August 7, 1998, the Bond Insurer shall
determine that its participation in the transactions contemplated
hereunder or under any related document will have a material adverse
impact on the Bond Insurer; or
(8) WITH RESPECT TO ANY DATE OF DETERMINATION, THE AGGREGATE
IMPLICIT PRINCIPAL BALANCE IS LESS THAN THE SUM OF (A) THE REQUIRED
COLLATERALIZATION AMOUNT AND (B) THE OUTSTANDING PRINCIPAL BALANCE OF
THE CERTIFICATES AND SUCH DEFICIENCY CONTINUES UNREMEDIED FOR A PERIOD
OF 60 DAYS.
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"Funding Report": The report in the form attached hereto as Exhibit C
delivered by the Transferor to the Trustee, the Bond Insurer and the
Certificateholders in connection with a Funding.
"Guaranty Amounts": Any and all amounts paid or payable by any
individual 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": As of any date of determination, with
respect to each Lease Receivable, the present value of the remaining stream of
Scheduled Payments due with respect to such Lease Receivable after the
applicable Calculation Date (as reduced by the Servicer Fee but not reduced by
any Additional Servicer Fee) based upon discounting such Scheduled Payments
(assuming such Scheduled Payments are received on the next succeeding
Calculation Date on or after the applicable Due Dates) to such Calculation Date
at the Discount Rate, at the same frequency as the Payment Dates; except that on
the Calculation Date (w) on or immediately following the deposit into the
Collection Account of Insurance Proceeds equal to the outstanding Implicit
Principal Balance of the related Lease Contract, or the Purchase Price of a
repurchased Lease Contract, or on or immediately following the delivery of a
Substitute Lease Contract, (x) immediately on or after the date that a Lease
Contract has become a Defaulted Lease Contract, or (y) immediately preceding the
Final Payment Date with respect to the Certificates, the Implicit Principal
Balance of each such related Lease Receivable shall be zero. To the extent that
the Final Due Date of any Lease Receivable is later than the Stated Maturity of
the Certificates, any Scheduled Payments due on such Lease Receivable after the
Calculation Date immediately preceding the Stated Maturity of such Certificates
shall not be taken into account in calculating the Implicit Principal Balance of
such Lease Receivable.
"Independent" or "independent": When used with respect to any specified
Person means such a Person, who (1) is in fact independent of the Transferor,
(2) does not have any direct financial interest or any material indirect
financial interest in the Transferor or in any Affiliate of the Transferor and
(3) is not connected with the Transferor as an officer, employee, promoter,
underwriter, 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": BDO Seidman LLP or any other firm of
independent certified public accountants of recognized national standing.
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"Initial Aggregate Implicit Principal Balance": The greatest Aggregate
Implicit Principal Balance calculated on any Calculation Date since the Closing
Date.
"Initial Payment Date": February 18, 1997.
"Insurance Agreement": The Insurance Agreement, dated as of February 1,
1997, by and among the Bond Insurer, the Transferor, the Servicer, K&P Finance
Corp. I, the Trustee and the Back-up Servicer.
"Insurance Policy": With respect to an item of Equipment or Leased
Vehicle 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 Leased Vehicle (including policies procured by the Company, either
Contributor or the Servicer on behalf of the Customer).
"Insurance Proceeds": With respect to an item of Equipment or Leased
Vehicle and a Lease Contract, any amount received during the related Due Period
pursuant to an Insurance Policy issued with respect to such Equipment or Leased
Vehicle 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.
"Insurer Insolvency": The meaning set forth in the Insurance Agreement.
"Interest Distribution Amount": With respect to each Payment Date, the
amount of interest owed on the Certificates for such Payment Date.
"Investment Letter": The meaning set forth in Section 2.06 hereof.
"Lease Assets": The meaning set forth in the Contribution Agreement.
"Lease Contract File": The meaning specified in the Contribution
Agreement.
"Lease Contracts": The lease contracts and loan contracts (and all
rights with respect thereto, including all security interests, 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 or Leased Vehicles to the extent specifically related to any Lease
Contract) which are pledged by the Transferor to the Trustee from time to time
pursuant to this Agreement to support payment of the Certificates and identified
on the Lease Schedule attached to a Funding Report delivered to the Trustee, the
Bond Insurer and the
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Certificateholders on any Funding Date or which are Substitute Lease Contracts,
and any amendments, riders and annexes thereto; provided, however, that, from
and after the date on which a Lease Contract is purchased or substituted by the
Company or the Transferor in accordance with Section 4.04 hereof, such
repurchased 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 (i) the Scheduled Payments, (ii) any Guaranty
Amounts, (iii) any Insurance Proceeds, (iv) any Residual Proceeds, (v) any
Recoveries and (vi) any Overdue Payments.
"Lease Schedule": With respect to each Funding, the listing of Lease
Contracts and Lease Receivables attached to a Funding Report as Schedule A,
which shall include with respect to each Lease Contract listed on such Schedule:
(a) a number identifying such Lease Contract, (b) the Implicit Principal
Balance, (c) the Customer, (d) the State of the Customer's billing address, (e)
the original and remaining term, (f) the Scheduled Payment, (g) the frequency
with which Scheduled Payments are due, (h) the zip code of the Customer's
billing address, (i) the SIC Code and (j) the type of equipment, as such
schedule may be amended upon any purchase or substitution of Lease Contracts
made in accordance with the terms of the Transaction Documents.
"Leased Vehicle": An automobile or truck which is the subject of a
Lease Contract.
"Lien": Any security interest, lien, charge, pledge, equity or
encumbrance of any kind other than liens for taxes due and payable after the
applicable Funding Date, mechanic's liens filed after the applicable Funding
Date and any liens that attach after the applicable Funding Date by operation of
law.
"Liquidated Lease Receivable": A Lease Receivable that has been
liquidated pursuant to Section 3.01(b) of the Servicing Agreement.
"Liquidity Facility": The liquidity facility established pursuant to
that certain liquidity agreement dated as of February 7, 1997 by and among
CoreStates Bank, N.A., as liquidity agent and the liquidity banks named as
parties thereto.
"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.
"Maximum Default Rate": 3.0%.
"Maximum Delinquency Rate": 7.0%.
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"Maximum Outstanding Certificate Amount": $100,000,000.
"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.
"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 of 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 the Bond Insurer and which opinion
shall be in form and substance acceptable to the Trustee and the Bond Insurer
and shall comply with the applicable requirements of Section 13.l3 hereof.
"Outstanding": With respect to the 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;
(b) Certificates for whose payment money in the necessary
amount has been theretofore irrevocably deposited with the Trustee or
any Paying Agent in trust for the Holders of such Certificates
(provided, however, that if such Certificates are to be redeemed,
notice of such redemption has been duly given pursuant to this
Agreement, satisfactory to the Trustee); and
(c) 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;
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provided, however, that for purposes of determining whether the Holders of the
requisite outstanding principal amount of Certificates have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Certificates owned by the Transferor or any Affiliate of the Transferor or the
Servicer 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.
"Outstanding Principal Balance": As of any date of determination, the
principal amount of the Certificates outstanding as of such date.
"Overdue Payment": With respect to a Due Period and a Delinquent Lease
Contract, all payments due in a prior Due Period that the Servicer receives from
or on behalf of a Customer during the related Due 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 Trust.
"Payment Date": The fifteenth 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.
"Policy": With respect to the Certificates, the financial guaranty
insurance policy issued by the Bond Insurer insuring the Certificates in
accordance with the terms thereof.
"Preference Claim": Shall have the meaning set forth in Section 8.01
hereof.
"Principal Distribution Amount": With respect to each Payment Date (a)
for any Payment Date prior to Stated Maturity, an amount equal to (i) if, on
such Payment Date, the Available Cash is sufficient to pay the Required
Principal Distribution Amount on such date, the Required Principal Distribution
Amount; or (ii) if, on such Payment Date, the Available Cash is not sufficient
to pay the Required Principal Distribution Amount on such date, the Available
Cash; and (b) on the Stated Maturity, an amount equal to the Outstanding
Principal Balance of the Certificates as of such date.
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"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase Price": With respect to any Lease Contract repurchased by the
Company or one of the Contributors pursuant to Section 3.03 of the Contribution
Agreement or by the Transferor pursuant to Section 4.04(d) hereof or Section
3.10 of the Servicing Agreement, the sum of (i) the Implicit Principal Balance
of the related Lease Receivable on the Calculation Date on or immediately
succeeding the date when the Lease Contract is repurchased, (ii) 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 (iii) with respect to
the related Equipment or Leased Vehicle, the amount recorded in the books and
records of the Company or the Transferor as the "unguaranteed residual."
"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 the Initial Payment Date, the Record Date shall be the Closing
Date.
"Recoveries": For any Due 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 Due Period in respect of such Defaulted Lease
Contract or from liquidation or re-leasing of the related Equipment or Leased
Vehicle, including but not limited to Scheduled Payments, Overdue Payments,
Guaranty Amounts, and Insurance Proceeds, as reduced by (i) any unreimbursed
Servicer Advances with respect to such Lease Contract and (ii) any reasonably
incurred out-of-pocket expenses incurred by the Servicer in enforcing such
Defaulted Lease Contract.
"Redemption Date": A date fixed pursuant to Section 10.01 hereof.
"Redemption Price": With respect to any Certificate, and as of any
Redemption Date, the Outstanding Principal Balance of such Certificate, together
with interest accrued thereon to the Redemption Date at the 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 any
Certificate, a date fixed pursuant to Section 10.01 hereof.
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"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 Property.
"Reported Company": Shall mean T & W Financial Corporation and its
Affiliates on a consolidated basis; provided, however, if T & W Financial
Corporation is no longer acting as Servicer, then "Reported Company" shall also
mean any successor Servicer appointed pursuant to this Agreement.
"Reported Company's Financial Statements": Shall include the Reported
Company's audited consolidated balance sheet, income statement, statement of
cash flows, auditors opinion letter regarding audited financial statements and
all notes to the audited financial statements.
"Required Collateralization Amount": As of any date of determination,
the greatest of (A) the Collateralization Percentage multiplied by the Aggregate
Implicit Principal Balance as of the related Calculation Date, and (B) the sum
of the aggregate Implicit Principal Balances of all the Lease Contracts under
which the three Customers with the largest aggregate Implicit Principal Balances
are obligated and (C) an amount equal to the product of (i) one-half of the
Collateralization Percentage and (ii) the Initial Aggregate Implicit Principal
Balance.
"Required Collateralization Percentage": As of any date of
determination, a percentage equal to the Required Collateralization Amount
divided by the Aggregate Implicit Principal Balance.
"Required Principal Distribution Amount": With respect to each Payment
Date, an amount equal to the Outstanding Principal Balance of the Certificates
as of the Calculation Date preceding such Payment Date, minus the product of (A)
one minus the Required Collateralization Percentage and (B) the Aggregate IPB as
of the Calculation Date preceding such Payment Date.
"Residual Proceeds": With respect to a Lease Contract that is not a
Defaulted Lease Contract and the related Equipment or Leased Vehicle, the net
proceeds (including Insurance Proceeds) of any sale, re-lease (including any
lease renewal) or other disposition of such Equipment or Leased Vehicle.
"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
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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.
"S & P": Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, a corporation organized and existing under the laws of the State of
Delaware, and its successors in interest.
"Sale": The meaning specified in Section 6.18 hereof.
"Scheduled Payment": With respect to a Payment Date and a Lease
Contract, the periodic payment (exclusive of any amounts in respect of taxes)
set forth in such Lease Contract due from the Customer in the related Due
Period, calculated without regard to any modification granted pursuant to
Section 3.01(b)(v) of the Servicing Agreement; a payment made in a Due Period is
not a Scheduled Payment with respect to such Due Period unless all prior
Scheduled Payments have been made as of the date of such payment.
"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.
"Servicer Fee": An amount equal to $5.00 per Lease Contract per
Scheduled Payment. The Servicer Fee shall not include the Additional Servicer
Fee.
"Servicer Remittance Date": The Determination Date.
"Servicing Agreement": The Servicing Agreement dated as of February 1,
1997 by and among the Servicer, the Transferor, the Trustee and the Back-up
Servicer, as amended or supplemented from time to time in accordance with the
terms thereof.
"Servicing Charges": The sum of (i) all late payment charges paid by
Customers on Delinquent Lease Contracts after payment in full of any Scheduled
Payments due in a prior Due Period and Scheduled Payments for the related Due
Period and (ii) any other incidental charges or fees received from a Customer,
including but not limited to, late fees, collection fees and insufficient funds
check charges.
"Servicing Officers": The persons listed on a certificate of the
Servicer from time to time delivered by the Servicer to the Transferor, the Bond
Insurer and the Trustee.
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"State": Any state of the United States of America and, in addition,
the District of Columbia and Puerto Rico.
"Stated Maturity": The Payment Date in the Due Period which is six
months following the Due Period in which the final Scheduled Payment is due with
respect to the Lease Contract funded prior to the end of the Funding Period with
the longest original term.
"Tangible Net Worth Requirement": The requirement that with respect to
the Reported Company:
(a) the total assets of the Reported Company and its
Affiliates which would be shown as assets on a consolidated balance
sheet of the Reported Company and its Affiliates as of such time
prepared in accordance with generally accepted accounting principles
consistently applied after eliminating all amounts properly
attributable to minority interests, if any, in the stock and surplus of
the Affiliates, minus
(b) the total liabilities of the Reported Company and its
Affiliates which would be shown as liabilities on a consolidated
balance sheet of the Reported Company and its Affiliates as of such
time prepared in accordance with generally accepted accounting
principles consistently applied, minus
(c) the net book value of all assets, after deducting any
reserves applicable thereto, which would be treated as intangible under
generally accepted accounting principles consistently applied
including, without limitation, good will, trademarks, trade names,
service marks, brand names, copyrights, patents, and unamortized debt
discount and expense, organizational expenses and the excess of the
equity in any Affiliate over the cost of the investment in such
Affiliate, minus
(d) the amount of any debt obligations to the Reported Company
or any of its Affiliates by any shareholder, officer or director of the
Servicer or any such Affiliate, is equal to at least $6,000,000 with
respect to the occurrence of a Trigger Event and $7,500,000 with
respect to the occurrence of a Funding Period Trigger Event.
"Transition Cost": Any documented expenses and allocated cost of
personnel reasonably incurred by a successor Servicer or the Trustee 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.
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"Transaction Documents": This Agreement, the Servicing Agreement, the
Contribution Agreement, the Assignment and Assumption Agreements, the
Certificates, the Insurance Agreement and the Policy.
"Transferor": T & W Funding Company I, L.L.C., and all successors
thereto in accordance with the terms hereof.
"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.
"Trigger Event": Any of the following events: (1) for any three
consecutive Due Periods, the average of the Annualized Default Rates for such
consecutive Due Periods shall be equal to or greater than the Maximum Default
Rate; (2) in any Due Period, the Annualized Default Rate is equal to or greater
than three times the Maximum Default Rate; (3) in any two consecutive Due
Periods, the sum of the Annualized Default Rates for such Due Periods is equal
to or greater than three times the Maximum Default Rate; (4) for any three
consecutive Due Periods, the average of the Delinquency Rates shall be greater
than the Maximum Delinquency Rate; (5) the Tangible Net Worth Requirement is not
met; (6) there is a Servicer Event of Default, as defined in the Servicing
Agreement; (7) if both Michael Price and Thomas Price are no longer officers and
directors of the Servicer or both are incapacitated for a period of six or more
consecutive months; (8) an Event of Default under this Agreement occurs and is
continuing; (9) any of the events set forth in clauses (d) or (e) of Section
6.01 occurs with respect to the Company or either of the Contributors; (10) the
Bond Insurer makes a payment to the Trustee under the Policy or (11) the
indebtedness of the Company under any of its other credit facilities has been
accelerated.
"Trust" or "T & W Lease-Backed Trust": The trust created by this
Agreement, the estate of which consists of the Trust Property.
"Trust Property": 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 (i) on the Initial Payment Date, the initial Outstanding
Principal Balance of the Certificates and (ii) on any Payment Date
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thereafter, the Outstanding Principal Balance of the Certificates on the
preceding Payment Date after giving effect to distributions on such date.
"Trustee Fee Rate": For any Due Period in which the Aggregate IPB is
less than $50 million, a rate equal to three and one-half one-hundredths of one
percent (0.035%) per annum. For any Due Period in which the Aggregate IPB is
greater than or equal to $50 million, a rate equal to two one-hundredths of one
percent (0.02%) per annum; provided, however, with respect to the Discount Rate
the Trustee Fee Rate shall be equal to three and one-half one-hundredths of one
percent (0.035%) per annum.
"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."
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Article Two
The Certificates
Section 2.01. Form Generally. The Certificates shall be in
substantially the form set forth in Exhibit D hereto, 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. Denomination. (a) This Agreement provides for the
issuance by the Trust of the Certificates, all subject to and in accordance with
the terms of this Agreement.
The Lease Contracts delivered in accordance with Section 4.01 on the
Closing Date or in accordance with Section 4.02 on any Funding Date, as
applicable, shall be deemed to be conveyed to the Trust by the Transferor. In
exchange for the Lease Contracts conveyed to the Trust on the Closing Date the
Trustee shall, on the Closing Date, transfer the proceeds the Trust receives
from the sale of the Certificates to the Transferor. On each subsequent Funding
Date, the Transferor shall receive the applicable Funding Amount from the
Trustee in exchange for the Lease Contracts conveyed to the Trust relating to
such Funding. Such Funding Amounts shall be paid to the Transferor in accordance
with Section 3.03(b).
(b) On the Closing Date the Trust shall issue the Certificates in the
initial aggregate principal amount of $11,166,448.64. The Outstanding Principal
Balance of the Certificates shall be adjusted on each Funding Date and/or
Payment Date in connection with subsequent Fundings or the repayment of
principal. The aggregate principal amount of the Certificates which may be
authenticated and delivered under this Agreement shall be $100,000,000, 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 Certificates shall be issuable only as registered
Certificates without coupons in denominations of at least $100,000 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 such Certificate with a remaining aggregate principal amount
outstanding of less than $100,000.
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Section 2.03. Execution, Authentication, Delivery and Dating. The
Certificates shall be executed on behalf of the Trust by a Responsible Officer
of the Trustee. Such signature on the Certificates must be manual.
Certificates bearing the manual signatures of individuals who were at
the time when such signatures were affixed, authorized to sign on behalf of the
Trust shall be valid, binding obligations, notwithstanding that such individuals
or any of them have ceased to be so authorized prior to the authentication and
delivery of such Certificates or did not hold such offices at the date of such
Certificates.
The Certificates shall bear on its face the Closing Date and be dated
as of the date of its authentication.
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 direct the Trustee to 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 Trustee 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
Corporate Trust Office, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Certificates, a Responsible Officer of
the Trustee 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. 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 Trustee shall cause to be kept at its Corporate Trust Office a register (the
"Certificate Register"), in which, subject to such reasonable regulations as it
may prescribe, the Trustee shall provide for
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the registration of Certificates and the registration of transfers of
Certificates. The Bond Insurer shall have the right to examine the Certificate
Register at all reasonable times. The Trustee shall provide the Bond Insurer, at
its request, a list of the names and addresses of the Certificateholders as
appears in the Certificate Register.
(b) Only upon surrender for registration of transfer of any Certificate
at the Corporate Trust Office and subject to the conditions set forth in Section
2.06 hereof, a Responsible Officer of the Trustee 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 and Stated Maturity.
(c) At the option of the Holder, a Certificate may be exchanged for
other Certificates of any authorized denominations and of a like aggregate
principal amount and Stated Maturity, upon surrender of the Certificates to be
exchanged at such office or agency. Whenever any Certificates are so surrendered
for exchange, a Responsible Officer of the Trustee 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 the valid obligations of the Trust, evidencing
the same debt and 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 Trustee) be duly endorsed or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee 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 Trustee 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.
Notwithstanding anything else to the contrary contained in this
Agreement, the obligation of the Trust to pay the principal of and interest on
the Certificates is not a general obligation of the Trust, but is limited solely
to the Trust Property and the Policy.
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
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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
substantially in the form set forth on Exhibit A hereto, or other applicable
document (the "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
Bond Insurer, the Servicer or the Trust). The Trustee is not 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, the Bond Insurer, the Trust 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 set forth in the next succeeding sentence, furnish to any
Holder, or any prospective transferee designated by a Holder, the information
required to be delivered to Holders and prospective transferees 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.
Section 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 or the Trustee 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 acquisition or transfer of a Certificate or any interest therein
may be made during the Funding Period without the prior written consent of the
Transferor.
(d) The Trustee shall have no liability to the Trust or any
Certificateholder arising from a transfer of any such Certificate in reliance
upon a certification described in this Section 2.06.
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Section 2.07. Mutilated, Destroyed, Lost or Stolen Certificate. If (i)
any mutilated Certificate is surrendered to the Trustee 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 the Bond Insurer
such security or indemnity as may be required by the Trustee or the Bond Insurer
to save the Trust, the Trustee and the Bond Insurer or any agent of them
harmless, then, in the absence of notice to the Trustee that such Certificate
has been acquired by a bona fide purchaser, a Responsible Officer of the Trustee
shall execute and, 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,
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, the Trust, the Trustee and the Bond Insurer 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 the Trust, the Trustee or the Bond
Insurer 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 Trustee 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 Trustee 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 Trustee 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 Trust, 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.
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Section 2.08. Payment of Principal and Interest; Principal and Interest
Rights Preserved. (a) Interest shall accrue on the Outstanding Principal Balance
of the Certificates for each applicable Accrual Period (or the Accrual Intervals
comprising each such Accrual Period) at the Certificate Interest Rate on the
basis of a 360-day year and actual days elapsed 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 payable (giving effect to any applicable grace periods)
until fully paid. Interest shall be due and payable in arrears on each Payment
Date, with each payment of interest calculated as described above on the
Outstanding Principal Balance of the Certificates on the Business Day
immediately following the preceding Payment Date or on the Closing Date, if
there has not been any preceding Payment Date. Notwithstanding the foregoing,
with respect to any Fundings with respect to the Certificates occurring since
the preceding Payment Date, interest shall be calculated with respect to each
Accrual Interval based upon the actual number of days elapsed during such
Accrual Interval and the Outstanding Principal Balance as of such Payment Date
or Funding Date, as appropriate. 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 Certificate shall be payable in installments
ending no later than the applicable Stated 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 Certificates
shall be in an amount equal to the Principal Distribution Amount, if any,
available to be paid in accordance with the priorities of Section 12.02(d)
hereof. The principal payable on the Certificates shall be paid on each Payment
Date beginning on the first Payment Date and ending on the Final Payment Date.
All payments of principal with respect to all of the Certificates, shall be made
on a pro rata basis based upon the ratio that the Outstanding Principal Balance
of a Certificate bears to the Outstanding Principal Balance of all Outstanding
Certificates; 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 of and interest 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
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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 Trustee 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 Trustee expects that
the final installment of principal of such Certificate will be paid that the
Trustee expects that such final installment will be paid on such Payment Date.
Such notice shall be mailed no later than the fifteenth 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) 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.
Section 2.09. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Certificate, the Trustee and any agent of the
Trustee or the Bond Insurer 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
Trustee, the Bond Insurer nor any agent of the Trustee or the Bond Insurer 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
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Certificates held by the Trustee shall be disposed of by the Trustee as is
customary with its standard practice.
Section 2.11. Intended Tax Characterization. The parties hereto,
including the Certificateholders, agree that it is their mutual intent that, for
all applicable purposes, the Certificates shall constitute indebtedness.
Further, each party hereto, including the Certificateholders, hereby covenants
to every other party hereto to treat the Certificates as indebtedness for all
applicable purposes in all tax filings, reports and returns and otherwise, and
further covenants that neither it nor any of its Affiliates will take or
participate in the taking of, or permit to be taken, any action that is
inconsistent with the treatment of the Certificates as indebtedness for tax
purposes. All successors and assigns of the parties hereto, including the
Certificateholders, shall be bound by the provisions hereof.
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Article Three
Fundings
Section 3.01. Fundings. (a) During the Funding Period the Transferor
shall acquire Additional Lease Contracts pursuant to the Contribution Agreement
with the proceeds of a Funding. Such Additional Lease Contracts shall be deemed
to be conveyed to the Trust upon the delivery to the Trustee of the Assignment
and Assumption Agreement or Agreements, as appropriate, and the related Funding
Report in accordance with Section 4.02.
(b) The Funding Amount for the Lease Contracts acquired by the Trust on
a Funding Date shall be determined by the Servicer on behalf of the Transferor
and shall be reflected in the Funding Report with respect to Lease Contracts
identified on the related Lease Schedule attached to the Funding Report for such
Funding. Such Additional Lease Contracts shall become subject to this Agreement
and the related Lease Contract Files shall be held by the Trustee.
(c) The Transferor may acquire funds from a corresponding increase in
the Outstanding Principal Balance of the Certificates in the following manner
and amounts on any Funding Date throughout the Funding Period:
(i) on the Closing Date, the Trustee will issue the
Certificates and the Transferor may receive funds from the sale of such
Certificates in an amount greater than or equal to 1,000,000; provided,
however, that the Outstanding Principal Balance of the Certificates
pursuant to this subsection (c) shall not be greater than $100,000,000;
and
(ii) the Transferor may on any Funding Date during the Funding
Period, receive additional funds from a corresponding increase in the
Outstanding Principal Balance of the Certificates; provided, however
that the conditions in Section 4.02 are satisfied and the aggregate
Funding Amount for any one month is no more than $10,000,000.
Section 3.02. Procedure for Fundings.
(a) Conditions Precedent. Each Funding is subject to the satisfaction
of the following conditions precedent on the relevant date specified below and
the conditions precedent set forth in Section 4.02 hereof:
(i) three Business Days advance notification by the Transferor
to the Servicer, the Bond Insurer, the Certificateholders and the
Trustee (in writing or by facsimile notification) of a request for a
Funding to occur and the related Funding Date;
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(ii) no later than 11:00 a.m. (New York time) the fifth
Business Day immediately prior to the requested Funding Date, the
Transferor shall have delivered to the Servicer, the Back-up Servicer,
the Bond Insurer and the Certificateholders, by a diskette or
electronic transfer in a format acceptable to the Servicer, the Back-up
Servicer, the Bond Insurer and the Certificateholders, 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 Lease i
Schedule as provided in the definition thereof and the Lease Contracts
that have been transferred to the Trust pursuant to this Agreement
prior to such date; provided, however, the Transferor shall notify the
Back-up Servicer and the Bond Insurer in writing no later than one
Business Day prior to the delivery or electronic transfer described
herein; and
(iii) no later than 1:00 p.m. (New York time) the fifth
Business Day immediately prior to the requested Funding Date, the
Transferor shall have delivered to the Trustee the sole original
executed counterpart of each Lease Contract and all other items
included in the Lease Contract File, subject to exceptions as shall
have been approved by the Certificateholders and the Bond Insurer.
With respect to each Lease Contract, the Trustee shall notify the Bond
Insurer and the Company if any of the documents set forth in clauses (i), (ii)
or (iv) of the definition of "Lease Contract File" is not complete on its face
or is missing from the related Lease Contract File.
(b) Preparation of Funding Report. The Servicer shall review such
diskette or electronic transfer I 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 Servicer shall fax or hand deliver the Funding
Report, and the amount of the Funding to be funded by Certificateholders, to the
Transferor, the Bond Insurer and the Certificateholders and the Transferor shall
thereupon execute such report and fax it to the Trustee no later than 11:00 a.m.
(New York time) on such date of receipt.
Section 3.03. Fundings by Certificateholders. (a) The
Certificateholders shall have agreed by their acceptance of their Certificates
and execution of an Investment Letter, on the terms and conditions set forth
herein to make Fundings to the Trust on behalf of the Transferor on the Closing
Date and from time to time thereafter on any Funding Date during the Funding
Period, as specified by the Transferor in accordance with Section 3.03(b) below.
(b) Subject to the terms hereof, each Certificateholder will make
available to the Trustee the Funding Amount that is specified in the Funding
Report (which shall be an amount
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equal to such Certificateholder's pro rata share of the Funding Amount) at
Norwest Bank Minnesota, N.A. ABA #091000019, Account #10-38-377 for further
credit to Account #13299400 in the name of T & W Funding Company I, L.L.C. by
2:00 p.m. (New York time) on the applicable Funding Date in immediately
available funds. The Trustee shall simultaneously transfer such Funding Amount
to the Transferor in accordance with the written instructions of the Transferor.
Such amounts received by the Trustee from the Certificateholders shall be held
by the Trustee as part of the Trust Property until disbursed to the Transferor.
Such amounts shall not be commingled with any other monies held by the Trustee.
(c) The failure of any Certificateholder to remit its pro rata share of
any Funding Amount on the Closing Date or any Funding Date shall not relieve any
other Certificateholder of any obligation hereunder to make its pro rata share
of a Funding Amount on such Funding Date. Any nondefaulting Certificateholder
may, but is not required to, fund the portion of the Funding Amount not funded
by the defaulting Certificateholder. If the nondefaulting Certificateholder does
not fund the portion of the Funding Amount by the defaulting Certificateholder,
the Funding Amount shall be reduced by the defaulting Certificateholder's
portion of the Funding Amount and the Transferor shall have all remedies
available to it under applicable law in respect of the defaulting
Certificateholder.
(d) Immediately following each Funding or payment of principal on any
Certificates, the Trustee shall make an appropriate notation in the Certificate
Register indicating the amount and date of the Funding or payment.
(e) If any errors have been discovered in any Funding Report by the
Independent Accountants or the Back-up Servicer pursuant to Section 4.03 or
Section 7.05, as the case may be, of the Servicing Agreement, the Lease Contract
which is the subject of such error shall be repurchased in accordance with
Section 3.03 of the Contribution Agreement or Section 4.04(b) of this Agreement,
as appropriate.
Section 3.04. Re-underwriting. On a quarterly basis, at the Bond
Insurer's request and expense, the Transferor shall cause a third party
acceptable to the Bond Insurer to re-underwrite a sample of the Lease Contracts
sold to the Trust since the last re-underwriting review. The scope of such
review shall be acceptable to the Bond Insurer.
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Article Four
Issuance of Certificates; Substitutions of Collateral
Section 4.01. Conditions to Issuance of Certificates. On the Closing
Date, subject to the conditions in Article III hereof, upon receipt by the Bond
Insurer of item (a) below and the Trustee of items (a) and (b) below at least
two Business Days prior to the Closing Date and upon receipt by the Bond Insurer
and the Trustee of items (c) through (o) below on the Closing Date, the
Transferor will direct the Trustee to authenticate and the Trustee will
authenticate the Certificates.
(a) a Funding Report with the Lease Schedule attached thereto;
(b) the sole original executed counterpart of each Lease
Contract and all other items included in the Lease Contract File,
subject to such exceptions as shall have been approved by the
Certificateholders and with respect to Leased Vehicles the Certificates
of Title or the Applications for Certificates of Title;
(c) a Board Resolution of each of the Transferor and the
Servicer 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 and the
Servicer, 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 and the Servicer in their
respective states of incorporation;
(e) copies of the Articles of Incorporation, Certificate of
Formation and By-Laws and Limited Liability Company Agreement, as
applicable, of each of the Transferor and the Servicer, certified by
the Secretary or an Assistant Secretary of the Transferor and the
Servicer, as applicable and evidence of the issuance by the Transferor
of its membership interests;
(f) (A) 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 appropriate Contributor's chief executive office of
UCC-1 financing statements executed by the appropriate Contributor, as
debtor, and naming the Transferor as secured party, the Trustee for the
benefit of the Certificateholders and the Bond Insurer as assignee and
the Lease Assets as collateral; and (B) evidence of filing with the
Secretary of State of the state (and with the
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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 the Bond Insurer as secured party, and the Trust Property
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
Contribution Agreement;
(i) evidence of the deposit by the Transferor into the
Collection Account of any amounts paid on the Lease Contracts since the
related Cut-Off Date;
(j) the Transferor and the Servicer shall have delivered to
the Trustee an Officers' Certificate of the Transferor or the Servicer,
as appropriate, to the effect that (A) the funding on the Closing Date
will not result in the occurrence of a Funding Period Trigger Event or
a Default under this Agreement or the Servicing Agreement and the
Transferor or the Servicer, as appropriate, is not in Default under
this Agreement or the Servicing Agreement, (B) the funding on the
Closing Date 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 or the Servicer, as
appropriate, 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 or the Servicer (C) the representations and warranties made
by the Transferor or the Servicer, as applicable, in the Contribution
Agreement, this Agreement, the Insurance Agreement, the Hedge
Assignment (as defined in the Certificate Purchase Agreement), the Swap
Agreement (as defined in the Certificate Purchase Agreement), the
Servicing Agreement and the Certificate Purchase Agreement are true and
correct in all material respects on the Closing Date, as appropriate,
is a party or by which it may be bound or to which it may be subject
and (D) all conditions precedent provided in this Agreement and the
Servicing Agreement relating to such funding have been compiled with;
(k) Counsel to the Transferor shall have delivered its
Opinions of Counsel with respect to the treatment of the transfers from
the Contributors to the Transferor as a "true sale," certain bankruptcy
issues with respect to the Transferor and its Affiliates and the
perfected first priority security interest of the Trustee in the Trust
Property and the treatment of the Certificates as debt;
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(l) the sum of (A) the initial Outstanding Principal Balance
of Certificates and (B) the Required Collateralization Amount does not
exceed the Aggregate Implicit Principal Balance;
(m) neither an Event of Default nor a Funding Period Trigger
Event has occurred;
(n) the Bond Insurer has delivered the Policy and the Bond
Insurer shall have received the fees, premium and expenses due and
owing to the Bond Insurer; and
(o) such other documents as the Trustee, the Bond Insurer or
the Certificateholders may reasonably require.
The Bond Insurer shall have agreed by the delivery of its Policy to the
Trustee on the Closing Date that the conditions precedent in this Section 4.01
have been satisfied to the Bond Insurer's satisfaction. The Certificateholders
shall have agreed by their payment of the Funding Amount in accordance with
Section 3.03(b) hereof that the conditions precedent in this Section 4.01 have
been satisfied to their satisfaction.
With respect to each Lease Contract, the Trustee shall notify the Bond
Insurer and the Company if any of the documents set forth in clauses (i), (ii)
or (iv) of the definition of "Lease Contract File" is defective or missing from
the related Lease Contract File.
Section 4.02. Additional Fundings. After the Closing Date, the
obligation of the Certificateholders to provide funds to the Trust on behalf of
the Transferor and the obligation of the Trustee to transfer such funds to the
Transferor on each Funding Date is subject to the satisfaction of the conditions
in Article III hereof and of the following conditions on or before the related
Funding Date:
(a) the Transferor shall have delivered to the Trustee the
original executed counterpart of each Lease Contract identified in the
related Lease Schedule and the Lease Contract File relating to such
Lease Contract including Certificates of Title with respect to each
Leased Vehicle;
(b) the Transferor shall have delivered to the Trustee and the
Bond Insurer an Officer's Certificate in the form attached hereto as
Exhibit E certifying that all of the terms of the Contribution
Agreement have been complied with and all of the representations and
warranties are true and correct as of the Funding Date;
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(c) the Transferor shall have delivered to the Trustee and the
Bond Insurer a Lease Schedule and an Assignment and Assumption
Agreement or Agreements, as appropriate, subjecting any new Lease
Contracts to the provisions of the Transaction Documents;
(d) the Transferor and the Servicer shall have delivered to
the Trustee and the Bond Insurer an Officers' Certificate of the
Transferor or the Servicer, in the forms attached hereto as Exhibits F
and G, as appropriate, to the effect that (A) such Funding will not
result in the occurrence of a Funding Period Trigger Event or a Default
under this Agreement and the Transferor or the Servicer, as
appropriate, is not in Default under this Agreement or the Servicing
Agreement, (B) the Funding 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 or the Servicer, as
appropriate, 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 or the Servicer, as appropriate, is a party or by which it
may be bound or to which it may be subject (C) all of the
representations and warranties of the Servicer and the Transferor
contained in the Contribution Agreement, the Certificate Purchase
Agreement, the Insurance Agreement, the Hedge Agreement (as defined in
the Certificate Purchase Agreement), the Swap Agreement (as defined in
the Certificate Purchase Agreement), the Servicing Agreement and this
Agreement are true and correct as of such Funding Date and (D) all
conditions precedent provided in this Agreement and the Servicing
Agreement relating to the Funding have been complied with;
(e) the Transferor shall have delivered to the Trustee and the
Bond Insurer evidence of (i) filing with the Secretary of State of the
state (and with the relevant county, if required by the applicable
state law) of the applicable Contributor's chief executive office of
UCC-1 financing statements executed by the applicable Contributor, as
debtor, and naming the Transferor as secured party, the Trustee for the
benefit of the Certificateholders and the Bond Insurer as assignee and
the Lease Assets as collateral, and (ii) 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 the
Bond Insurer as secured party, and the Trust Property as collateral;
(f) evidence of the deposit by the Transferor into the
Collection Account of any amounts paid under the related Lease
Contracts since the related Cut-Off Date (as certified by the
Transferor);
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(g) the Transferor shall have delivered to the Trustee and the
Bond Insurer an Officer's Certificate of the Transferor in the form
attached hereto as Exhibit H to the effect that all conditions
precedent to the Funding have been complied with;
(h) the sum of (a) the Outstanding Principal Balance of
Certificates and the Funding Amount and (b) the Required
Collateralization Amount (computed taking into account the Aggregate
Implicit Principal Balance including the Funding IPB) does not exceed
the sum of (x) the Funding IPB and (y) the Aggregate Implicit Principal
Balance of Lease Contracts conveyed to the Transferor prior to such
Funding;
(i) the Trustee shall have no actual knowledge that a Funding
Period Trigger Event has occurred;
(j) the Trustee shall have no actual knowledge that an Event
of Default has occurred or is continuing;
(k) Counsel to the Transferor shall have delivered to the
Trustee and the Bond Insurer an updated Opinion of Counsel for the
calendar quarter prior to such Funding Date with respect to the
perfected first priority security interest of the Trustee in the Trust
Property;
(l) The Policy remains in full force and effect as of such
Funding Date;
(m) Such Funding shall not result in a lowering of the rating
of the commercial paper notes issued by the Certificateholders and the
Certificateholders shall have received a letter from each of Moody's
and S&P confirming their rating of such commercial paper notes;
(n) Any taxes, fees and other governmental charges which are
due and payable in connection with the performance of the Contribution
Agreement, this Agreement, the Hedge Assignment (as defined in the
Certificate Purchase Agreement), the Swap Agreement (as defined in the
Certificate Purchase Agreement), the Certificate Purchase Agreement,
the Servicing Agreement and delivery of the Certificates shall have
been paid at or prior to the relevant Funding Date;
(o) All financing statements previously filed by the
Transferor and the Servicer remain in full force and effect;
(p) The Servicer shall have entered into such (i) Interest
Rate Hedge Assignments (as defined in the Certificate Purchase
Agreement) between the Servicer and
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CoreStates Bank, N.A., as Collateral Agent and (ii) Swap Agreements
(as defined in the Certificate Purchase Agreement) between the Servicer
and CoreStates Bank, N.A., as swap counterparty, as the
Certificateholders shall require;
(q) The Liquidity Facility remains in full force and effect
and no Transaction Termination Event (as defined therein) shall have
occurred and be continuing
(r) delivery of such other documents as the Trustee, the
Certificateholders or the Bond Insurer may reasonably require,
including, but not limited to an updated Opinion of Counsel for the
present calendar quarter prior to such Funding Date with respect to
certain bankruptcy issues relating to the Transferor and its
Affiliates.
The Bond Insurer shall notify the Trustee, in writing, no later than
10:00 a.m. (New York time) on the Funding Date if the Bond Insurer has not
received any of the documentation required to be delivered to the Bond Insurer
pursuant to this Section 4.02. Upon satisfaction of the above conditions, the
Trustee shall execute the related Funding Report. By their payment of the
Funding Amount in accordance with Section 3.03(b) hereof the Certificateholders
shall be deemed to have received any additional documentation required by them
pursuant to subsection (r) and shall be deemed to have agreed that the
conditions precedent in this Section 4.02 have been satisfied to their
satisfaction.
Section 4.03. Perfection of Transfer. (a) The Servicer shall file UCC-1
financing statements in the time and manner described in Section 4.01 and 4.02
hereof in accordance with such Sections except as provided in the next following
sentence. No later than 30 days after the Closing Date, with respect to
Equipment related to Lease Contracts backing the initial funding of
Certificates, and no later than 30 days after the end of each calendar quarter
with respect to Equipment related to Lease Contracts backing any subsequent
funding of Certificates, the Transferor shall file with respect to all such
Equipment related to Lease Contracts, other than Loan Contracts, UCC-1 financing
statements with the Secretaries of State of the Enumerated States, executed by
the Transferor as debtor, and naming the Trustee for the benefit of the
Certificateholders and the Bond Insurer as secured party and the Equipment
located in such States as collateral; provided that no filings naming an
individual Customer as debtor shall be required. With respect to Equipment
relating to Loan Contracts the Transferor shall file UCC-3 financing statements
with the Secretaries of State of the Enumerated States within the same time
period. From time to time, and no less than annually, 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 interests in the Lease Contracts and the
Equipment owned by the Transferor and located in the Enumerated States 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
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title. File-stamped copies of such UCC-1 financing statements and UCC-3
financing statements shall be mailed to the Trustee upon receipt by the Servicer
or the Transferor. Within 60 days after any date of determination upon which the
aggregate Implicit Principal Balance of Loan Contract equals or exceeds 4% of
the Aggregate Implicit Principal Balance, the Transferor shall cause to be
delivered to the Trustee and the Bond Insurer an Opinion of Counsel with respect
to the perfected first priority security interest of the Trustee in the
Equipment in the Enumerated States relating to such Loan Contracts.
(b) If any change in any of the Company's, either Contributor'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 or the applicable Contributor, as the case
may be, to deliver 30 days' prior written notice of such change or relocation to
the Servicer, the Bond Insurer 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 interests in
the Trust Property.
(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 the Bond Insurer's respective right,
title and interest in and to the Trust Property (other than the Equipment not
initially located in the Enumerated States).
(e) On or prior to the Closing Date, the Transferor shall provide to
the Trustee the Applications for Certificates of Title with respect to each
Leased Vehicle relating to a Lease Contract to be funded on such Closing Date.
Within 120 days of the Closing Date, the Transferor shall provide the Trustee
the original Certificate of Title with respect to each Leased Vehicle.
Section 4.04. Lease Receivables. (a) If at any time the Transferor, the
Bond Insurer 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 one of the Contributors or the Company in the
Contribution 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 the Bond Insurer and the
other parties to this Agreement.
(b) In the event any representation or warranty of one of the
Contributors or the Company in the Contribution Agreement is incorrect and
materially and adversely affects the interests of the Bond Insurer or the
Holders of the Certificates, or in the event of any breach of
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any of the representations and warranties set forth in Sections 3.01(a)(i),
3.01(a)(ii), 3.01(a)(iii), 3.01(a)(v), 3.01(a)(vi), 3.01(vii) or 3.01(a)(xxi) of
the Contribution Agreement, then the Transferor shall require the Company and
the applicable Contributor pursuant to the Contribution 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 or the applicable Contributor fails or is unable to cure
such circumstance or condition in accordance with the Contribution Agreement
then the Transferor shall require the Company or the applicable Contributor to
substitute or purchase pursuant to the Contribution Agreement any Lease Contract
as to which such representation or warranty is incorrect within the time
specified in Section 3.03 of the Contribution Agreement; provided, however, that
after such substitution, the aggregate average remaining life on all
Certificates after such substitution is not greater than four years. 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(a) of
the Servicing Agreement. The Trustee shall not be required to calculate the
aggregate average remaining life on the Certificates.
(c) If the Transferor fails to enforce the purchase or substitution
obligation of the Company and the applicable Contributor under the Contribution
Agreement, 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 3.10 of the Servicing Agreement and (ii) any Defaulted
Lease Contract or Delinquent Lease Contract, the Transferor shall be entitled to
purchase such Lease Contract or to deliver a Substitute Lease Contract meeting
the same requirements as those specified in Section 3.04 of the Contribution
Agreement for substitutions and purchases by the Company or the applicable
Contributor upon breaches of a representation or warranty by the Company or
another Contributor thereunder; provided, however, that each and all of the
following are met,.(w) the cumulative Implicit Principal Balance of prepaid or
early terminated Lease Contracts which are substituted by the Transferor
(measured as of the date of substitution) shall not exceed 10% of the Aggregate
Implicit Principal Balance (measured as of the date of substitution), (x) the
cumulative Implicit Principal Balance of Defaulted Lease Contracts which are
purchased or substituted by the Transferor (measured as of the date of
substitution) shall not exceed the Defaulted Lease Purchase and Substitution
Limit and (y) the cumulative Implicit Principal Balance of Delinquent Lease
Contracts which are purchased or substituted by the Transferor (measured as of
the date of substitution) shall not exceed the Delinquent Lease Purchase and
Substitution Limit.
(e) The Transferor shall provide to the Trustee on the date of delivery
of any Substitute Lease Contract the items listed in (i) and (ii) below and to
the Bond Insurer the item
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listed in (i) below, and the Transferor shall provide to the Trustee and the
Bond Insurer at the end of each calendar quarter the items listed in (iii) below
with respect to any Substitute Lease Contracts substituted during such period:
(i) a supplement to the Contribution Agreement and this
Agreement substantially in the form of Exhibit A to the Contribution
Agreement and Exhibit B hereto, subjecting such Substitute Lease
Contract to the provisions hereof and thereof and providing with
respect to the Substitute Lease Contract the information set forth in
the Lease Schedule;
(ii) the original executed counterpart of the Lease Contract
relating to such Substitute Lease Contract and the Certificate of
Title, if applicable; and
(iii) evidence that financing statements have been filed with
respect to such Substitute Lease Contract in accordance with Section
4.03(a) hereof.
Section 4.05. Releases. (a) The Transferor shall be entitled to obtain
a release from the lien of this Agreement for any Lease Contract and the related
Equipment or Leased Vehicle at any time (i) after a payment by the Company or
the Transferor of the Purchase 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 or Leased Vehicle in accordance with
Section 3.01(b)(vii) of the Servicing Agreement, if the Transferor delivers to
the Trustee and the Bond Insurer an Officer's Certificate (A) identifying the
Lease Receivable and the related Lease Contract and Equipment or Leased Vehicle
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 or Leased Vehicle 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 Purchase Price of
the Lease Contract, in the event a Lease Contract and the related Equipment or
Leased Vehicle are being released from the lien of this Agreement pursuant to
(i) above or (y) equals the entire amount of Recoveries or Residual Proceeds
received with respect to such Lease Contract and related Equipment or Leased
Vehicle in the event of a release from the lien of this Agreement pursuant to
(iii) above; provided, however, that upon the termination of a Lease Contract,
any Residual Proceeds from the Equipment or Leased Vehicle shall be placed in
the Collection Account prior to the Trustee or the Transferor releasing the
Equipment or Leased Vehicle from the security interest granted to the Trustee by
the Transferor pursuant to this Agreement or to the Transferor by a Contributor
pursuant to the Contribution Agreement.
(b) Upon satisfaction of the conditions specified in subsection (a)
above, the Trustee shall release from the lien of this Agreement and deliver to
or upon the order of the Transferor
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(or to or upon the order of the Company if it has satisfied its obligations
under Section 4.04 hereof and Section 3.04 of the Contribution Agreement with
respect to a Lease Contract) the Lease Contract, the Lease Receivable and the
Equipment or Leased Vehicle described in the Transferor's request for release.
Section 4.06. Trust Property. 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 4.07. Notice of Release. The Trustee shall be entitled to
receive at least 10 days' notice of any action to be taken pursuant to Section
4.05(a) hereof, accompanied by copies of any instruments involved.
Section 4.08. Nature of Transfer. To the extent that the transfer of
the Trust Property 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 Property, whether now owned or hereafter acquired. For purposes of
such grant, this Agreement shall constitute a security agreement under
applicable law.
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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 and the Back-up Servicer, (iii) all other obligations of the Transferor
under the Transaction Documents (iv) all amounts owing to the Bond Insurer under
the Insurance Agreement, and (v) the release by the Trustee of the Trust
Property in accordance with Section 5.01(b) hereof, this Agreement shall be
discharged.
(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 a Transferor's
Certificate to the Trustee requesting the release to the Transferor or its
designee of some or all of the Trust Property (collectively, the "Withdrawn
Collateral"), accompanied by an Opinion of Counsel reasonably acceptable to the
Bond Insurer to the effect that, after the release of the Withdrawn Collateral,
there will remain an amount in the Collection Account or otherwise subject to
this Agreement at least equal to the payments of interest due on the Outstanding
Certificates and the Principal Distribution Amount 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
Transferor's Certificate and Opinion of Counsel and authorization to release
from the Bond Insurer, 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 request and Opinion of Counsel until the entire Trust Property is
released and delivered to the Transferor or its designee. Notwithstanding the
foregoing, the Bond Insurer 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 Collection
Account or other items of the Trust Property 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 Policy with respect to
any Preference Claim until termination of the Policy.
(c) In connection with the discharge of this Agreement and the release
of the Trust Property, 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 Property and shall execute and file, at the expense of the Holder of the
Certificates, UCC financing statements evidencing such discharge and release.
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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 (i) 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.
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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 on any Certificate
when the same becomes due and payable; or
(b) default in the payment of any principal of any Certificate
when the same becomes due and payable; or
(c) default in the performance of any covenant of the
Transferor, or material breach of any representation or warranty of the
Transferor, in this Agreement, the Contribution Agreement, the
Insurance Agreement 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; or
(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
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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 the Bond Insurer, or during the continuance of a Bond Insurer
Default, the Trustee may, at the direction of the Holders of 66-2/3% in
principal amount of the Outstanding Certificates, declare the principal of all
the Certificates to be immediately due and payable, by notice given in writing
to the Trustee provided that the Bond Insurer shall not declare the principal
amount of the Outstanding Certificates immediately due and payable unless it
shall have endorsed the Policy to provide coverage for any shortfall in the
payment of accelerated principal and any interest due on the Outstanding
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 Property 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, the Bond Insurer, or if a Bond Insurer Default has occurred
and is continuing, the Holders of 66-2/3% in principal amount of the Outstanding
Certificates, by written notice to the Trustee, may rescind and annul such
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
Certificates;
(B) the principal of any 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, the Bond Insurer or any
Certificateholder hereunder or by the Bond Insurer under the
Insurance Agreement or the Policy, and the reasonable
compensation, expenses, disbursements and advances of the
Trustee, the Bond Insurer and the Certificateholders, their
agents and counsel incurred in connection
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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 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 the Bond Insurer, direct the
Trustee, for the benefit of the Holders of the Certificates, to sell the Trust
Property.
If the Transferor fails to direct the Trustee to sell the Trust
Property upon such demand, the Trustee, in its own name and as Trustee of an
express trust shall, at the direction of the Holders of 66-2/3% in principal
amount of the Outstanding Certificates, take possession of and sell the Trust
Property 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.
If an Event of Default occurs and is continuing, the Trustee shall, at
the direction of the Bond Insurer, and if a Bond Insurer Default has occurred
and is continuing the Trustee may in its discretion proceed, and shall at the
direction of the Holders of 66-2/3% in principal amount of the Outstanding
Certificates proceed, to protect and enforce its rights and the rights of the
Bond Insurer by such appropriate Proceedings as the Trustee, at the direction of
the Bond Insurer or, if a Bond Insurer Default has occurred and is continuing,
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 may, and shall, at the direction of the Bond Insurer
and if a Bond Insurer Default has occurred and is continuing, at the direction
of the Holders of 66-2/3% in principal amount of the Outstanding Certificates,
do one or more of the following:
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(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 Property 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 Property securing the Certificates;
(d) during the continuance of a default under a Lease
Contract, exercise any of the rights of the lessor under such Lease
Contract; and
(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,
the Bond Insurer and the Holders of the Certificates hereunder;
provided, however, that without the consent of the Bond Insurer, or if a Bond
Insurer Default has occurred and is continuing, all the Holders of 66-2/3% in
principal amount of the Outstanding Certificates, the Trustee may not sell or
otherwise liquidate any portion of the Trust Property 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 Outstanding
Certificates for principal and interest together with any amounts owed to the
Bond Insurer under the Insurance Agreement.
Section 6.05. Optional Preservation of Trust Property. 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 the Bond Insurer, or if a Bond Insurer
Default has occurred and is continuing, the Trustee may in its sole discretion
if it determines it to be in the best interests of the Holders of the
Outstanding Certificates and shall, upon request from the Holders of 66-2/3% in
principal amount of the Outstanding Certificates elect, by giving written notice
of such election to the Transferor, to take possession of and retain the Trust
Property 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
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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 Property securing the
Certificates remaining at the time of such rescission by written notice to the
Trustee and the Transferor from the Bond Insurer or, if a Bond Insurer Default
has occurred and is continuing, from the Holders of 66-2/3% in principal amount
of the Outstanding Certificates.
Section 6.06. Trustee May File Proofs of Claim. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial Proceeding relating to
any obligor upon any of the Certificates or the property of such 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 the
Bond Insurer 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 the
Bond Insurer 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 the Bond Insurer and 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 the Bond
Insurer or any Certificateholder any plan of reorganization, arrangement,
adjustment or composition affecting the Bond Insurer or
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any of the Certificates or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of the Bond Insurer 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 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:
FIRST: 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;
SECOND: 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 and to the
payment to the Back-up Servicer of the Back-up Servicer fee then due;
THIRD: To the payment of the Bond Insurer of the Bond Insurer
Premium then due;
FOURTH: To the payment of the amounts then due and unpaid upon
the Certificates for interest, with interest (to the extent such
interest has been collected by the
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Trustee or a sum sufficient therefor has been collected and payment
thereof is legally enforceable at the rate prescribed therefor in the
Certificates) on overdue principal, ratably without preference or
priority of any kind, according to the amounts due and payable on the
Certificates for interest;
FIFTH: To the payments of the remaining principal amount of
Outstanding Certificates, ratably without preference or priority of any
kind;
SIXTH: To the payment to the Bond Insurer of any amounts
previously paid by the Bond Insurer under the Policy and not
theretofore repaid, together with interest thereon and any other
amounts due under the Insurance Agreement;
SEVENTH: To the payment to the Servicer of any other amounts
due the Servicer as expressly provided herein and in the Servicing
Agreement;
EIGHTH: 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;
NINTH: To pay to the Bond Insurer any other amounts owing
under the Insurance Agreement;
TENTH: To reimburse the Bond Insurer and the
Certificateholders for any costs or expenses incurred in connection
with any enforcement action with respect to this Agreement or the
Certificates; and
ELEVENTH: To the payment of any surplus to the Transferor.
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 a Bond Insurer Default is not continuing,
and if a Bond Insurer Default is continuing, unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of 66-2/3% in principal amount of the
Outstanding Certificates 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;
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(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 Holders of
66-2/3% in principal amount of the Outstanding Certificates; 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. The Holder of any Certificate shall have the right,
which is absolute and unconditional, to receive payment of the principal and
interest on such 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, the
Bond Insurer 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, the Bond Insurer or to such Certificateholder, then, and in every
case, the Transferor, the Trustee, the Bond Insurer 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, the Bond Insurer 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, the Bond
Insurer 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.
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Section 6.13. Delay or Omission; Not Waiver. No delay or omission of
the Trustee, the Bond Insurer 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, the Bond Insurer or to the Certificateholders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee, the
Bond Insurer or by the Certificateholders, as the case may be.
Section 6.14. Control by Certificateholders. The Bond Insurer or, if a
Bond Insurer Default has occurred and is continuing, the Holders of 66-2/3% in
principal amount of the Outstanding Certificates 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 aggregate principal amount of all Outstanding Certificates;
(b) any direction to the Trustee by the Certificateholders to
undertake a private Sale of the Trust Property shall be by the Holders
of all Outstanding Certificates, 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 which a Responsible Officer or Officers of the Trustee
in good faith determines might involve it in personal liability or be
prejudicial to the Certificateholders 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 Less than All
Certificateholders. The Bond Insurer, or if a Bond Insurer Default has occurred
and is continuing, the Holders of 66-2/3% in principal amount of the Outstanding
Certificates may on behalf of the Holders of all the Certificates waive any past
Default or Funding Period Trigger Event or Trigger Event hereunder and its
consequences, except:
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(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 Funding Period Trigger Event 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 Funding Period Trigger Event 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 the Bond Insurer or to any suit instituted
by the Holders of 66-2/3% in principal amount of the Outstanding Certificates,
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 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 Property. (a) The power to effect any sale
(a "Sale") of any portion of the Trust Property pursuant to Section 6.04 hereof
shall not be exhausted by any one or more Sales as to any portion of the Trust
Property remaining unsold, but shall continue unimpaired until the entire Trust
Property securing the Certificates shall have been sold or all amounts payable
on the Certificates and under this Agreement with respect thereto shall have
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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
Property, or any portion thereof unless:
(i) the Bond Insurer, or if a Bond Insurer Default
has occurred and is continuing, the Holders of 66-2/3% in
principal amount of the Outstanding Certificates, consent in
writing to or directs the Trustee to make such Sale; or
(ii) if a Bond Insurer Default has occurred and is
continuing, the proceeds of such Sale would not be less than
the sum of all amounts due to the Trustee hereunder and the
aggregate principal amount of the Outstanding Certificates and
interest due or to become due thereon on the Payment Date next
succeeding such Sale together with any amounts owing to the
Bond Insurer under the Insurance Agreement.
(c) The Trustee, the Bond Insurer or the Certificateholders
may bid for and acquire any portion of the Trust Property 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, the Bond Insurer 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, the
Bond Insurer 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 Property 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 Property 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 Property shall be commercially
reasonable.
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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 Property
or upon any of the assets of the Transferor.
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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 the Bond Insurer or the Holders of 66-2/3% in
principal amount of the Outstanding Certificates (or other such
percentage as may be required by the terms hereof) in accordance with
Section 6.14
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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
Contribution 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 extraordinary activities relating
to its duties hereunder, or in the exercise of any of its rights or
powers which include discretionary judgments to be made by the Trustee,
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 regular
and administrative duties as Trustee as articulated 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 or Funding Period 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, Trigger Event or Funding Period 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 Property
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 Property 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
Property to another person or the acquisition
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of the Trust Property 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.
(i) The Trustee shall provide the reports and accountings as required
pursuant to Section 12.03 hereof.
Section 7.02. Notice of Default and Other Events. Promptly after the
occurrence of any Default, Trigger Event or Funding Period Trigger Event known
to the Trustee (within the meaning of Section 7.01(e) hereof), within one
Business Day of obtaining such knowledge, the Trustee shall transmit by
telephonic, facsimile or telegraphic communication confirmed by mail to the Bond
Insurer and all Holders of Certificates, as their names and addresses appear on
the Certificate Register, notice of such Default, Trigger Event or Funding
Period Trigger Event known to the Trustee, unless in the case of notice of
Default or notice of any Funding Period Trigger Event or Trigger Event to
Certificateholders, such Default shall have been promptly cured or waived 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
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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 or the Bond Insurer
pursuant to this Agreement, unless such Certificateholders or the Bond
Insurer, as the case may be, 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) 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 Property 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 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 existence or 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 Property 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
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substance or form of any such Lease Contract), the performance or enforcement of
any Lease Contract, the validity or sufficiency of the 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
(other than in its individual capacity as obligor on any Eligible Investment),
the acts or omissions of the Transferor, the Servicer, the Bond Insurer or any
Customer, any action of the Servicer, taken in the name of the Trustee, or the
validity of the Servicing Agreement or the Contribution 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, 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,
Authenticating Agent or such other agent.
Section 7.06. Money Held in Trust. Money and investments held in trust
by the Trustee, the Certificate Registrar or any Paying Agent hereunder shall be
held in one or more trust accounts hereunder. 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;
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(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 the 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 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 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 or reimbursement pursuant to this Section 7.07 shall
only be payable from the assets of the Transferor and shall not be
payable from the Trust Property. 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.
Upon the occurrence of an Event of Default resulting in an acceleration of
maturity of the Certificates that has not been rescinded and annulled, the
Trustee shall have, as security for the performance of the Trust under this
Section 7.07, a lien ranking senior to the lien of the Certificates with respect
to which any claim of the Trustee under this Section 7.07 arose upon all
property and funds held or collected as part of the Trust Property by the
Trustee in its capacity as such except the Trustee shall have no liens on the
amounts paid under the Policy. The Trustee shall not institute any Proceeding
seeking the enforcement of such lien against the Trust Property without the
consent of the Bond Insurer and if a Bond Insurer Default has occurred and is
continuing no such consent shall be required, and unless such Proceeding is in
connection with a proceeding in accordance with Article Six hereof for
enforcement of the lien of this Agreement for the benefit of the Holders of the
Certificates secured by such Trust Property after the occurrence of an Event of
Default (other than an Event of Default due solely to a breach of this Section
7.07) and a resulting declaration of acceleration of maturity of such
Certificates that has not been rescinded and annulled. All monies so collected
by the Trustee shall be applied in accordance with Section 6.08 hereof and the
Trustee shall receive amounts pursuant to
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Section 6.08 hereof only to the extent that payment thereof will not result in a
subsequent Event of Default caused by such payment to the Trustee.
Section 7.08. Corporate Trustee Required; Eligibility. There shall at
all times be a trustee hereunder which shall be a corporation, association or
national banking 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
$100,000,000, or be a member of a consolidated bank holding company with a
combined capital and surplus of at least $100,000,000, subject to supervision or
examination by Federal or state authority and having an office within the United
States of America, and, except with respect to the initial Trustee hereunder,
which shall have a commercial paper or other short-term rating of the highest
short term rating categories by S&P and Moody's, or otherwise acceptable to the
Bond Insurer, or if a Bond Insurer Default is continuing, the Holders of 66-2/3%
in principal amount of the Outstanding Certificates. 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 7.08, 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
7.08, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article Seven.
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, the Bond Insurer 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 the Bond Insurer or if a Bond Insurer
Default has occurred and is continuing, by the Holders of 66-2/3% in principal
amount of the Outstanding Certificates by notice to the Trustee, 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, the Bond Insurer or by any Certificateholder, or
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(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 the Certificates, the Transferor by a Board Resolution, shall
promptly appoint a successor Trustee reasonably satisfactory to the Bond
Insurer. 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, the Bond Insurer may appoint a
successor Trustee. If the Bond Insurer shall fail to appoint a successor Trustee
within 90 days of notice of removal or resignation, then the Holders of 66-2/3%
in principal amount of the Outstanding Certificates may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to 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. 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.
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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. 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 Property may at the time be located, the Transferor and the
Trustee shall have power to appoint, and, upon the written request of the
Trustee, the Bond Insurer or of the Holders representing at least 25% in
aggregate principal amount of all Outstanding 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 Property, 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
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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 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
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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, the Bond Insurer and
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, the Bond Insurer and the Transferor. The Trustee may at
any time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent and 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 the Bond Insurer 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
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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 shall hold
each Lease Contract, Certificates of Title and Applications for Certificates of
Title 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 Property pursuant to the terms of this Agreement or delivered to
the Servicer pursuant to the terms of the Servicing Agreement.
Except as set forth in Sections 3.02 and 4.01 hereof, 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 an instrument in which
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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 until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(b) give the Trustee, the Bond Insurer 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; 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, the Bond Insurer or such Paying Agent
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 any
Policy shall be returned to the Bond Insurer, and the Certificateholders shall
look only to the Bond Insurer 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
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determinable from the records of any Paying Agent, at the last address as shown
on the Certificate Register for each such Certificateholder).
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ARTICLE EIGHT
THE POLICY
Section 8.01. Payments under the 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) are not sufficient (after taking into account the payments
required to be made on such Payment Date pursuant to Section 12.02(d)(i)-(iv))
to make the payment of amounts due on the Outstanding Certificates on such
Payment Date in accordance with Section 12.02(d)(v), 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 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 and available to be distributed on such Payment Date pursuant
to Section 12.02(d) are not sufficient (after taking into account the payments
required to be made on such Payment Date pursuant to Section 12.02(d)(i)-(v)) to
pay the Outstanding Principal Balance of Outstanding Certificates, 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 Policy in an
amount equal to such insufficiency. Proceeds of claims on the Policy shall be
deposited in the Collection Account and shall remain uninvested and shall be
used solely to pay amounts due in respect of interest on the Certificates on
each Payment Date and principal of the Certificates 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 Certificateholder has been
subsequently recovered from such Certificateholder pursuant to a final order of
a court of competent jurisdiction that such payment constitutes a voidable
preference within the meaning of any applicable bankruptcy law to such
Certificateholder (a "Preference Claim"), the Trustee shall make a claim within
three Business Days upon the Policy for the full amount of such Preference Claim
in accordance with the terms of the Policy. Any proceeds of any such Preference
Claim received by the Trustee shall be paid to the related Certificateholder .
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ARTICLE NINE
AMENDMENTS
Section 9.01. Amendments without Consent of Certificateholders. The
Transferor, the Servicer, the Trustee and the Back-up Servicer, with the consent
of the Bond Insurer 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 effect on the Holders:
(a) to correct or amplify the description of any property at any
time subject to the lien of this Agreement, or better to assure, convey
and confirm unto the Trustee any property subject or required to be
subjected to the lien of this Agreement, or to subject to the lien of
this Agreement 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
the Bond Insurer 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; or
(f) to evidence the succession of the Trustee pursuant to Article
Seven hereof; or
(g) to add to any Events of Default.
The Trustee is hereby authorized to join in the execution of any such
amendment and to make any other appropriate agreements and stipulations that may
be therein contained, but the
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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
Trustee and the Back-up Servicer of any amendment pursuant to this Section, the
Transferor shall mail to the Rating Agencies, the Bond Insurer and each
Certificateholder a copy of such amendment.
Section 9.02. Amendments and Modifications to Agreement with Consent of
Certificateholders. (a) With the consent of the Bond Insurer and with the prior
written consent of the Holders of 66-2/3% in principal amount of the Outstanding
Certificates, by Act of said Holders delivered to the Transferor and the
Trustee, the Transferor, the Servicer, the Trustee and the Back-up Servicer 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 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 the principal amount of Outstanding
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 Property; or
(iv) modify or alter the definition of the term "Outstanding"; 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
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(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 Property 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(a) or (b), 6.02, 6.03, 6.18, or
Section 12.02(d) hereof.
(b) With the prior written consent of the Bond Insurer and the Holders of
not less than 66-2/3% of the principal amount of Outstanding Certificates, by
Act of said Holders delivered to the Transferor and the Trustee, the Transferor,
the Servicer, the Trustee and the Back-up Servicer 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) The Trustee is hereby authorized to join in the execution of any
amendments to this Agreement pursuant to clause (a) or (b) 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
Trustee and the Back-up Servicer of any amendment pursuant to this Section, the
Transferor shall mail to the Rating Agencies, the Bond Insurer and the Holders
of the Certificates a copy of such amendment.
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.
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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.
Section 9.06. Amendment as to Registered Form. Notwithstanding anything
to the contrary contained in Sections 9.01 and 9.02 hereof, no amendment shall
be entered into by the parties to this Agreement which would result in the
Certificates not to be in registered form in accordance with Section 163(f) of
the Internal Revenue Code of 1986, as amended, unless the Transferor obtains an
Opinion of Counsel on behalf of the Trust and delivered to the Bond Insurer and
the Trustee to the effect that the failure of the Certificates to be in
registered form will not result in adverse federal tax consequences.
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ARTICLE TEN
REDEMPTION OF CERTIFICATES
Section 10.01. Redemption at the Option of the Transferor; Election to
Redeem. The Transferor shall have the option, and in the absence of the exercise
thereof the Bond Insurer shall have the option, to redeem all of the Outstanding
Certificates, at any time after the aggregate principal amount of the
Outstanding Certificates is less than 10% of the largest aggregate principal
amount of the Certificates Outstanding at any point in time.
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 interest and principal that are due regarding the
Certificates on or prior to the Redemption Date shall continue to be payable to
the Holders of such Certificates called for redemption as of the relevant Record
Dates according to their terms and the provisions of Section 2.08 hereof. The
election of the Transferor or the Bond Insurer to redeem any Certificates
pursuant to this Section shall be evidenced by a Board Resolution or written
notice from the Bond Insurer, 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 the Bond
Insurer shall, at least 15 days prior to the Redemption Date, notify the
Trustee, the Bond Insurer and the Certificateholders of such Redemption Date and
shall deposit into the Collection Account on the related Calculation Date an
amount equal to the Redemption Price of all Certificates to be redeemed on such
Redemption Date plus any fees and expenses due hereunder plus all amounts due to
the Bond Insurer 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
Calculation 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;
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(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 Transferor or the Bond Insurer, 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. Deposit of the Redemption Price. On or before the
Calculation Date next preceding any Redemption Date, the Transferor or the Bond
Insurer, as applicable, shall deposit with the Trustee or with the Paying Agent
an amount of monies sufficient to pay the Redemption Price of all Certificates
which are to be redeemed on such Redemption Date plus any fees due hereunder,
and all amounts due to the Bond Insurer under the Insurance Agreement.
Section 10.05. 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 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 their 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 and premium on such Certificates, if any, shall, until paid,
bear interest from the applicable Redemption Date at the Certificate Interest
Rate.
Section 10.06. Release of Lease Contracts. In connection with any
redemption permitted under this Article Ten, the Transferor shall be permitted
to obtain a release of the related Lease Contracts after the Redemption Price
plus any fees and expenses due hereunder and all amounts due to the Bond Insurer
under the Insurance Agreement shall have been deposited into the Collection
Account as required by Section 10.04.
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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, the
Bond Insurer and the Certificateholders on which the Trustee relies in accepting
the Trust Property in trust and in authenticating the Certificates and the Bond
Insurer relies in issuing the Policy. Such representations and warranties are
made as of the Closing Date and, except as specifically provided herein, each
Funding Date, and shall survive the transfer, conveyance and assignment of the
Trust Property to the Trustee.
(a) Organization and Good Standing. The Transferor is a limited
liability company duly organized, validly existing and in good standing under
the laws 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 this Agreement or the Contribution
Agreement.
(b) Authorization. The Transferor has the power, authority and legal
right to execute, deliver and perform this Agreement, the Servicing Agreement,
the Insurance Agreement and the Contribution Agreement and the execution,
delivery and performance of this Agreement, the Insurance Agreement and the
Contribution Agreement have been duly authorized by the Transferor by all
necessary action.
(c) Binding Obligation. This Agreement, assuming due authorization,
execution and delivery by the Trustee, the Back-up Servicer and the Transferor,
the Insurance Agreement, assuming due authorization, execution and delivery by
the Bond Insurer, the Trustee, the Back-up Servicer, the Transferor, the
Company and the Servicer, the Contribution Agreement, assuming the due
authorization, execution and delivery by the Company and each of the
Contributors, the Certificate Purchase Agreement, assuming due authorization,
execution and delivery by the Company, the Transferor and the purchaser and the
Servicing Agreement, assuming due authorization, execution and delivery by the
Transferor, the Servicer, the Back-up Servicer and the Trustee, each 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.
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(d) No Violation. The consummation of the transactions contemplated by
the fulfillment of the terms of this Agreement, the Insurance Agreement, the
Certificate Purchase Agreement, the Servicing Agreement and the Contribution
Agreement 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 Limited Liability Company Agreement 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 this Agreement, the
Insurance Agreement, the Certificate Purchase Agreement, the Servicing Agreement
or the Contribution Agreement, or violate any law or, to the best of the
Transferor's knowledge, 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 its 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 this Agreement, the Insurance Agreement, the
Contribution Agreement or the Certificates, (B) seeking to prevent the issuance
of the Certificates or the consummation of any of the transactions contemplated
by the Contribution Agreement, the Insurance Agreement, this Agreement, the
Certificate Purchase Agreement, the Servicing Agreement or the Certificates 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, this Agreement, the Insurance Agreement, the
Contribution Agreement, the Certificate Purchase Agreement, the Servicing
Agreement or the Certificates.
(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 this Agreement, the
Insurance Agreement, or the Contribution Agreement 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 6416 Pacific Highway East, Tacoma,
Washington 98424.
(h) Transfer and Assignment. Upon the delivery to the Trustee of the
Lease Contracts and the filing of the Financing Statements described in Sections
4.01, 4.02 and 4.03 hereof,
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respectively, the Trustee for the benefit of the Certificateholders and the Bond
Insurer shall have a first priority perfected security interest in the Lease
Receivables, the Lease Contracts, the Equipment (to the extent owned by the
Transferor) initially located in the Enumerated States, 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 and provided, that, the security interest of the Trustee for the
benefit of the Certificateholders and the Bond Insurer with respect to the
Equipment will not be a perfected security interest with respect to any
Equipment located initially in any States other than the Enumerated States. 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 Property (other than that Equipment in such other States), including the
transfer of the Lease Contracts and the payments to become due thereunder, have
been made.
(i) Owners of the Transferor. The Contributors and K & P Finance Corp. I
comprise all of the owners of all of the outstanding membership interests of the
Transferor, all of which membership interests are fully paid and nonassessable
and are owned of record, free and clear of all mortgages, assignments, pledges,
security interests, warrants, options and rights to purchase.
(j) Contribution. As of the Closing Date the Transferor has entered into
the Contribution Agreement with the Contributors relating to its acquisition of
the Lease Contracts, the Lease Receivables, the Equipment and the Leased
Vehicles, and the representations and warranties made by the Company and each of
the Contributors relating to the Lease Contracts, Lease Receivables, the
Equipment and the Leased Vehicles have been validly assigned to and are for the
benefit of the Transferor, the Trustee, the Bond Insurer and the
Certificateholders and such representations and warranties are true and correct
in all material respects.
(k) The Lease Contracts. The Transferor hereby restates and makes each
of the representations and warranties with respect to the Lease Contracts, the
Lease Receivables, the Equipment and the Leased Vehicles that are made by the
Contributors and the Company in Section 3.01 of the Contribution Agreement.
(l) Taxable Income From Lease Contracts. Each of the Transferor, the
Company, the Contributors and their shareholders and members, as applicable,
shall treat the Lease Contracts as owned by the Transferor for federal, State,
and local income tax purposes, shall report and include in the computation of
the Transferor's gross income for such tax purposes the rental and other income
from the Lease Contracts, and shall deduct the interest paid or accrued with
respect to the Certificates in accordance with its applicable method of
accounting for such purposes.
Section 11.02. Covenants. The Transferor hereby makes the following
covenants for the benefit of the Trustee, the Bond Insurer and the
Certificateholders, on which the Trustee
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relies in accepting the Trust Property in trust and in authenticating the
Certificates and the Bond Insurer relies in issuing the Policy. Such covenants
shall survive the transfer, conveyance and assignment of the Trust Property to
the Trustee.
(a) No Liens. Except for the conveyances and grant of security interests
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
Property now existing or hereafter created, or any interest therein prior to the
termination of this Agreement. The Transferor will notify the Trustee and the
Bond Insurer of the existence of any Lien on any Trust Property immediately upon
discovery thereof and the Transferor shall defend the right, title and interest
of the Trustee in, to and under the Trust Property 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 Trust Property any Liens for municipal or other local taxes and other
governmental charges if such taxes or governmental charges shall not at the time
be due and payable or if the Transferor shall currently be contesting the
validity thereof in good faith by appropriate proceedings and 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 Property (other than amounts distributed to or for the benefit of
the Transferor pursuant to Section 12.02(d)(xiv) 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 the Bond Insurer) in the Lease
Receivables, the Lease Contracts and any other Trust Property. 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; provided, however, that the Transferor may contest any act, regulation,
order, decree or direction in any reasonable manner which shall not materially
and adversely affect the rights of the Trustee (for the benefit of the
Certificateholders and the Bond Insurer) in the Lease Receivables, the Lease
Contracts, the related Leased Vehicles and the related Equipment. The Transferor
will comply, in all material respects, with all requirements of law applicable
to the Transferor.
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(e) Preservation of Security Interest. The Transferor shall execute and
file such continuation statements (and deliver file-stamped copies thereof to
the Trustee) 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 the Bond Insurer) in the Trust Property; provided, that
the Transferor shall not be required to file financing statements or any related
agreements or documentation with respect to any Equipment not initially located
in the Enumerated States.
(f) Maintenance of Office, etc. The Transferor will not, without
providing 30 days notice to the Trustee and the Bond Insurer and without filing
such amendments to any previously filed financing statements as the Trustee or
the Bond Insurer may require or as may be required in order to maintain the
Trustee's perfected security interest in the Trust Property (other than
Equipment located initially in any states other than the Enumerated States), (a)
change the location of its principal executive office, or (b) change its name,
identity or company 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. Except as set forth in Section 11.02(e), 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 Property, as the Trustee may request and reasonably require.
(h) Notice of Liens. The Transferor shall notify the Trustee and the
Bond Insurer promptly after becoming aware of any Lien on the Trust Property,
except for any Liens for municipal or other local taxes if such taxes shall not
at the time be due or payable without penalty or if the Transferor shall
currently be contesting the validity thereof in good faith by appropriate
proceedings and 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 Contribution Agreement, and
causing the issuance of and selling of the Certificates pursuant to this
Agreement and (2) the exercise of any powers permitted to limited liability
companies under the limited liability company 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; (b) will (1)
maintain its books and records separate from the books and records of any other
entity, (2) maintain separate bank accounts and no funds of the Transferor shall
be commingled with funds of any other entity, (3) keep in full effect its
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existence, rights and franchises as a limited liability company under the laws
of the State of Delaware, and will obtain and preserve its qualification to do
business as a foreign limited liability company in each jurisdiction in which
such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement; 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)
without the unanimous consent of all of its members (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 company 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
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 (y) 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, the Bond Insurer and the Rating Agencies,
to be delivered to the Trustee, the Certificateholders, the Bond Insurer and the
Rating Agencies and (z) the Rating Agencies shall indicate in writing that the
taking of such action will not affect the then current rating of the
Certificates or the risk to the Bond Insurer in insuring the Certificates. The
Transferor shall not amend any article in its Limited Liability Company
Agreement that deals with any matter discussed above without the prior written
consent of the Bond Insurer.
(j) Directors. The Transferor agrees that at all times with respect to
it and K&P Finance Corp. I at least one of the directors and one of the
executive officers (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 such entity;
provided, however, that such independent director and officer may serve in
similar capacities for other "special purpose entities" formed by the Company
and its Affiliates. The Transferor's Limited Liability Company Agreement shall
at all times provide that the independent director of the independent member
shall have a fiduciary duty to the Certificateholders.
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(k) Preservation of the Equipment and the Leased Vehicles. The
Transferor warrants that it is the lawful owner and possessor of the Equipment
or Leased Vehicles (except with respect to Equipment or Leased Vehicles in which
it has a valid security interest) and that it will warrant and defend such
Equipment or Leased Vehicle 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 or Leased Vehicles, except as
permitted under this Agreement.
(l) Taxable Income from the Lease Contracts. The Transferor shall treat
the Lease Contracts as owned by it for federal, state and local income tax
purposes, shall report and include in the computation of the Transferor's gross
income for such tax purposes in its return the rental and other income from the
Lease Contracts, and shall deduct the interest paid or accrued with respect to
the Certificates in accordance with its applicable method of accounting for such
purposes.
(m) Maintenance of Office or Agency. The Transferor will maintain an
office or agency within the United States of America where the Certificates may
be presented or surrendered for payment 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 at Sixth Street and
Marquette Avenue, Minneapolis, Minnesota for each of said purposes. The
Transferor will give 30 days prior written notice to the Trustee, the Bond
Insurer and the Certificateholders of any change in 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 maintain any such office or agency or shall
fail to furnish the Trustee or the Bond Insurer 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 Contribution 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 Contribution
Agreement and the Contributors and the Company under the Contribution 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
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assets of the Transferor substantially as an entirety shall be a Person
organized and existing as a limited purpose entity under the laws of the
United States of America or any State thereof and shall have expressly
assumed, by an agreement supplemental hereto, executed and delivered to
the Trustee and the Bond Insurer in form reasonably satisfactory to the
Trustee and the Bond Insurer, the obligation to make due and punctual
payments of the principal of and interest on 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 and the risk to the Bond Insurer in
insuring the Certificates is confirmed, notwithstanding the consummation
of such merger, consolidation, transfer or conveyance together with the
consent of the Bond Insurer to such merger, consolidation, transfer or
conveyance; and
(iii) immediately after giving effect to such transaction, no Event
of Default or Default, Trigger Event or Funding Period Trigger Event
shall have occurred and be continuing; and
(iv) the Transferor shall have delivered to the Trustee and the
Bond Insurer an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger, conveyance or transfer and such
supplemental agreement 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 hereof, the
perfection and priority thereof and the rights and powers of the
Trustee, the Bond Insurer and the Certificateholders; and
(vi) the surviving entity shall be a "special purpose entity;"
i.e., shall have an organizational charter substantially similar to the
Certificate of Formation and the Limited Liability Company Agreement of
the Transferor including specific limitations on the business purposes,
and provisions for independent directors; and
(vii) the Bond Insurer 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
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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. In the event of any such
conveyance or transfer, the Transferor 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 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 of the sale of the Lease Contracts
will be used by the Transferor (i) to pay the Existing Indebtedness, (ii) to pay
the expenses associated with this transaction and (iii) for general corporate
purposes. None of the transactions contemplated in this Agreement, the
Contribution Agreement or the Servicing Agreement 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) Tax Returns. The Transferor and the Company each has filed and will
continue to file all applicable federal income tax returns until the termination
of this Agreement.
(s) The Transferor will not elect to treat the Trust as an association
taxable as a corporation for federal income tax purposes.
(t) The Transferor will not elect to treat itself as an association
taxable as a corporation for federal income tax purposes.
(u) The Transferor will not cause the Trust to issue a certificate or
other written instrument to evidence the Transferor's interests in the Trust.
Section 11.03. Other Matters as to the Transferor.
(a) Limitation on Liability of Directors, Officers, or Employees of the
Transferor. (a) 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
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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.
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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, directly and without intervention or assistance of any fiscal agent or
other intermediary, 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 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 Property 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 the Bond Insurer or the Certificateholders 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.
Section 12.02. Collection Account. (a) Prior to the Closing Date, the
Trustee shall open and maintain a trust account (the "Collection Account") for
the benefit of the Certificateholders and the Bond Insurer, for the receipt of
(i) payments remitted to the Trustee by the Servicer, (ii) proceeds of claims
made under the Policy, in accordance with Article Eight hereof, upon receipt and
(iii) 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 Trust to the Certificateholders out of funds in the Collection Account
pursuant to this Agreement shall be made by the Trustee. 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 Property as herein provided.
(b) Upon Transferor Order, the Trustee shall invest the funds in the
Collection Account (other than proceeds of claims made under the Policy) 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 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 (i) or (vi) 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
(other than proceeds of claims made under the Policy) in Eligible Investments
described in clause (vi) of the definition thereof. Eligible Investments shall
be made in the name of the Trustee for the
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benefit of the Certificateholders and the Bond Insurer. The Trustee shall
provide to the Servicer and the Bond Insurer at its request monthly account
statements relating to the Collection Account and such other account information
reasonably requested by the Bond Insurer.
(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 caused as a result of the Transferor's investment instructions
provided for 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 (except to the extent that the Trustee is the obligor and has
defaulted thereon).
(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 unpaid principal amount of the
Certificates shall not have been declared due and payable, then on such Payment
Date, after making all transfers and deposits to the Collection Account pursuant
to 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) 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 that the proceeds of claims under the Policy
shall be used solely to pay the amounts due under paragraph (v) and, on the
Stated Maturity, paragraph (vi) of this Section 12.02(d); and provided further
that the Trustee shall withdraw from the Collection Account and make interest
payments based on the outstanding principal balance of the Certificates even if
it shall not have received the Monthly Servicer's Report:
(i) to pay to the Servicer: (A) the Servicer Fee; (B) the
Reinvestment Income (except to the extent previously remitted to the
Servicer); (C) the amounts necessary to reimburse the Servicer and any
successor Servicer as provided in Section 3.09(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 Defaulted Lease Contracts, from amounts
received as Recoveries from any Defaulted Lease Contracts; (D) 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; (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
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Advance; and (F) the amount necessary to reimburse the Servicer for any
Nonrecoverable Advance;
(ii) to pay to the Trustee the Trustee Fee (and, following an
Event of Default, any expenses of the Trustee previously approved by the
Bond Insurer) then due;
(iii) to pay to the Back-up Servicer the Back-up Servicer Fee (and,
following an Event of Default, any expenses of the Back-up Servicer
previously approved by the Bond Insurer) then due;
(iv) to pay to the Bond Insurer the Bond Insurer Premium then
due;
(v) to pay the Interest Distribution Amount due on that Payment
Date and any overdue interest, to be applied as provided in Section 2.08
hereof;
(vi) to pay the Principal Distribution Amount then due, to be
applied to the payment of Certificates principal as provided in Section
2.08 hereof;
(vii) to pay to the Bond Insurer any amounts previously paid by
the Bond Insurer under the Policy and not repaid plus any unpaid Bond
Insurer Premium, together with interest thereon in accordance with the
Insurance Agreement;
(viii) 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,
or the Trustee, any Transition Costs incurred by any successor Servicer,
or the Trustee and not previously reimbursed;
(ix) on and after the Payment Date following a Trigger Event,
apply any remaining funds to the payment of principal to the Holders of
Certificates Outstanding on a pro rata basis;
(x) to pay to the Servicer, any other amounts due the Servicer
as expressly provided herein and in the Servicing Agreement other than
unreimbursed Servicer Advances;
(xi) to pay to the Servicer, any unreimbursed Servicer Advances;
(xii) to pay to the Trustee and the Back-up Servicer, any other
amounts due to the Trustee and the Back-up Servicer as expressly
provided herein and in the Servicing Agreement;
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(xiii) to pay to the Bond Insurer any other amounts owed to the
Bond Insurer pursuant to the Insurance Agreement; and
(xiv) to remit any excess funds to or at the direction of the
Transferor in accordance with the instructions on the Monthly Servicer's
Report.
(e) Upon the Transferor's or the Trustee's obtaining actual knowledge of
the occurrence of any Trigger Event, the Transferor or the Trustee, as the case
may be, shall within one Business Day of obtaining such actual knowledge notify
the Bond Insurer and the Certificateholders of such occurrence.
Section 12.03. Reports by Trustee to 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 of all such payments. The Trustee may
satisfy its obligations under this Section 12.03 by delivering the Monthly
Servicer's Report to each such Holder of the Certificates. On or before the 10th
day prior to any Final Payment Date the Trustee shall provide notice to the
Holders of the 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, on a monthly basis beginning on the first
Calculation Date, confirm 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 (v) of the definition of Eligible Investments
and shall promptly notify the Certificateholders and the Bond Insurer 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.
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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 reasonably
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, Bond Insurer, 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 (facsimile number (612) 667-3539).
Attention: Corporate Trust Services-Asset-Backed Administration/T & W
Funding Company I, L.L.C., or at any
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other address previously furnished in writing to the Transferor, the
Certificateholders, the Bond Insurer, the Servicer and the Back-up
Servicer; or
(b) to the Transferor at T & W Funding Company I, L.L.C., 6416
Pacific Highway East, Tacoma, Washington 98424 (facsimile number (206)
926-0739), Attention: President, or at any other address previously
furnished in writing to the Trustee, the Certificateholders, the Bond
Insurer, the Servicer and the Back-up Servicer; or
(c) to the Servicer at 6416 16th Street East, Tacoma, Washington
98424 (facsimile number (206) 926-0739), Attention: President, or at any
other address previously furnished in writing to the Trustee, the
Certificateholders, the Bond Insurer, the Transferor and the Back-up
Servicer; or
(d) to the Back-up Servicer at Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust
Services/ Asset-Backed Administration, or at any other address
previously furnished in writing to the Trustee, the Certificateholders,
the Bond Insurer, the Transferor and the Servicer; or
(e) to the Bond Insurer at 113 King Street, Armonk, New York
10504 (facsimile number (914) 765-3810), Attention: Insured Portfolio
Management Structured Finance (IPM-SF), or at any other address
previously furnished in writing by the Bond Insurer to the Trustee, the
Certificateholders, the Servicer, the Back-up Servicer and the
Transferor; or
(f) to each of (i) S&P, 26 Broadway, New York, NY 10004,
Attention: Asset Backed Surveillance Group, and (ii) Moody's, 99 Church
Street, New York, New York 10007, Attention: ABS Surveillance Group.
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.
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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.
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.
Section 13.09. Legal Holidays. In any case in which the date of any
Payment Date or the Stated Maturity of the Certificates 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 the Stated Maturity or any such 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
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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 when 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 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
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(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 13.14. Bond Insurer Default. If a Bond Insurer Default occurs and
is continuing, the Bond Insurer's right to consent hereunder and to direct the
Trustee shall be suspended until remedied and, during such suspension, in all
provisions of this Agreement wherein the Bond Insurer's consent or direction is
required or permitted, the consent or direction of the Holders of not less than
a majority in principal amount of Outstanding Certificates shall be required or
permitted unless the terms of this Agreement require the consent or direction of
a larger number of Holders.
Section 13.15. Third Party Beneficiary. The Bond Insurer is an express
third party beneficiary of this Agreement and is entitled to enforce this
Agreement as if it were a party hereto.
-103-
<PAGE> 104
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.
T & W FUNDING COMPANY I, L.L.C., as
Transferor
By: /s/ MICHAEL A. PRICE
--------------------------------------------
Name: Michael A. Price
Title: President
T & W FINANCIAL CORPORATION, as
Servicer
By: /s/ THOMAS W. PRICE
--------------------------------------------
Name: Thomas W. Price
Title: President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee and Back-up
Servicer
By: /s/ EILEEN R. STETZNER
--------------------------------------------
Name: Eileen R. Stetzner
Title: Corporate Trust Officer
-104-
<PAGE> 105
EXHIBIT A
FORM OF INVESTMENT LETTER
T & W FUNDING COMPANY I, L.L.C.
LEASE-BACKED CERTIFICATES
T & W Funding Company I, L.L.C.
6416 16th Street East
Tacoma, Washington 98424
Norwest Bank Minnesota, National Association,
as Trustee
6th Street & Marquette Avenue
Minneapolis, Minnesota 55479-0069
The undersigned hereby certifies on behalf of the purchaser named below
(the "Purchaser") as follows:
1. I ________________________________________, am the chief
financial officer, a person fulfilling an equivalent function or other
executive officer of the Purchaser.
2. I am familiar with the provisions of Rule 144A ("Rule 144A")
under the Securities Act of 1933 (the "Act").
3. The Purchaser is a "qualified institutional buyer," as
defined in Rule 144A.
4. The Purchaser is aware that the Transferor may rely on the
exemption from the registration requirements of the Act provided by Rule
144A.
5. The Purchaser acknowledges that the Purchaser has (i)
received such information regarding the Transferor of the Certificates
as the Purchaser may require pursuant to Rule 144A or (ii) the Purchaser
has determined not to request such information.
[6. The Purchaser is either (i) not an ERISA Plan as of the date
hereof, and the Purchaser is not acquiring Certificates for the account
of, or with the assets of, an ERISA Plan or (ii) the Purchaser is an
ERISA Plan and the Trustee has been provided with
<PAGE> 106
evidence that establishes to the satisfaction of the Trustee that (A)
either no prohibited transaction under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or the Internal Revenue Code
of 1986, as amended (the "Code") will occur in connection with such
Purchasers acquisition and holding of the Certificates or that the
acquisition and holding of the Certificates by the Purchaser is subject
to a statutory or administrative exemption and (B) the prospective
Purchaser's acquisition and holding will not subject the Transferor, the
Servicer, the Trust, the Bond Insurer or the Trustee 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. For these purposes, an "ERISA Plan" means on
employee benefit plan the investments of which are regulated under ERISA
and/or the Code.]
7. The Purchaser acknowledges that transfer of a Certificate can
only be effected in accordance with the Trust and Security Agreement.
The representations and warranties contained herein shall be binding
upon the heirs, executors, administrators and other successors of the
undersigned. If there is more than one signatory hereto, the obligations,
representations, warranties and agreements of the undersigned are made jointly
and severally.
Executed at _____________________, _____________________ this ________
day of _____________________, 199___.
- --------------------------------------- ------------------------------------
Purchaser's Name and Title (Print) Signature of Purchaser
- ---------------------------------------
Address of Purchaser
- ---------------------------------------
Purchaser's Taxpayer Identification
or Social Security Number
A-106-
<PAGE> 107
EXHIBIT B
FORM OF SUPPLEMENTAL GRANT OF
SUBSTITUTE LEASE CONTRACTS
Pursuant to Section 4.04(e) of the Trust and Security Agreement, dated
as of February 1, 1997, among T & W Funding Company I, L.L.C. (the
"Transferor"), T & W Financial Corporation (the "Servicer"), Norwest Bank
Minnesota, National Association, as Trustee (the "Trustee") and as Back-Up
Servicer, (such Trust and Security Agreement as amended and supplemented from
time to time, the "Trust and Security Agreement"), attached hereto as Schedule I
is an amendment to Schedule II to the related Assignment and Assumption
Agreement, which includes information regarding certain interests in Lease
Contracts, the related Lease Receivables and the related Equipment or related
Leased Vehicles that are hereby conveyed by the Transferor to the Trustee in
accordance with the Trust and Security Agreement. For purposes of this
Supplement, all defined terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Trust and Security Agreement.
Dated:
T & W FUNDING COMPANY I, L.L.C.
By
Name:
Title:
<PAGE> 108
EXHIBIT B
SCHEDULE I
<PAGE> 109
EXHIBIT C
FORM OF FUNDING REPORT
DATED: ___________________
Proposed Funding Date: ________________
Calculation Date: ________________
Aggregate IPB: $_______________
Proposed Funding IPB: $_______________
Sum of Funding IPB and Aggregate IPB: $_______________
Funding Amount: $_______________
Funding by Certificateholders: $_______________
Outstanding Certificates (as of date hereof): $_______________
Outstanding Certificates after Funding: $_______________
Largest Single Customer Concentration prior to Funding: $_______________
Largest Single Customer Concentration after Funding: $_______________
Required Collateralization Amount prior to Funding: $_______________
Required Collateralization Amount after Funding: $_______________
T & W FUNDING COMPANY I, L.L.C.
By
Its
------------------------------------
Accepted By:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
<PAGE> 110
By
---------------------------------------
Its
---------------------------------
C-110
<PAGE> 111
SCHEDULE A - LEASE CONTRACTS TO BE FUNDED
ACCT. NO. BALANCE LESSEE STATE OTERM RTERM PAYMENT ZIP
C-111
<PAGE> 112
EXHIBIT D
FORM OF LEASE-BACKED CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN
RESTRICTIONS AND CONDITIONS SET FORTH IN THE TRUST AND SECURITY AGREEMENT UNDER
WHICH THIS CERTIFICATE IS ISSUED (A COPY OF WHICH IS AVAILABLE FROM THE TRUSTEE
UPON REQUEST).
DUE TO THE PROVISIONS FOR THE PAYMENT OF PRINCIPAL AND FUNDINGS ON THE
CERTIFICATE CONTAINED HEREIN, THE OUTSTANDING PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. ANYONE
PURCHASING THIS CERTIFICATE MAY ASCERTAIN THE OUTSTANDING PRINCIPAL BALANCE
HEREOF BY INQUIRY OF THE TRUSTEE.
No. R-1 INITIAL PRINCIPAL AMOUNT: $_________
(as reduced or increased on Schedule I hereto)
MAXIMUM PRINCIPAL AMOUNT: $100,000,000
T & W LEASE-BACKED TRUST
LEASE-BACKED CERTIFICATE
CLOSING DATE: February 7, 1997
This certifies that ____________ is the registered holder (the
"Registered Holder") of an interest in certain assets of the T & W Lease-Backed
Trust (the "Trust") created pursuant to a Trust and Security Agreement dated
February 1, 1997 (herein called the "Trust and Security Agreement"), among T & W
Funding Company I, L.L.C. (the "Transferor"), T & W Financial Corporation, as
Servicer (the "Servicer"), Norwest Bank Minnesota, National Association, as
Trustee (the "Trustee," which term includes any successor Trustee under the
Trust and Security Agreement) and as Back-up Servicer (the "Back-up Servicer").
To the extent not otherwise defined herein, the capitalized terms used herein
have the meaning ascribed to them in the Trust and Security Agreement.
The Registered Holder hereof is entitled to receive the Principal
Distribution Amount and interest at the per annum rate described below on the
fifteenth day of each calendar month or, if
<PAGE> 113
such fifteenth day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), for the period from and including the delivery date
set forth above (the "Closing Date") through the Stated Maturity. The Principal
Distribution Amount will be paid to the Person in whose name this Certificate is
registered on the Record Date for such Payment Date, which shall be the close of
business on the last day of the month prior to such Payment Date (whether or not
a Business Day).
This Certificate is a duly authorized Certificate of the Trust
designated as its Lease-Backed Certificates, (herein called the "Certificate"
issued under the Trust and Security Agreement.
Interest will accrue on the Outstanding Principal Balance of the
Certificates for each applicable Accrual Period (or the Accrual Intervals
comprising each such Accrual Period) at the Certificate Interest Rate on the
basis of a 360-day year and actual days elapsed 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 payable (giving effect to any applicable grace periods)
until fully paid. Interest will be due and payable in arrears on each Payment
Date, with each payment of interest calculated as described above on the
Outstanding Principal Balance of the Certificates on the Business Day
immediately following the preceding Payment Date or on the Closing Date, if
there has not been any preceding Payment Date. Notwithstanding the foregoing,
with respect to any Fundings with respect to the Certificates occurring since
the preceding Payment Date, interest shall be calculated with respect to each
Accrual Interval based upon the actual number of days elapsed during such
Accrual Interval and the Outstanding Principal Balance as of such Payment Date
or Funding Date, as appropriate. 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.
The principal and interest on this Certificate are payable by check
mailed by first-class mail to the Person whose name appears as the Registered
Holder of this 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 the 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 payment of public and private debts. Funds represented by checks
returned undelivered will be held for payment to the Person entitled thereto,
subject to the terms of the Trust and Security Agreement.
D-113
<PAGE> 114
The Certificates are secured by certain Lease Assets described in the
Trust and Security Agreement.
Unless earlier declared due and payable by reason of an Event of
Default, the Certificates are payable only at the time and in the manner
provided in the Trust and Security Agreement and are not redeemable or
prepayable at the option of the Transferor before such time, except that the
Transferor, or the Bond Insurer under certain circumstances, may at any time
after the aggregate principal amount of the outstanding Certificates declines to
10% or less of the largest principal amount of the outstanding Certificates at
any point in time instruct the Trustee to redeem all of the Certificates
Outstanding at a redemption price equal to the aggregate principal amount
thereof outstanding plus accrued and unpaid interest thereon to the date of
redemption. If an Event of Default as defined in the Trust and Security
Agreement shall occur and be continuing, the principal of all the Certificates
may become or be declared due and payable in the manner and with the effect
provided in the Trust and Security Agreement.
Prior to due presentment for registration of transfer of this
Certificate, the Transferor, the Trustee, the Bond Insurer and any agent of the
Transferor, the Bond Insurer or the Trustee may treat the Person in whose name
this Certificate is registered as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes whether or not this
Certificate be overdue, and neither the Transferor, the Trustee, the Bond
Insurer, nor any such agent shall be affected by notice to the contrary.
The Trust and Security Agreement permits, with certain exceptions as
therein provided, the amendment thereof and the modification of the rights and
obligations of the Transferor and the rights of the Holders of the Certificates
under the Trust and Security Agreement at any time by the Transferor, the
Trustee, the Back-up Servicer and the Servicer with the consent of the Bond
Insurer and Holders of 66-2/3% in principal amount of Certificates at the time
Outstanding. The Trust and Security Agreement also contains provisions
permitting the Bond Insurer or, if a Bond Insurer Default has occurred and is
continuing Holders of specified percentages in aggregate principal amount of the
Certificates at the time Outstanding, on behalf of the Holders of all
Certificates, to waive compliance by the Transferor with certain provisions of
the Trust and Security Agreement and certain past defaults under the Trust and
Security Agreement and their consequences. Any such consent or waiver by the
Holder of this Certificate shall be conclusive and binding upon such Holder and
upon all future Holders of this Certificate and of any Certificate issued upon
the registration of transfer hereof or in exchange therefor or in lieu hereof
whether or not notation of such consent or waiver is made upon this Certificate.
Each Holder of a Certificate, by acceptance of its Certificate, agrees
that during the term of the Trust and Security Agreement and for one year and
one day after the termination thereof, such Holder or any Affiliate thereof will
not file any involuntary petition or otherwise institute
D-114
<PAGE> 115
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any Federal or state bankruptcy or similar
law against the Transferor.
Each Certificateholder by its acceptance of a Certificate covenants to
every party to the Trust and Security Agreement to treat the Certificates as
indebtedness for all applicable tax purposes in all tax filings, reports and
returns and otherwise, and further covenants that neither it nor any of its
Affiliates will take or participate in the taking of, or permit to be taken, any
action that is inconsistent with the treatment of the Certificates as
indebtedness for tax purposes.
The Certificates are issuable only in registered form without coupons in
such authorized denominations as provided in the Trust and Security Agreement
and subject to certain limitations therein set forth.
This Certificate and the Trust and Security Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York,
without regard to conflicts of laws principles.
No reference herein to the Trust and Security Agreement and no provision
of this Certificate or of the Trust and Security Agreement shall alter or impair
the obligation of the Trust, which is absolute and unconditional, to pay the
principal of and interest on a Certificate, but solely from the Trust Property
at the times, place and rate, and in the coin or currency, herein prescribed.
STATEMENT OF INSURANCE
OBLIGATIONS: $100,000,000
T & W Leased-Backed Trust
Lease-Backed Certificates
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of the Bond Insurance Policy
(the "Policy"), thereby unconditionally and irrevocably guarantees to any Owner
that an amount equal to each full and complete Insured Payment will be received
by Norwest Bank Minnesota, National Association, or its successor, as trustee
for the Owners (the "Trustee"), on behalf of the Owners, for distribution by the
Trustee to each Owner of each Owner's proportionate share of the Insured
Payment. The Insurer's obligations under the Policy with respect to a particular
Insured Payment shall be discharged to the extent funds equal to the applicable
Insured Payment are received by the Trustee, whether or not such funds are
properly applied by the Trustee. Insured Payments shall be made only at the time
set forth in the Policy, and no accelerated Insured Payments shall
D-115
<PAGE> 116
be made regardless of any acceleration of the Obligations, unless such
acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the Policy does not cover
shortfalls, if any, attributable to the liability of the Transferor, the Trust
or the Trustee for withholding taxes, if any (including interest and penalties
in respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of
such preference payment, (ii) an opinion of counsel satisfactory to the Insurer
that such order is final and not subject to appeal, (iii) an assignment in such
form as is reasonably required by the Insurer, irrevocably assigning to the
Insurer all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or otherwise
with respect to such preference payment and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Owner in any legal
proceeding related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon, New York City time, on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
The Insurer will pay any other amount payable under the Policy no later
than 12:00 noon New York City time on the later of the Payment Date on which the
related Deficiency Amount is due or the second Business Day following receipt in
New York, New York on a Business Day by State Street Bank and Trust Company,
N.A., as Fiscal Agent for the Insurer or any successor fiscal agent appointed by
the Insurer (the "Fiscal Agent") of a Notice (as described below); provided that
if such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim under the Policy, it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Insured Payments due under the Policy, unless otherwise stated therein,
will be disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by
wire transfer of immediately available funds in the amount of the Insured
Payment less, in respect of Insured Payments related
D-116
<PAGE> 117
to Preference Amounts, any amount held by the Trustee for the payment of such
Insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under the Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated
to the rights of each Owner to receive payments under the Obligations to the
extent of any payment by the Insurer under the Policy.
As used in the Policy, the following terms shall have the following
meanings:
"Agreement" means the Trust and Security Agreement dated as of February
1, 1997 among T & W Funding Company I, L.L.C., T & W Financial Corporation, as
servicer, and the Trustee, as trustee and as back-up servicer, without regard to
any amendment or supplement thereto unless such amendment or supplement has been
approved in writing by the Insurer in accordance with the terms of the
Agreement.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which the Insurer or banking institutions in New York City or in the city in
which the corporate trust office of the Trustee under the Agreement is located
are authorized or obligated by law or executive order to close.
"Deficiency Amount" means (i) for any Payment Date, any shortfall in
amounts available in the Collection Account to pay the interest due on the
Obligations under Section 12.02(d)(v) of the Agreement after payment of all
amounts payable pursuant to Section 12.02(d)(i) through (iv) of the Agreement,
plus (ii) on the Stated Maturity any shortfall in amounts available in the
Collection Account to pay the Outstanding Principal Balance after the payment of
all amounts payable pursuant to Section 12.02(d)(i) through (v) of the
Agreement.
"Insured Payment" means (i) as of any Payment Date, any Deficiency
Amount and (ii) any unpaid Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached to the
Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Insured Payment which shall be
due and owing on the applicable Payment Date.
D-117
<PAGE> 118
"Owner" means Holder (as defined in the Agreement) who, on the
applicable Payment Date, is entitled under the terms of the applicable
Obligation to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner
on the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Capitalized terms used in the Policy and not otherwise defined therein
shall have the respective meanings set forth in the Agreement as of the date of
execution of the Policy, without giving effect to any subsequent amendment to or
modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice under the Policy or service of process on the Fiscal Agent of
the Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency.
The Policy is being issued under and pursuant to, and shall be construed
under, the laws of the State of New York, without giving effect to the conflict
of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the Policy
is not refundable for any reason, including payment, or provision being made for
payment, prior to maturity of the Obligations.
MBIA INSURANCE CORPORATION
Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Certificate shall not be entitled to any
benefit under the Trust and Security Agreement or be valid or obligatory for any
purpose.
D-118
<PAGE> 119
Unless this Certificate has been executed on behalf of the Trust by the Trustee,
by manual signature of an authorized signatory of the Trustee, this Certificate
shall not be entitled to any benefit under the Trust and Security Agreement, or
be valid for any purpose.
T & W LEASE-BACKED TRUST
By NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as
Trustee
By
Authorized Signatory
D-119
<PAGE> 120
SCHEDULE I
PRINCIPAL DISTRIBUTION AMOUNT
AND FUNDING AMOUNTS
Initial Principal Amount: $_____________
Closing Date: February 7, 1997
<TABLE>
<CAPTION>
===============================================================================================================================
AMOUNT OF PRINCIPAL REPAID Funding Amounts Unpaid Principal Balance
- -------------------------------------------------------------------------------------------------------------------------------
Notation
AMT Date AMT Date AMT Total Made By
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
===============================================================================================================================
</TABLE>
D-120
<PAGE> 121
[FORM OF TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates described in the within-mentioned Trust
and Security Agreement.
Dated:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By
--------------------------------------------------
Authorized Signatory
D-121
<PAGE> 122
EXHIBIT E
T & W LEASE-BACKED TRUST
LEASE-BACKED CERTIFICATES
CERTIFICATE PURSUANT TO THE TRUST AND SECURITY AGREEMENT
I, _______________, do hereby certify that I am the _____________ of
T & W Funding Company I, L.L.C. (the "Transferor") and that I have reviewed the
Trust and Security Agreement (the "Trust and Security Agreement") dated as of
February 1, 1997, among the Transferor, T & W Financial Corporation, as
Servicer, Norwest Bank Minnesota, National Association, as Back-up Servicer and
as Trustee. Capitalized terms used but not defined herein are used with the
meanings set forth in the Trust and Security Agreement.
Pursuant to the Trust and Security Agreement I hereby certify, to the
best of my knowledge based upon reasonable investigation, that the
representations and warranties of the Transferor contained in the Contribution
Agreement are true and correct on and as of the date hereof (the "Funding Date")
with the same effect as if made on the Funding Date, and that all of the terms
of the Contribution Agreement have been complied with.
IN WITNESS WHEREOF, I have hereunto set my hand, this __th day of
___________, 199_.
T & W FUNDING COMPANY I, L.L.C.
By
Title:
[SEAL]
<PAGE> 123
EXHIBIT F
T & W LEASE-BACKED TRUST
LEASE-BACKED CERTIFICATES
CERTIFICATE PURSUANT TO THE TRUST AND SECURITY AGREEMENT
I, _______________, do hereby certify that I am the _____________ of
T & W Funding Company I, L.L.C. (the "Transferor") and that I have reviewed the
Trust and Security Agreement (the "Trust and Security Agreement") dated as of
February 1, 1997, among the Transferor, T & W Financial Corporation, as
Servicer, Norwest Bank Minnesota, National Association, as Back-up Servicer and
as Trustee and the Servicing Agreement dated as of February 1, 1997, among the
Servicer, the Transferor, the Trustee and the Back-up Servicer. Capitalized
terms used but not defined herein are used with the meanings set forth in the
Trust and Security Agreement.
Pursuant to the Trust and Security Agreement I hereby certify, to the
best of my knowledge based upon reasonable investigation, that:
(a) that the Transferor is not in Default under the Trust and
Security Agreement or the Servicing Agreement and that the Funding will
not result in the occurrence of a Funding Period Trigger Event or a
Default under the Trust and Security Agreement.
(b) that the Funding 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, to the best of my knowledge, 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;
and
(c) all of the representations and warranties of the Servicer and
the Transferor contained in the Contribution Agreement, the Certificate
Purchase Agreement, the Insurance Agreement, the Hedge Agreement (as
defined in the Certificate Purchase Agreement), the Swap Agreement (as
defined in the Certificate Purchase Agreement), the Servicing Agreement
and Trust and Security Agreement are true and correct as of such Funding
Date
(d) that all conditions precedent provided in the Trust and
Security Agreement and the Servicing Agreement relating to the Funding
have been complied with.
<PAGE> 124
IN WITNESS WHEREOF, I have hereunto set my hand, this __th day of
__________, 199_.
T & W FUNDING COMPANY I, L.L.C.
By
Title:
F-124
<PAGE> 125
EXHIBIT G
T & W FINANCIAL CORPORATION
CERTIFICATE PURSUANT TO THE TRUST AND SECURITY AGREEMENT
I, _______________, hereby certify that I am the _____________ of T & W
Financial Corporation (the "Servicer") and that I have read the Trust and
Security Agreement dated as of February 1, 1997 (the "Trust and Security
Agreement"), among T & W Funding Company I, L.L.C., the Servicer, Norwest Bank
Minnesota, National Association, as Back-up Servicer and as Trustee and the
Servicing Agreement dated as of February 1, 1997, among the Servicer, the
Transferor, the Trustee and the Back-up Servicer. Capitalized terms used but not
defined herein are used with the meanings set forth in the Trust and Security
Agreement.
Pursuant to the Trust and Security Agreement I hereby certify, to the
best of my knowledge based upon reasonable investigation:
(a) that the Servicer is not in Default under the Trust and
Security Agreement or the Servicing Agreement and that the Funding will
not result in the occurrence of a Funding Period Trigger Event or a
Default under the Trust and Security Agreement.
(b) that the Funding 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 Servicer is a party or by which it
is bound, or, to the best of my knowledge, any order of any court or
administrative agency entered in any proceeding to which the Servicer is
a party or by which it may be bound or to which it may be subject; and
(c) all of the representations and warranties of the Servicer and
the Transferor contained in the Contribution Agreement, the Certificate
Purchase Agreement, the Insurance Agreement, the Hedge Agreement (as
defined in the Certificate Purchase Agreement), the Swap Agreement (as
defined in the Certificate Purchase Agreement), the Servicing Agreement
and the Trust and Security Agreement are true and correct as of such
Funding Date
(d) that all conditions precedent provided in the Trust and
Security Agreement and the Servicing Agreement relating to the Funding
have been complied with.
IN WITNESS WHEREOF, I have hereunto set my hand, this __th day of
__________, 199_.
T & W FINANCIAL CORPORATION
<PAGE> 126
By
Title:
G-126
<PAGE> 127
EXHIBIT H
T & W LEASE-BACKED TRUST
LEASE-BACKED CERTIFICATES
CERTIFICATE PURSUANT TO THE TRUST AND SECURITY AGREEMENT
I, _______________, do hereby certify that I am the ______________ of
T & W Funding Company I, L.L.C. (the "Transferor") and that I have reviewed the
Trust and Security Agreement (the "Trust and Security Agreement") dated as of
February 1, 1997, among the Transferor, T & W Financial Corporation, as
Servicer, Norwest Bank Minnesota, National Association, as Back-up Servicer and
as Trustee. Capitalized terms used but not defined herein are used with the
meanings set forth in the Trust and Security Agreement.
Pursuant to the Trust and Security Agreement I hereby certify, to the
best of my knowledge based upon reasonable investigation, that all the
conditions precedent to the Funding have been complied with.
IN WITNESS WHEREOF, I have hereunto set my hand, this __th day of
__________, 199_.
T & W FUNDING COMPANY I, L.L.C.
By
Title:
<PAGE> 1
EXHIBIT 10.2
================================================================================
CONTRIBUTION AGREEMENT
between
T & W FINANCIAL CORPORATION
("Company")
T & W FUNDING COMPANY V, L.L.C.
("Contributor")
T & W FUNDING COMPANY VI, L.L.C.
("Contributor")
and
T & W FUNDING COMPANY I, L.L.C.
("Transferor")
Dated as of February 1, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
- ------- ------- ----
<S> <C> <C>
ARTICLE 1 DEFINITIONS ................................................................... 2
Section 1.01. Defined Terms ............................................................. 2
ARTICLE 2 DISPOSITION OF LEASE ASSETS ................................................... 3
Section 2.01. Lease Disposition ......................................................... 3
Section 2.02. Lease Acquisition; Delivery of Lease Contracts; Filing of
Financing Statements ...................................................... 3
Section 2.03. Servicing of Lease Contracts and Equipment and Leased
Vehicle ................................................................... 3
Section 2.04. Review of Lease Contracts ................................................. 4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES ................................................ 4
Section 3.01. Representations and Warranties of the Company and the
Contributors .............................................................. 4
Section 3.02. Representations and Warranties of the Transferor .......................... 15
Section 3.03. Purchase or Substitution Required upon Breach of
Certain Representations and Warranties .................................... 17
Section 3.04. Requirements for Purchase or Substitution of Lease
Contracts ................................................................. 17
ARTICLE 4 COVENANTS OF THE COMPANY AND THE CONTRIBUTORS ................................. 19
Section 4.01. Company and Contributor Covenants ......................................... 19
Section 4.02. Transferor Covenants ...................................................... 23
Section 4.03. Assignment of Lease Assets ................................................ 24
ARTICLE 5 CONDITIONS PRECEDENT .......................................................... 24
Section 5.01. Conditions to the Transferor's Obligations ................................ 24
Section 5.02. Conditions to the Company's and the Contributors'
Obligations ............................................................... 25
ARTICLE 6 TERM AND TERMINATION .......................................................... 25
Section 6.01. Term ...................................................................... 25
Section 6.02. Default by the Company or the Contributors ................................ 25
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 7 MISCELLANEOUS ................................................................. 26
Section 7.01. Amendments ................................................................ 26
Section 7.02. Governing Law ............................................................. 26
Section 7.03. Notices ................................................................... 26
Section 7.04. Separability Clause ....................................................... 26
Section 7.05. Assignment ................................................................ 26
Section 7.06. Further Assurances ........................................................ 26
Section 7.07. No Waivers; Cumulative Remedies ........................................... 27
Section 7.08. Binding Effect ............................................................ 27
Section 7.09. Set-Off ................................................................... 27
Section 7.10. Counterparts .............................................................. 27
</TABLE>
EXHIBIT A
Form of Supplement Substitute Lease Contracts
EXHIBIT B
Form of Lease Contract
EXHIBIT C
Form of Assignment and Assumption Agreement
EXHIBIT D
Existing Indebtedness of T & W Funding Company VI, L.L.C.
EXHIBIT E
Credit Manual
-3-
<PAGE> 4
This CONTRIBUTION AGREEMENT (herein, as supplemented and amended from
time to time as permitted hereby, this "Agreement"), dated as of February 1,
1997, is entered into by T & W FINANCIAL CORPORATION, a Washington corporation
(herein, together with its permitted successors and assigns, the "Company"), T &
W FUNDING COMPANY V, L.L.C., a Delaware limited liability company, and T & W
FUNDING COMPANY VI, L.L.C., a Delaware limited liability company (herein, each
together with its permitted successors and assigns, a "Contributor" and,
collectively, the "Contributors") and T & W FUNDING COMPANY I, L.L.C., a
Delaware limited liability company (herein, together with its permitted
successors and assigns, the "Transferor").
PRELIMINARY STATEMENT
The Transferor has entered into a Trust and Security Agreement dated as
of February 1, 1997 (the "Trust and Security Agreement"), with Norwest Bank
Minnesota, National Association, as trustee (the "Trustee") and as back-up
servicer (the "Back-up Servicer") and the Company, as Servicer (the "Servicer"),
pursuant to which a series of Certificates will be issued
(the "Certificates").
In furtherance thereof, the Transferor, the Contributors and Company
have entered into this Agreement to provide for, among other things, an
agreement as to the terms of the contribution by the Contributors to the
Transferor of certain of their right, title and interest in and to certain Lease
Assets which the Transferor is and will be conveying to the Trustee; in
addition, the Company is herein making certain covenants, representations and
warranties with respect to Lease Contracts that it originated on behalf of the
Contributors. The Transferor will be conveying to the Trust such Lease Assets
and Lease Contracts, as security for the Certificates. As a precondition to the
effectiveness of this Agreement, the Transferor, the Trustee, the Back-up
Servicer and the Servicer will enter into the Servicing Agreement to provide for
the servicing of the Lease Assets. In connection with the issuance of the
Certificates, each of the Contributors will contribute certain Lease Assets to
the Transferor in exchange for a membership interest in the Transferor and, if
applicable, the assumption by the Transferor of certain debt of the applicable
Contributor pursuant to a separate Assignment and Assumption Agreement entered
into between the Transferor and each Contributor. In connection with the
additional Fundings under the Certificates and pursuant to this Agreement, each
of the Contributors will contribute additional Lease Assets to the Transferor in
return for cash, an assumption of related debt, if any, and an increase, as
necessary, of such Contributor's membership interest in the Transferor. The list
of leases transferred in accordance with this Agreement shall be listed on
Schedule II of each such Assignment and Assumption Agreement.
-4-
<PAGE> 5
In order to further secure the Certificates, the Transferor is conveying
to the Trustee a security interest in, among other things, the rights of the
Transferor derived under this Agreement and the Servicing Agreement, and each of
the Contributors and the Company agrees that all covenants and agreements made
by it in this Agreement with respect to the Lease Assets shall also be for the
benefit and security of the Trustee, the Bond Insurer and the
Certificateholders.
ARTICLE 1
DEFINITIONS
Section 1.01. Defined Terms. For purposes of this 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 there, in the
Servicing Agreement.
"Company Address" shall mean 6416 16th Street East, Tacoma, Washington
98424.
"Contributor Address" for each Contributor, shall mean 6416 Pacific
Highway East, Tacoma, Washington 98424.
"Eligible Lease Contract" shall mean a Lease Contract that satisfies the
selection criteria set forth in Section 3.01(a) and (b) hereof, provided that
with respect to any Substitute Lease Contract or Additional Lease Contract, as
applicable, any reference in such Section to Cut-Off Date shall be deemed to
refer to the date as of which such Eligible Lease Contract becomes a Substitute
Lease Contract or an Additional Lease Contract, as applicable.
"Transferor Address" shall mean 6416 Pacific Highway East, Tacoma,
Washington 98424.
"Lease Assets" shall mean with respect to the Lease Contracts, the
Contributors' and the Company's interest in (a) the Lease Contracts and the
Lease Receivables, including the proceeds of the Lease Contracts and Lease
Receivables and all payments received on or with respect to the Lease Contracts
and Lease Receivables after the related Cut-Off Date, other than payments of
principal and interest due on the Lease Contracts and Lease Receivables on or
before the related Cut-Off Date, (b) the Lease Contract Files, (c) the Equipment
and any Leased Vehicle (or a security interest in Equipment which is the subject
of a Loan Contract), (d) the Insurance Policies and (e) all income and proceeds
of the foregoing or relating thereto.
"Lease Contract File" shall mean, with respect to each Lease Contract,
the following documents:
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<PAGE> 6
(i) a copy of the Lease Contract, the Certificate of Title or
the Application for Certificate of Title, as applicable;
(ii) any evidence of insurance and any other documents
evidencing or related to any Insurance Policy;
(iii) copies of such documents, if any, that the Company keeps
on file indicating that the Equipment or Leased Vehicle is owned by the
lessor in accordance with its customary procedures relating to an
individual Lease Contract, Customer or Equipment or Leased Vehicle; and
(iv) evidence that the Customer received the Equipment or Leased
Vehicle and that the Equipment or Leased Vehicle was in good working
order and acceptable to the Customer at the time of receipt by the
Customer.
"Substitute Lease Contract" shall have the meaning set forth in
Section 3.04(b) hereof.
"Substitution Criterion" shall have the meaning set forth in
Section 3.04(b).
ARTICLE 2
DISPOSITION OF LEASE ASSETS
Section 2.01. Lease Disposition. In reliance upon the representations,
warranties and covenants set forth in this Agreement and in accordance with the
Trust and Security Agreement, the Transferor will convey the Lease Assets to the
Trust.
Section 2.02. Lease Acquisition; Delivery of Lease Contracts; Filing of
Financing Statements. (a) In return for the respective membership interests and
other rights created by this Agreement, each of the Contributors hereby
transfers, assigns, sells, grants and contributes, or shall contribute, to the
Transferor, without recourse except as provided in Section 3.03 of this
Agreement, on the Closing Date or each Funding Date, as the case may be, any and
all of such Contributor's respective right, title and interest in and to all of
the Lease Assets set forth on Schedule II to respective Assignment and
Assumption Agreement. Each of the Contributors hereby acknowledges that its
respective transfer of the Lease Assets to the Transferor is absolute and
irrevocable, without reservation or retention of any interest whatsoever by such
Contributor.
(b) In connection with the Transferor's disposition of the Lease Assets,
the Company, on behalf of the Transferor and the Contributors, shall deliver the
original Lease Contracts, Certificates of Title or Applications for Certificates
of Title, as applicable, to the Trustee so that
-6-
<PAGE> 7
the Trustee may retain possession thereof as provided in the Transaction
Documents. In addition, the Company agrees to record and file, 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 timing and filing requirements of the Transaction Documents.
(c) In connection with such acquisition, 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 Agreement and transferred by the Transferor to the Trust in accordance
with the Transaction Documents.
Section 2.03. Servicing of Lease Contracts and Equipment and Leased
Vehicle. The Servicer shall service the Lease Contracts and the related Lease
Receivables and Equipment or Leased Vehicle for the benefit of the Transferor
(and its successors and assigns) in accordance with the terms and conditions of
the Transaction Documents. Notwithstanding the foregoing, the Company
acknowledges and agrees that its obligations under this Agreement are
independent of any obligations it may have as Servicer and that its obligations
under this Agreement will continue in full force and effect, whether or not it
is acting as Servicer, until termination of this Agreement in accordance with
Section 6.01 hereof.
Section 2.04. Review of Lease Contracts. If the Company, any of the
Contributors, the Transferor or the Trustee (who shall thereupon notify the
Company) discovers that any Lease Contracts, Certificates of Title or
Applications for Certificates of Title, as applicable, are missing or defective
(that is, mutilated, damaged, defaced, incomplete, improperly dated, clearly
forged or otherwise physically altered) in any material respect, the Company or
the applicable Contributor shall correct or cure such omission, defect or other
irregularity within 30 days from the date the Company or the applicable
Contributor discovered, or is notified by the Trustee, the Bond Insurer or the
Transferor of, such omission or defect within such period. Otherwise, the
Company or the applicable Contributor shall purchase or replace such Lease
Contract from the Transferor in accordance with Section 3.03 hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company and the
Contributors. Each of the Contributors and the Company hereby makes the
following representations and warranties to the Transferor and for the benefit
of the Bond Insurer, the Trustee and Certificateholders, on which the Transferor
relies in acquiring the Lease Assets. Such representations and warranties speak
as of the related Cut-Off Date unless otherwise indicated, but shall survive any
subsequent transfer, assignment, contribution or conveyance of the Lease
-7-
<PAGE> 8
Contracts and related Lease Receivables and Equipment or Leased Vehicle. Each of
the Contributors makes the following representations and warranties only with
respect to Lease Assets that it is transferring to the Transferor in accordance
with this Agreement. The Company makes these representations and warranties with
respect to all Lease Contracts, whether transferred to the Transferor in
accordance with this Agreement or originated by the Company on behalf of the
Transferor or an affiliate thereof.
(a) As to each Lease Contract including all Lease Contracts acquired
through bulk purchases:
(i) The information set forth in the related Lease Schedule is
true and correct as of the related Cut-Off Date.
(ii) Such Lease Contract is pursuant to its terms an absolute and
unconditional obligation of the Customer, non-cancellable and
non-prepayable prior to the expiration of the initial term of such Lease
Contract; it does not provide for the substitution, exchange or addition
of any other items of Equipment or Leased Vehicles pursuant to such
Lease Contract; and the rights with respect to such Lease Contract are
assignable by the lessor thereunder without the consent of any Person.
Such 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 or Leased Vehicle.
(iii) Either the Company or one of the Contributors has heretofore
provided to the Trustee the sole original counterpart of such Lease
Contract previously in its possession, as amended, and the terms of such
Lease Contract has not been amended, waived or modified subsequent to
the above being provided to the Trustee, and, if another original
counterpart of such Lease Contract should subsequently come into the
possession of such party hereto, it will also be so provided to the
Trustee. On or prior to the Closing Date, the Company shall have
provided to the Trustee the Application for Certificate of Title with
respect to each Leased Vehicle. Within 120 days of the Closing Date, the
Company shall have provided to the Trustee the original Certificate of
Title with respect to each Leased Vehicle. On or prior to each Funding
Date or date of substitution, as the case may be, the Company shall have
provided to the Trustee the original Certificate of Title with respect
to each Leased Vehicle.
(iv) There is only one original executed counterpart of such Lease
Contract that constitutes "chattel paper" for purposes of
Section 9-105(l)(b) and 9-308 of the UCC, and the Electronic Ledgers
have been marked as provided in Section 2.02(b) hereof.
-8-
<PAGE> 9
(v) Such 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
Transaction Documents.
(vi) Such Lease Contract is, and on the related Funding Date will
be, in full force and effect in accordance with its respective terms,
and neither the Company, any of the Contributors nor any Customer 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 related Cut-Off Date, the Customer has not
been delinquent in making payments due under such Customer's Lease
Contract for a period in excess of 30 days (without regard to advances,
if any, made by the Servicer), and there are no proceedings pending, or
to the best of the knowledge of the parties hereto, threatened asserting
insolvency of such Customer; there has been no other default, breach or
violation and no event permitting acceleration under such Lease
Contract; there are no proceedings pending, or to the best of the
knowledge of the parties hereto, threatened, wherein such Customer or
any governmental agency has alleged that 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) Such Lease Contract is the valid, binding and legally
enforceable 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) and
recordings as may be necessary to perfect the interest of the Trustee in
such Lease Contract and the related Lease Receivable have been
accomplished and are in full force and effect. All filings and
recordings required to perfect the interest of the Transferor and the
Trustee in the Equipment underlying such Lease Contract have been or
will be, within 30 days of the related Funding Date, accomplished in
accordance with the Transaction Documents and are or will be in full
force and effect.
(ix) Except for Lease Contracts acquired through bulk purchases,
such Lease Contract is identical to one of the form lease contracts
attached as Exhibit B hereto (or a form approved by the
Certificateholders and the Bond Insurer subsequent to the Closing Date),
except for such immaterial modifications or deviations from such form
lease contracts which appear in certain Lease Contracts or which may
appear in the future form
-9-
<PAGE> 10
lease contracts of the Company or either of the Contributors; any such
modifications or deviations from the form lease contracts will not have
a material adverse effect on the Certificateholders or the Bond Insurer
and will not reduce the Scheduled Payments or other payments due under
such Lease Contract; provided, further, the form of Lease Contracts
acquired through bulk purchases will be approved by the Bond Insurer and
the Certificateholders.
(x) Such Lease Contract was originated by the Company on behalf
of one of the Contributors, was purchased by the Company on behalf of
one of the Contributors or was purchased by one of the Contributors in
the ordinary course of business and meets the Company's rating system;
provided, however that no Additional Lease Contract was originated by
the Company. The origination and collection practices used by the
Company with respect to such Lease Contract (or by the originator with
respect to purchased Lease Contracts) have been in all respects legal,
proper, prudent and customary in the equipment and vehicle financing and
servicing business and comply in all material respects to the Company's
underwriting criteria as set forth in the Credit Manual attached hereto
as Exhibit E; and no Customer has been involved as a debtor in any
bankruptcy or insolvency proceeding during the term of the Lease
Contract.
(xi) Any payment required to be made by a Customer subject to a
PUT ("Purchase Upon Termination") clause does not exceed five times the
largest regular rental payment due under such Lease Contract. In
determining whether to lease Equipment or a Leased Vehicle to any
particular Customer, the Company considered each Customer's ability to
pay any PUT payments included in the terms of such Lease Contract.
(xii) Such Lease Contract has an original stated term of at least
six months and not more than 84 months. Such Lease Contract is within
its original term and has not had any extensions or modifications. Such
Lease Contract or assignment has a remaining term of not more than 83
months.
(xiii) The Equipment or Leased Vehicle related to such Lease
Contract was properly delivered to the Customer in good repair, without
defects and in satisfactory order and is in proper working order as of
the related Cut-Off Date. The Customer has accepted such Equipment or
Leased Vehicle leased to it and, after reasonable opportunity to inspect
and test such Equipment or Leased Vehicle, has not notified the Company
or any of the Contributors of any defects therein.
-10-
<PAGE> 11
(xiv) With the exception of the Loan Contracts, such Lease Contract
constitutes a "true lease" for federal income tax purposes. Such Lease
Contract or Loan Contract satisfies such other ratios and tax related
criteria as maybe set forth herein.
(xv) The related Customer will have made at least one lease
payment with respect to such Lease Contract, including any security
deposit or advance payment made by the lessee upon the execution of such
Lease Contract or the delivery of the Equipment or Leased Vehicle. Such
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 the related 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.
(xvi) The related Customer is not a lessee that is a merchant with
respect to the Equipment or Leased Vehicle leased under such Lease
Contract.
(xvii) All requirements of applicable federal, State and local laws,
and regulations thereunder, including, without limitation, usury laws,
if any, in respect of such Lease Contract have been complied with in all
material respects, and such 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.
(xviii) With the sole exception of the related Customer's right to
quiet enjoyment, such Lease Contract is not and will not be subject to
any right of rescission, set-off, counterclaim or defense, including the
defense of usury, whether arising out of transactions concerning such
Lease Contract or otherwise, and the operation of any of the terms of
such Lease Contract or the exercise by the Transferor or such Customer
of any right under such Lease Contract will not render such Lease
Contract unenforceable in whole or in part, and no such right of
rescission, set-off, counterclaim or defense, including a defense
arising out of a breach of such Customer's right of quiet enjoyment of
the related Equipment or Leased Vehicle, has been asserted with respect
thereto, except that certain rights or defenses may exist under
applicable law which, individually or in the aggregate, do not make the
remedies available to the Company, the Contributor or the Transferor
with respect to such Lease Contract inadequate for the practical
realization of the benefits provided thereby.
(xix) The Company or one of the Contributors has duly fulfilled all
obligations on the lessor's part to be fulfilled under or in connection
with such Lease Contract, including, without limitation, giving any
notices or consents necessary to effect the
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<PAGE> 12
acquisition of the Lease Assets by the Transferor and has done nothing
to impair the rights of the Certificateholders or the Bond Insurer in
the Lease Contract or payments with respect thereto.
(xx) The Lease Contract and the Equipment or Leased Vehicle have
not been sold, transferred, assigned or pledged by the Company or any of
the Contributors 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 the related Funding Date), and the
Transferor has all of the right, title and interest in and to the Lease
Contract, the Lease Receivables and the related Equipment or Leased
Vehicle, free and clear of all liens and encumbrances, except for the
interests of the Customer pursuant to the Lease Contract.
(xxi) Each Lease Contract requires that the Customer maintain the
Equipment or Leased Vehicle in good and workable order and that the
Customer obtain and maintain physical damage insurance, or provide
self-insurance or purchase insurance from the Transferor (which may be
self-insured) covering the Equipment or Leased Vehicle. Insurance
coverage required to be maintained by the Customer under each Lease
Contract is of a type customary for the equipment or vehicle covered
thereby and consistent with industry practice for monitoring compliance
thereof; such insurance coverage is in full force and effect.
(xxii) The related Equipment is not subject to any titling
requirements unless such Equipment is a Leased Vehicle.
(xxiii) Each Lease Contract related to a Leased Vehicle constitutes a
"true lease".
(b) As to the pool of Lease Contracts, including all Lease Contracts
acquired through bulk purchases as of each Cut-Off Date:
(i) Customers located in any single State are obligated with
respect to Lease Contracts accounting for no more than 10% of the
Aggregate Implicit Principal Balance except that Customers located in
(A) Washington are obligated with respect to Lease Contracts accounting
for no more than 45% of the Aggregate Implicit Principal Balance; (B)
each of California and New York are obligated with respect to Lease
Contracts accounting for no more than 20% of the Aggregate Implicit
Principal Balance. Up to 5% of the Aggregate Implicit Principal Balance
of Lease Contracts may be with Customers located in Canada, so long as
such Customers are obligated to pay any withholding taxes over and above
net rental payments.
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<PAGE> 13
(ii) Lease Contracts with Customers located in a particular zip
code do not account for more than 3% of the Aggregate Implicit Principal
Balance.
(iii) No single Customer accounts for more than 2.5% of the
Aggregate Implicit Principal Balance and no ten Customers account for
more than 15% of the Aggregate Implicit Principal Balance.
(iv) Lease Contracts with rental payments that are not fixed for
the remaining term do not exceed 15% of the Aggregate Implicit Principal
Balance.
(v) The computer tape, from which the selection of the Lease
Contracts was made, was made available to the Transferor's accountants
who are providing an agreed upon procedures letter to the Bond Insurer
and the Certificateholders with respect to certain information 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 related Cut-Off Date.
(vi) None of the Company or either Contributor used any selection
procedures that identified the Lease Contracts as being less desirable
or valuable than other comparable equipment or vehicle leases owned by
the Company or either Contributor.
(vii) No more than 1% of the Aggregate Implicit Principal Balance
are Lease Contracts made to a lessee who is an individual and who takes
under the lease primarily for a personal, family, or household purpose.
(viii) Lease Contracts containing a PUT clause account for no more
than 10% of the Aggregate Implicit Principal Balance.
(ix) The aggregate Implicit Principal Balance of the Loan
Contracts do not exceed 20% of the aggregate Implicit Principal Balance
of the Lease Contracts; provided, however, on the Closing Date none of
the Lease Contracts are Loan Contracts.
(x) At least 85% of the Aggregate Implicit Principal Balance is
attributable to Lease Contracts that provide that payment of the
Scheduled Payments due thereon are to be made monthly.
(xi) All Lease Contracts are denominated in U.S. dollars.
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<PAGE> 14
(xii) Lease Contracts with a remaining term exceeding 60 months
account for no more than 10% of the Aggregate Implicit Principal
Balance. The weighted average remaining term of the Leases Contracts
does not exceed 48 months.
(xiii) Unless otherwise approved in writing by the Bond Insurer, no
more than 10% of the Aggregate Implicit Principal Balance are Lease
Contracts acquired by the Company or one of the Contributors in a bulk
purchase; provided, however, that no more than 5% of the Aggregate
Implicit Principal Balance are Lease Contracts acquired by the Company
or one of the Contributors from any single entity. The Company has fully
re-underwritten all Customers with Lease Contracts that account for 1%
or more of the Aggregate Implicit Principal Balance.
(xiv) Unless otherwise approved by the Bond Insurer, no more that
25% of the Aggregate Implicit Principal Balance are Lease Contracts with
respect to which the related Equipment relates to Customers in the
restaurant business (as defined by SIC code).
(xv) Unless otherwise approved by the Bond Insurer, no more that
20% of the Aggregate Implicit Principal Balance are Lease Contracts with
respect to which the related Equipment relates to Customers in the
grocery store business (as defined by SIC code).
(xvi) Unless otherwise approved by the Bond Insurer, no more that
15% of the Aggregate Implicit Principal Balance are Lease Contracts with
respect to which the related Equipment relates to Customers in the
refuse system business (as defined by SIC code).
(xvii) Unless otherwise approved by the Bond Insurer, no more that
20% of the Aggregate Implicit Principal Balance are Lease Contracts with
respect to which the related Equipment relates to Customers in the
funeral home and crematory business (as defined by SIC code).
(xviii) Unless otherwise approved by the Bond Insurer, no more that
10% of the Aggregate Implicit Principal Balance are Lease Contracts with
respect to which the related Equipment relates to Customers in any
single industry, except as set forth in clauses (xiv) through (xvii)
above (as defined by SIC code).
(c) As to any Lease Contracts related to a bulk purchase:
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(i) Prior to making any bulk purchase, the Company shall deliver
to the Bond Insurer for review and approval a description of the
Company's policies and procedures with respect to bulk purchases
including, but not limited to, (i) a description of all due diligence
performed on the party from whom the Lease Contracts are purchased; (ii)
a description of any re-underwriting procedures performed by the
Company; and, (iii) any Lease Contract File and legal document review
procedures performed by the Company.
(ii) The Company shall provide all of the same representations,
warranties and covenants for the Lease Contracts acquired through bulk
purchases as for Lease Contracts originated by the Company itself. In
addition, the Company shall represent and warrant that the underwriting
criteria of the originator of the Lease Contracts to be acquired through
bulk acquisitions comply in all material respects with the Company's
underwriting criteria.
(iii) With respect to each bulk purchase, the Company shall fully
re-underwrite all Customers that comprise 1% or more of the Aggregate
Implicit Principal Balance, and on a quarterly basis at the request of
the Bond Insurer, a third party acceptable to the Bond Insurer shall be
permitted to re-underwrite a sample of Lease Contracts acquired through
bulk purchases. This review shall be made at the Company's expense.
(iv) The Company shall provide to the Bond Insurer additional
information with respect to the performance of Lease Contracts acquired
through bulk purchases. This information shall be reported in the format
currently provided for in the Transaction Documents.
(v) The inclusion of the Lease Contracts acquired through bulk
purchases shall not adversely affect the risk assigned by either Rating
Agency to the Bond Insurer in connection with insuring the Certificates.
(vi) On each Funding Date, the Company shall cause to be delivered
to the Trustee and the Bond Insurer an Opinion of Counsel with respect
to the treatment of the transfer from each originator of Lease Assets
acquired through bulk purchase to the Company or either Contributor, as
the case may be, as a "true sale" and the perfected first priority
security interest of the Trustee in such Lease Assets.
(d) As to each of the Company and the Contributors:
(i) Each of the Company and the Contributors has been duly
organized and is validly existing and in good standing as a corporation
or as a limited liability company, as applicable, under the laws of its
jurisdiction of incorporation or formation, as applicable,
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<PAGE> 16
with power and authority to own its properties and to transact the
business in which it is now engaged, and each is duly qualified to do
business in and is in good standing under the laws of each State in
which any Equipment, Leased Vehicle 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 such entity to perform its obligations under the Transaction
Documents or on any of the Lease Contracts, the Lease Receivables or the
Equipment or Leased Vehicles.
(ii) The performance of the obligations of each of the Company and
the Contributors under this 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 such entity, or any material indenture, agreement, mortgage,
deed of trust or other instrument to which such entity 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 such entity pursuant to
the terms of such indenture, mortgage, deed of trust, or other agreement
or instrument to which such entity is a party or by which such entity is
bound or to which any of such entity's property or assets is subject,
nor will such action result in any violation of the provisions of such
entity's Certificate of Incorporation or By-laws 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 such entity
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 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 Agreement, the Insurance Agreement (with respect to the
Company only) and any other Transaction Document to which each of the
Company and the Contributors is a party have been duly authorized,
executed and delivered by such entity by all necessary corporate action
and such agreements are the valid and legally binding obligations of
such entity, enforceable against such entity 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.
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<PAGE> 17
(iv) The Company Address is the chief executive office, chief
place of business and the office where the Company keeps its records
concerning the Lease Contracts, Lease Receivables and the Equipment and
Leased Vehicles.
(v) The Contributor Address for each of the Contributors is the
chief executive office, chief place of business and the office where
each of the Contributors keeps its records concerning the Lease
Contracts, the Lease Receivables and the Equipment and Leased Vehicles.
(vi) Each of the Company and the Contributors does not believe,
nor does it have any reasonable cause to believe, that it cannot perform
each and every covenant contained in the Transaction Documents to which
it is a party.
(vii) The transactions contemplated by the Transaction Documents
are being consummated by each of the Company and the Contributors 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.
(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 any of the Company or the
Contributors:
(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 or
any of the Contributors will be an unreasonably small capital or
the remaining assets of any of the Company or the Contributors
will be unreasonably small in relation to its respective
business or the transaction; and
(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 or each Contributor'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 each of the Company's and each Contributor's assets,
respectively, 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
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<PAGE> 18
matured; and (b) the sum of each of the Company's and each Contributor's
assets, respectively, was or will be greater than the sum of its debts,
valuing its assets at a fair salable value.
(x) There are no proceedings or investigations pending, or to the
knowledge of either the Company or any of the Contributors, threatened,
against or affecting any of the Company or the Contributors 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 or Leased
Vehicles) 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
either the Company or the Contributors, or the ability of either the
Company or any of the Contributors to perform its obligations under the
Transaction Documents to which it is a party. Neither the Company nor
any of the Contributors is in default with respect to any order of any
court, governmental authority or agency or arbitration board or
tribunal.
(xi) All tax returns or extensions required to be filed by each of
the Company and the Contributors in any jurisdiction have in fact been
filed, and all taxes, assessments, fees and other governmental charges
upon each entity, or upon any of the respective properties, income or
franchises shown to be due and payable on such returns have been, or
will be, paid. To the best of the knowledge of the Company and each of
the Contributors, all such tax returns are true and correct and each
entity has no knowledge of any proposed additional tax assessment
against it in any material amount nor of any basis therefor.
(xii) Neither the Company nor any of the Contributors (i) is in
violation of any laws, ordinances, governmental rules or regulations to
which it is subject, (ii) has 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 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 or any of the Contributors.
(xiii) This Agreement does not contain any untrue statement of
material fact or omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
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<PAGE> 19
(xiv) It is the intention of the Company and each of the
Contributors that the Lease Assets are owned by the Transferor and that
the beneficial interest in and title to the Lease Assets are not part of
the Company's or any of the Contributors' estate in the event of the
filing of a bankruptcy petition by or against the Company or either of
the Contributors under any bankruptcy law.
(xv) Immediately prior to the pledge and grant to the Trustee of a
security interest in the Lease Assets by the Transferor pursuant to the
Trust and Security Agreement, the Transferor was the sole owner of the
Lease Contracts and the related Leased Vehicle or the related Equipment
(with the exception of Equipment which is the subject of a Loan
Contract, as to which the Transferor has a valid security interest in
the related Equipment), the Transferor had good and marketable title
thereto, free and clear of all liens, claims and encumbrances (except
for the security interests in the Lease Assets which shall be terminated
on or prior to the Closing Date or the related Funding Date) and as of
such time the Transferor owned no other assets other than the Lease
Assets and the accounts established under the Trust and Security
Agreement.
(xvi) The Contributors are the registered owners of all of the
membership interests of the Transferor, all of which are fully paid and
nonassessable and owned of record, free and clear of all mortgages,
assignments, pledges, security interest, warrants, options and rights to
purchase.
(xvii) Each of the Company, the Contributors, the Transferor and
their shareholders and members shall treat the Lease Contracts as owned
by the Transferor for Federal, State and local income tax purposes,
shall report and include in the computation of the Transferor's gross
income for such purposes in its consolidated or combined return the
rental and other income from the Lease Contracts, shall treat the
Certificates as debt of the Transferor for such purposes, and shall
cause the Transferor to deduct the interest paid or accrued with respect
to the Certificates in accordance with its applicable method of
accounting for such purposes.
(xviii) Each of the Company and the Contributors are in compliance
with the Employee Retirement Income Security Act of 1974, as amended.
(xix) None of the Contributors will incur any indebtedness or
transact any business other than that contemplated by the Transaction
Documents as set forth in Exhibit D hereto.
Section 3.02. Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to, and agrees with the Company and
the Contributors for the
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benefit of the Bond Insurer, the Trustee and Certificateholders, on which each
of the Company and the Contributors relies in entering into this Agreement with
the Transferor. Such representations and warranties speak as of the related
Cut-Off Date unless otherwise indicated, but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Lease Contracts and
related Lease Receivables and Equipment or Leased Vehicles.
(a) The Transferor has been duly organized and is validly existing in
good standing as a special purpose limited liability company under the laws of
the State of Delaware, with 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 or Leased Vehicles pursuant
to this 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 Formation or Limited
Liability Company Agreement 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 Formation or Limited Liability Company Agreement 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 Equipment or Leased Vehicles hereunder.
(c) The Transaction Documents have been duly authorized, executed and
delivered by the Transferor by all necessary 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
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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 Agreement,
(ii) seeking to prevent the issuance of the Certificates or the consummation of
any of the transactions contemplated by the Transaction Documents, 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, the Transaction Documents to which it is a party.
(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 Agreement, have been or will
be taken or obtained on or prior to the Closing Date or the related Funding
Date.
(f) The Transferor Address is the principal place of business and chief
executive office of the Transferor.
(g) Since the formation of the Transferor (i) the Transferor has engaged
solely in the acquisition, ownership, leasing, selling and pledging of equipment
and vehicles pursuant to lease contracts substantially in the form attached
hereto as Exhibit B originated by the Company on behalf of the Transferor and
the exercise of any powers permitted to limited liability companies under the
limited liability company law of the State of Delaware which are incidental to
the foregoing or necessary to accomplish the foregoing; (ii) the Transferor has
incurred no debt other than trade payables and expense accruals in connection
with its operations in the normal course of business; (iii) the Transferor has
maintained its books and records separate from the books and records of any
other entity, has maintained separate bank accounts and no funds of the
Transferor have been commingled with funds of any other entity; (iv) the
Transferor has kept in full effect its existence, rights and franchises as a
limited liability company under the laws of the State of Delaware, and has
obtained and preserved its qualification to do business as a foreign limited
liability company in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of the Lease Contracts;
(v) the Transferor does not own any subsidiary and has not loaned or advanced
any moneys to, or made an investment in, any Person; (vi) the Transferor has not
made any capital expenditures; (vii) the Transferor has not guaranteed (directly
or indirectly), endorsed or is otherwise contingently liable (directly or
indirectly) for the obligations of, or own or purchased any stock, obligations
or securities of or any other interest in, or made any capital contribution to,
any Person; and (viii) the Transferor has not engaged in any other action that
bears on whether the separate legal identity of the
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Transferor will be respected, including without limitation (1) has not held
itself out as being liable for the debts of any other party, (2) has not acted
other than in its corporate name and through its duly authorized officers or
agents, and (3) has not created, incurred, assumed, or in any manner became
liable in respect of any indebtedness other than trade payables and expense
accruals incurred in the ordinary course of business and which are incidental to
its business purpose.
Section 3.03. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties. Upon discovery by the Company, any of the
Contributors or the Transferor of the breach of any representations or
warranties set forth in Sections 3.01 and 3.02 hereof which materially and
adversely affects the value of a Lease Contract, the related Equipment or Leased
Vehicle, or the interests of the Certificateholders or of the Bond Insurer, or a
breach of any of the representations and warranties set forth in Sections
3.01(a)(i), 3.01(a)(ii), 3.01(a)(iii), 3.01(a)(v), 3.01(a)(vii) or 3.01(a)(xx),
the party discovering such breach shall give prompt written notice to the other
parties, the Bond Insurer and to the Trustee. Each of the Company and the
Contributors shall, within 30 days from the date such entity was notified of, or
otherwise discovers, such breach, cure such breach, or, (1) if the breach
relates to a particular Lease Contract and is not cured (as the liquidated
damages remedy therefor), either (a) purchase such Lease Contract and the
related Equipment or Leased Vehicle from the Transferor at the Purchase Price or
(b) provide a Substitute Lease Contract 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 by the Company or the Contributor, either
(a) purchase such non-conforming Lease Contracts and the related Equipment or
Leased Vehicle 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 or the applicable Contributor to the Trustee. The Purchase Price for
a purchased Lease Contract and the related Equipment or Leased Vehicle shall be
paid, and any Substitute Lease Contract shall be delivered, by the Company or
the applicable Contributor to the Transferor in accordance with Section 3.04(c)
hereof. It is understood and agreed that the obligation of the Company and the
Contributor 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 Certificateholders or the Trustee on behalf of
the Certificateholders (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
Property.
Section 3.04. Requirements for Purchase or Substitution of Lease
Contracts. (a) If the Company or any of the Contributors is required to purchase
any Lease Contract under Section 3.03 or if the Transferor is required or elects
to purchase any Lease Contract under Section 3.10 of the Servicing Agreement,
such Lease Contract shall be purchased by the
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Company or the applicable Contributor at the Purchase Price. All purchases shall
be accomplished at the times specified in subsection (c) below.
(b) If the Company or any of the Contributors is required to substitute
any Lease Contract under Section 3.03, or if the Transferor is required or
elects to substitute any Lease Contract under Section 3.10 of the Servicing
Agreement (a "Substitute Lease Contract"), each such Substitute Lease Contract
shall (i) be an Eligible Lease; (ii) be with respect to types of Equipment,
types of Leased Vehicles and types of Customers represented in the pool of Lease
Contracts previously pledged to the Trustee pursuant to the Trust and Security
Agreement; (iii) be with a Customer whose credit is equal to or better than that
of the Customer under the withdrawn Lease Contract; (iv) be written on one of
the standard lease forms attached as Exhibit B to this Agreement; (v) be
accompanied by (A) a supplement to this Agreement 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 the information
required in the Lease Schedule and (B) evidence of the UCC filings required as
set forth in the Trust and Security Agreement; and (vi) not have been selected
using procedures that identified the Lease Contracts as being less desirable or
valuable than other comparable equipment or vehicle leases owned by the Company
or any of the Contributors. In addition, such Substitute Lease Contracts shall
meet the following substitution criterion (collectively, the "Substitution
Criterion"):
(1) Such Substitute Lease Contracts have an aggregate Implicit
Principal Balance at least equal to the aggregate Implicit Principal
Balance of the Lease Contracts being withdrawn; and
(2) Such Substitute Lease Contracts have a weighted average
remaining term (determined based upon the Implicit Principal Balance of
such Substituted Lease Contracts) that is not more than 33% longer or
shorter than the weighted average remaining term of the Lease Contracts
being withdrawn (determined based upon the Implicit Principal Balance of
such withdrawn Lease Contracts).
A Substitute Lease Contract may have scheduled payments that are due
after the last day of the month preceding the stated maturity of the
Certificate, but such payments shall not be counted in any Implicit Principal
Balance computation. Upon a substitution as described in this Section 3.04(b),
either the Company or the Contributor shall also pay any past due lease payments
not received through the Calculation Date preceding the date on which the
substitution occurs. Upon the substitution of any Substitute Lease Contract
pursuant to the provisions of this Section 3.04(b), each of the Company and the
Contributors hereby agrees that such Substitute Lease Contract will be subject
to all the terms and provisions of this Agreement, the Servicing Agreement and
the Trust and Security Agreement just as if such Substitute Lease Contract had
been one of the original Lease Contracts acquired on the Closing Date or the
related Funding
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Date. Upon the substitution of a Substitute Lease Contract pursuant to this
Section 3.04(b), the Transferor, the Contributors 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 or
any of the Contributors in accordance with Section 3.03 hereof or this
Section 3.04 or by the Transferor under Section 3.10 of the Servicing Agreement
shall be made either by remittance of the Purchase Price to the Servicer for
deposit into the Collection Account in accordance with Section 3.03(a) of the
Servicing Agreement or by substitution of a Substitute Lease Contract, as
applicable, following the expiration of the cure period set forth in
Section 3.03 hereof.
(d) Any voluntary purchase or substitution of a Lease Contract by the
Transferor pursuant to the terms of a related Servicing Agreement or Trust and
Security Agreement in the event of a default, delinquency 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 COMPANY AND THE CONTRIBUTORS
Section 4.01. Company and Contributor Covenants. Each of the Company and
the Contributors hereby covenants and agrees with the Transferor as follows:
(a) Except as hereinafter provided, such entity 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
Agreement or any of the Lease Contracts and to perform its duties
hereunder. Any person into which such entity may be merged or
consolidated, or to whom such entity has sold substantially all of its
assets, or any corporation resulting from any merger, conversion or
consolidation to which such entity shall be a party, or any Person
succeeding to the business of such entity shall be the successor of such
entity 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 (w) immediately
after giving effect to such transaction, no representation or warranty
made pursuant to Section 3.01(c) shall have been breached, (x) such
successor executes an agreement or assumption, in form reasonably
satisfactory to the Trustee and the Bond Insurer, to perform every
obligation under this Agreement, (y) such entity shall have
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delivered to the Transferor and the Bond Insurer a certificate of an
officer of such entity 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 Agreement relating to such transaction have
been complied with, and (z) such entity shall have delivered to the
Transferor and the Bond Insurer an Opinion of Counsel either (1) stating
that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and
filed that are necessary fully to preserve and protect the interest of
the Transferor in the Lease Assets 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 Contributors, nor any of
the directors, officers, employees or agents of any such entity shall be
under any liability to the Transferor, the Trustee or the
Certificateholders for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for
errors in judgment not involving recklessness or gross negligence;
provided, however, that this provision shall not protect either such
entity against any breach of warranties or representations made herein,
or failure to perform its obligations in strict compliance with this
Agreement, or any liability which would otherwise be imposed by reason
of any breach of the terms and conditions of this Agreement. The
Company, the Contributors and any director, officer, employee or agent
of any such entity, 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. Neither the Company nor any of the
Contributors shall be under any obligation to appear in, prosecute, or
defend any legal action that is not incidental to its obligations under
this Agreement and that in its opinion may involve it in any expense or
liability.
(c) Each of the Company and the Contributors will from time to
time, at its own expense, 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) and are reasonably satisfactory in form and
substance to the Transferor; provided, however, that financing
statements with respect to the Equipment shall be filed only with
respect to the Equipment initially located in the Enumerated States and
neither the Company nor any of the Contributors will be required to file
any financing statements with any Customer as Debtor.
(d) Neither the Company nor any of the Contributors will 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
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Section 9-402(7) of the UCC, unless it shall have given the Transferor,
the Bond Insurer and the Trustee at least 10 days' prior written notice
thereof.
(e) Each of the Company and the Contributors will give the
Transferor, the Bond Insurer and the Trustee at least 10 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.
(f) Each of the Company and the Contributors 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 or
the Trustee in the Lease Contracts or the Equipment or Leased Vehicles.
In the event that the rights of the Company or any of the Contributors
under any Lease Contract, any guaranty of the related Customer's
obligations under any Lease Contract, or any Insurance Policy are not
assignable to the Transferor or to the Trustee, each of the Company and
the Contributors will enforce such rights on behalf of the Trustee.
(g) Each of the Company and the Contributors will comply, in all
material respects, with all material acts, rules, regulations, orders,
decrees and directions of any governmental authority applicable to the
Lease Assets or any part thereof; provided, however, that each of the
Company and the Contributors 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 or the Trustee in the
Lease Assets.
(h) Each of the Company and the Contributors will advise the
Transferor, the Bond Insurer and the Trustee promptly, in reasonable
detail, of the occurrence of any breach by the Company or any of the
Contributors following discovery by the Company or any of the
Contributors of such breach of any of its representations, warranties
and covenants contained herein.
(i) Each of the Company and the Contributors will execute or
endorse, acknowledge, and deliver to the Transferor, the Bond Insurer
and the Trustee from time to time such schedules, confirmatory
assignments, conveyances, and other reassurances or instruments and take
such further similar actions relating to the Lease Contracts, the
related Lease Receivables and Equipment or Leased Vehicles, and the
rights covered by the Transaction Documents, as the Transferor, the Bond
Insurer or the Trustee may reasonably request to preserve and maintain
title to the Lease Assets and the rights of the
-26-
<PAGE> 27
Trustee, the Bond Insurer and the Certificateholders therein against the
claims of all persons and parties.
(j) Each of the Company and the Contributors agrees to
indemnify, defend and hold the Transferor 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 or any of the Contributors 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 or any of the
Contributors which is set forth in any Lease Schedule delivered
hereunder, being untrue in any respect when any such representation was
made or schedule delivered, provided that neither the Company nor any of
the Contributors shall have any liability with respect to a
representation or warranty as to any specific Lease Contract, Lease
Receivable, Equipment or Leased Vehicle 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 or the applicable Contributor's fraud, gross
negligence, bad faith or willful misconduct. Each of the Company and the
Contributors shall also indemnify the Trustee, the Servicer and the Bond
Insurer for any cost or expenses incurred by them in the enforcement of
this Agreement. The obligations of the Company and the Contributors
under this Section 4.01(j) shall be considered to have been relied upon
by the Transferor and shall survive the execution, delivery and
performance of this Agreement, regardless of any investigation made by
or on behalf of the Transferor, until termination of the Trust and
Security Agreement. If the Company or any of the Contributors has made
any indemnity payments pursuant to this Section 4.01(j) and thereafter
the recipient collects any of such amounts from others, such party will
promptly repay the amount collected to the Company or the applicable
Contributor, as applicable, without interest.
(k) Neither the Company nor any of the Contributors will do
anything to disturb or impair the acquisition hereunder by the
Transferor of the Lease Contracts and the related Lease Receivables and
Equipment or Leased Vehicles.
(l) Each of the Company and the Contributors (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 (ii) will not (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) for one year and one day after the termination of this Agreement
institute
-27-
<PAGE> 28
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 (1)
shall survive termination of this Agreement.
(m) Each of the Company and the Contributors shall notify the
Transferor, the Bond Insurer and the Trustee promptly after becoming
aware of any material Lien on any Lease Asset.
(n) On each date as of which the Company or the applicable
Contributor substitutes a Substitute Lease Contract in accordance with
Section 3.03 hereof, the Company shall provide to the Transferor a
supplement to this Agreement 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 the information
required in the Lease Schedule.
(o) The annual financial statements of the Company and the
Contributors will disclose the effects of the transactions contemplated
by the Transaction Documents in accordance with generally accepted
accounting principles. The financial statements of the Company, the
Contributors and the Transferor will also disclose that the assets of
the Transferor are not available to pay creditors of the Company or any
of the Contributors, as applicable. The resolutions, agreements and
other instruments underlying the Transaction Documents will be
continuously maintained by each of the Company and the Contributors as
official records.
(p) Each of the Company, the Contributors, the Transferor and
their shareholders and members shall treat the Lease Contracts as owned
by the Transferor for federal, State and local income tax purposes,
shall include in the computation of the Transferor's gross income for
such purposes the rental and other income from the Lease Contracts,
shall treat the Certificates as debt of the Transferor for such
purposes, and shall cause the Transferor to deduct the interest paid or
accrued with respect to the Certificates in accordance with its
applicable method of accounting for such purposes.
(q) The Company will, at its own cost and expense, (i) retain
the Electronic Ledger as a master record of the Lease Contracts,
Equipment and Leased Vehicles and copies of all documents relating to
each Lease Contract (other than the original executed Lease Contracts
and the original Certificates of Title) as custodian for the Transferor,
the Trustee and other Persons, if any, with interests in the Lease
Contracts, Equipment and Leased Vehicles and (ii) mark the Lease
Contracts and the Electronic Ledger to the effect that the Lease
Contracts, Equipment and Leased Vehicles have been acquired by the
-28-
<PAGE> 29
Transferor and that they have been transferred and assigned to the
Trustee pursuant to the Trust and Security Agreement.
(r) During the term of this Agreement and for one year and one
day after the termination hereof, none of the Company or the
Contributors 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.
Section 4.02. Transferor Covenants. The Transferor hereby covenants and
agrees with the Company and the Contributors as follows:
(a) The Transferor hereby acknowledges and agrees that its
rights in the Equipment and Leased Vehicles are expressly subject to the
rights of the related Customers in such Equipment and Leased Vehicles
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 Leased Vehicles and the
Customer's unrestricted use thereof for its intended purpose.
(b) On each date as of which Lease Contracts and the related
Equipment or Leased Vehicles are to be purchased or replaced by the
Company or a Contributor, as applicable, pursuant to Section 3.03, the
Transferor shall submit to the Company an instrument of assignment
assigning such Lease Contract and Equipment or Leased Vehicle to the
Company or a Contributor, as applicable, signed by the president, senior
vice president or any vice president of the Transferor. Each such
assignment shall operate as an assignment, without recourse,
representation, or warranty, to the Company or a Contributor, as
applicable, of all of the Transferor's right, title, and interest in and
to such Lease Contract, Equipment, Leased Vehicle and any security
documents relating thereto, such assignment being an assignment outright
and not for security, and upon payment of the Purchase Price or delivery
of a Substitute Lease Contract, the Company or a Contributor, as
applicable, will thereupon own such Lease Contract and all such security
and documents, free of any further obligation to the Transferor with
respect thereto. If in any enforcement suit or legal proceeding it is
held that the Company or a Contributor, as applicable, 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 Lease Contract, including bringing suit in the
Transferor's name.
-29-
<PAGE> 30
(c) The Transferor warrants that it will own and possess the
Equipment and Leased Vehicles subsequent to its acquisition thereof and
that it will warrant and defend its title to such Equipment or Leased
Vehicle 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 or Leased Vehicle, except
as permitted under the Trust and Security Agreement.
(d) Each of the Company, the Contributors, the Transferor and
their shareholders shall treat the Lease Contracts as owned by the
Transferor for federal, State and local income tax purposes, shall
include in the computation of the Transferor's gross income for such
purposes the rental and other income from the Lease Contracts, shall
treat the Certificates as debt of the Transferor for such purposes, and
shall cause the Transferor to deduct the interest paid or accrued with
respect to the Certificates in accordance with its applicable method of
accounting for such purposes.
(e) On or prior to the Closing Date, the Transferor shall
provide to the Trustee the Applications for Certificates of Title with
respect to each Leased Vehicle. Within 120 days of the Closing Date, the
Transferor shall provide the Trustee the original Certificate of Title
with respect to each Leased Vehicle.
Section 4.03. Assignment of Lease Assets. Each of the Company and the
Contributors understands that the Transferor will assign to and grant to the
Trustee a security interest in all its right, title and interest to this
Agreement and the Lease Assets. Each of the Company and the Contributors
consents to such assignment and grants and further agrees that all
representations, warranties, covenants and agreements the Company and the
Contributors made herein shall also be for the benefit of and inure to the
Trustee, the Bond Insurer and the Certificateholders.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.01. Conditions to the Transferor's Obligations. The
obligations of the Transferor hereunder shall be subject to the satisfaction of
the following conditions:
(a) All representations and warranties of each of the Company
and the Contributors contained in this Agreement and all information
provided in the Lease Schedule shall be true and correct on the Closing
Date and the related Funding Date, and each of the Company and the
Contributors shall have delivered to the Transferor, the Bond Insurer
and the Trustee an Officer's Certificate to such effect;
-30-
<PAGE> 31
(b) Each of the Company and the Contributors shall have
delivered all other information theretofore required or reasonably
requested by the Transferor to be delivered by the Company and each of
the Contributors hereunder, duly certified by an officer of
the Company or the Contributor, as applicable, and each of the Company
and the Contributors shall have substantially performed all other
obligations required to be performed by the provisions of this
Agreement;
(c) On or before the Closing Date, the Transferor, the Servicer,
the Back-Up Servicer and the Trustee shall have entered into the
Servicing Agreement; and
(d) 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.
Section 5.02. Conditions to the Company's and the Contributors'
Obligations. The obligations of the Company and the Contributors to enter into
this Agreement shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Transferor
contained in this Agreement shall be true and correct on the Closing
Date and the related Funding Date with the same effect as though such
representations and warranties had been made on such date; and
(b) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement and the
Transaction Documents shall be satisfactory in form and substance to
each of the Company and the Contributors, and each of the Company and
the Contributors shall have received from the Transferor copies of all
documents (including, without limitation, records of corporate
proceedings) relevant to the transactions herein contemplated as each of
the Company and the Contributors may reasonably have requested.
ARTICLE 6
TERM AND TERMINATION
Section 6.01. Term. This 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.
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<PAGE> 32
Section 6.02. Default by the Company or the Contributors. If either of
the Company or any of the Contributors shall be in default under this Agreement
and such default shall not have been cured for a period of 60 days, or if either
of the Company or any of the Contributors 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 or any of the Contributors, as applicable, are not
stayed or dismissed within 90 days after being commenced against the Company or
any of the Contributors, as applicable, 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 Bond Insurer, in addition to any other rights
it may have under any applicable law, to terminate this Agreement upon 30 days
prior written notice to the Company or any of the Contributors, as applicable;
provided that any termination of this Agreement shall not release the Company or
any of the Contributors from any obligation under this Agreement.
ARTICLE 7
MISCELLANEOUS
Section 7.01. Amendments. This 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. This Agreement
may be amended by the Transferor, the Contributors and the Company only with the
prior written consent of the Trustee and the Bond Insurer.
Section 7.02. Governing Law. This 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 the Company Address, in the case of each of the Contributors, to the
Contributor Address, in the case of the Transferor, to the Transferor Address
and in the case of the Bond Insurer, to the address set forth in
Section 13.03(e) of the Trust and Security 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. 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 Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the
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<PAGE> 33
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 Agreement may not be assigned or delegated by the Company or any of the
Contributors without the prior written consent of the Transferor, the Bond
Insurer and the Trustee and may not be assigned or delegated by the Transferor
without the prior written consent of the Company, the Contributors, the Bond
Insurer and the Trustee.
Section 7.06. Further Assurances. Each of the Company, the Contributors
and the Transferor agrees to do such further acts and things and to execute and
deliver to the Trustee such additional assignments, agreements, powers and
instruments as are required by the Trustee or the Bond Insurer to carry into
effect the purposes of this Agreement or to better assure and confirm unto the
Trustee, the Bond Insurer or the Certificateholders their rights, powers or
remedies hereunder. If any Customer shall be in default under any Lease
Contract, upon reasonable request from the Servicer, each of the Company and the
Contributors 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, the Bond Insurer and the Certificateholders therein against the
claims of all Persons and parties to the extent such entity is capable of
performing such requested steps and the Servicer reasonably determines that the
assistance of the Company or any of the Contributors 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, any of the
Contributors 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 Agreement
will inure to the benefit of and be binding upon the parties hereto, the
Trustee, the Bond Insurer, the Certificateholders, and their respective
successors and permitted assigns. The Bond Insurer is an express third party
beneficiary of this Agreement.
Section 7.09. Set-Off. (a) Each of the Company and the Contributors
hereby irrevocably and unconditionally waives all right of set-off that it may
have under contract (including this Agreement), applicable law or otherwise with
respect to any funds or monies of the Transferor at any time held by or in the
possession of the Company.
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<PAGE> 34
(b) The Transferor shall have the right to set-off against the Company
or the Contributors any amounts to which the Company or the applicable
Contributor may be entitled and to apply such amounts to any claims the
Transferor may have against the Company or the applicable Contributor from time
to time under this Agreement. Upon any such set-off the Transferor shall give
notice of the amount thereof and the reasons therefor.
Section 7.10. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall together constitute one original document.
-34-
<PAGE> 35
IN WITNESS WHEREOF, the Company, the Contributors and the Transferor have
caused this Agreement to be duly executed by their respective officers thereunto
duly authorized as of the date and year first above written.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee and as Back-up Servicer
By: /s/ EILEEN R. STETZNER
-----------------------------------------------
Name: Eileen R. Stetzner
Title: Corporate Trust Officer
T & W FINANCIAL CORPORATION,
as Servicer
By: /s/ THOMAS W. PRICE
-----------------------------------------------
Name: Thomas W. Price
Title: President
T & W FUNDING COMPANY I, L.L.C.,
as Transferor
By: /s/ MICHAEL A. PRICE
-----------------------------------------------
Name: Michael A. Price
Title: President
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<PAGE> 36
EXHIBIT A
FORM OF SUPPLEMENT FOR SUBSTITUTE LEASE CONTRACTS
Pursuant to Section 3.04(b) of the Contribution Agreement dated as of
February 1, 1997 (the "Agreement") between T & W Financial Corporation (the
"Company"), T & W Funding Company V, L.L.C. and T & W Funding Company VI, L.L.C.
(each, a "Contributor" and collectively, the "Contributors") and T & W Funding
Company I, L.L.C. (the "Transferor"), attached hereto as Schedule I is a
supplement to Schedule II of the related Assignment and Assumption Agreement
which includes information regarding Lease Assets that are hereby sold,
assigned, transferred and delivered by the undersigned Contributor to the
Transferor in accordance with the Contribution Agreement.
[CONTRIBUTOR]
By
Name:
Title:
<PAGE> 37
SCHEDULE I
<PAGE> 38
EXHIBIT B
FORM OF LEASE CONTRACT
<PAGE> 39
EXHIBIT C
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Assignment") is made as of
_________, 1997 (the "Contribution Date"), by and between _______________, a
Delaware limited liability company ("Assignor"), and T & W Funding Company I,
L.L.C., a Delaware limited liability company ("Assignee"), with reference to the
following facts:
RECITALS:
A. In connection with the contribution, from time to time, of certain
lease assets of Assignor in conjunction with the issuance of certificates (the
"Certificates") by the trust created by Assignee, Assignee and the Assignor have
executed the Contribution Agreement dated as of February 1, 1997 (the
"Contribution Agreement").
B. In connection with the Contribution Agreement, the Assignor desires
to assign and transfer to Assignee all of Assignor's right, title and interest
in and to each of the assets described in Schedule II hereto, as supplemented
from time to time, and the corresponding paragraphs below (the "Assigned
Interests").
C. Assignor desires to transfer and Assignee is willing to assume
certain indebtedness of Assignor listed on Schedule I hereto.
D. Assignee desires to accept the Assignment and transfer of the
Assigned Interests and assume all duties and obligations attendant thereto,
accruing after the Contribution Date.
E. Terms used but not defined herein have the meanings ascribed to them
in the Contribution Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignor and Assignee hereby agree as follows:
1. Assignment. The Assignor hereby assigns, conveys, grants and
transfers, without recourse except as provided in the Contribution Agreement, to
Assignee (and the successors and assigns of Assignee) the following property:
1.1. The Assignor's right, title and interest in and to the
Lease Contracts and related Lease Receivables described and listed on
Schedule II hereto.
<PAGE> 40
1.2. All of Assignor's right, title and interest in and to the
equipment or vehicles subject to each such Lease Contract (the
"Equipment" or "Leased Vehicle," as applicable).
1.3. All of Assignor's other Lease Assets relating to each such
Lease Contract.
2. Assumption. The Assignee hereby agrees to assume the indebtedness of
Assignor listed on Schedule I hereto and to use the proceeds of the initial sale
of Certificates to pay such indebtedness. Assignee hereby accepts the foregoing
Assignment and hereby assumes all of the other obligations incident hereto and
thereto, subject to the terms and conditions of the Contribution Agreement.
3. Further Assurance. The Assignor and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignor and Assignee hereby acknowledge that
for all purposes the Assignor and Assignee are each separate and distinct legal
entities. Accordingly, the Assignor shall not be liable to any third party for
the debts, obligations and liabilities of the Assignee; and Assignee shall not
be liable to any third party for the debts, obligations and liabilities of the
Assignor to the extent that such debts, obligations and liabilities have not
been expressly assumed by Assignee hereunder.
5. Governing Law. This Assignment shall be governed by and interpreted
in accordance with the laws of the State of Delaware, and the parties hereto
hereby acknowledge and agree that this Assignment and Assumption Agreement and
the transactions contemplated hereunder were negotiated and entered into in the
State of Delaware.
6. Authority. The Assignor and Assignee each hereby represent
respectively that they have full power and authority to enter into this
Assignment.
7. Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
8. Successors and Assigns. The Assignor and Assignee each agree that
this Assignment will be binding and will inure to the benefit of the Assignor
and its successors and assigns and the Assignee and its successors and assigns.
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<PAGE> 41
9. Third Party Beneficiary. The Assignor and Assignee each agree that
MBIA Insurance Corporation is an express third party beneficiary to this
Assignment.
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<PAGE> 42
IN WITNESS WHEREOF, this Assignment has been executed as of the date first
above written.
________________________., Assignor
By
Name:
Title:
T & W FUNDING COMPANY I, L.L.C.,
Assignee
By
Name:
Title:
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<PAGE> 43
SCHEDULE I
SCHEDULE OF EXISTING INDEBTEDNESS
LENDER AMOUNT
$______________
$______________
<PAGE> 44
SCHEDULE II
LEASE SCHEDULE
<PAGE> 45
EXHIBIT D
EXISTING INDEBTEDNESS OF
T & W FUNDING COMPANY VI, L.L.C.
<TABLE>
<CAPTION>
LENDER AMOUNT
<S> <C>
Seafirst Bank $7,068,085.54
CoreStates Bank, N.A. $4,331,399.92
</TABLE>
<PAGE> 46
EXHIBIT E
CREDIT MANUAL
<PAGE> 1
EXHIBIT 10.3
================================================================================
SERVICING AGREEMENT
among
T & W FUNDING COMPANY I, L.L.C.
("Transferor")
and
T & W FINANCIAL CORPORATION
("Servicer")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
("Trustee" and "Back-up Servicer")
Dated as of February 1, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS.........................................................................1
Section 1.01. Defined Terms...................................................................1
ARTICLE II SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS..................................3
Section 2.01. Representations and Warranties..................................................3
Section 2.02. Covenants.......................................................................5
ARTICLE III ADMINISTRATION AND SERVICING OF LEASE CONTRACTS.....................................5
Section 3.01. Responsibilities of Servicer....................................................5
Section 3.02. Servicer Standard of Care.......................................................8
Section 3.03. Servicer Remittances............................................................8
Section 3.04. Servicer Advances...............................................................9
Section 3.05. Financing Statements............................................................9
Section 3.06. Maintenance of Insurance Policy; Insurance Proceeds.............................9
Section 3.07. Personal Property and Sales Taxes..............................................10
Section 3.08. No Offset......................................................................10
Section 3.09. Servicing Compensation.........................................................10
Section 3.10. Substitution or Purchase of Lease Contracts....................................10
Section 3.11. Titles.........................................................................11
Section 3.12. Errors and Omissions Insurance.................................................12
ARTICLE IV ACCOUNTINGS, STATEMENTS AND REPORTS................................................12
Section 4.01. Monthly Servicer's Reports.....................................................12
Section 4.02. Financial Statements; Certification as to Compliance; Notice of Default........12
Section 4.03. Annual Independent Accountants' Servicing 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 V THE SERVICER AND THE TRANSFEROR....................................................17
Section 5.01. Servicer Indemnification.......................................................17
Section 5.02. Corporate Existence; Reorganizations...........................................18
Section 5.03. Limitation on Liability of the Servicer and Others.............................18
Section 5.04. The Servicer Not to Resign.....................................................18
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.05. Transferor Indemnification.....................................................19
ARTICLE VI SERVICING TERMINATION..............................................................19
Section 6.01. Servicer Events of Default.....................................................19
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.............................................24
Section 6.06. No Effect on Other Parties.....................................................24
ARTICLE VII THE BACK-UP SERVICER...............................................................24
Section 7.01. Representations of Back-up Servicer............................................24
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations of, Back-
up Servicer....................................................................25
Section 7.03. Back-up Servicer Resignation...................................................25
Section 7.04. Back-up Servicer Removal.......................................................26
Section 7.05. Oversight of Servicing.........................................................26
Section 7.06. Additional Back-up Servicer Duties.............................................27
Section 7.07. Back-up Servicer Compensation..................................................27
ARTICLE VIII MISCELLANEOUS PROVISIONS...........................................................27
Section 8.01. Termination of This Agreement..................................................27
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.................................................................30
Section 8.07. Article Headings and Captions..................................................30
Section 8.08. Legal Holidays.................................................................30
Section 8.09. Assignment for Security for the Certificates...................................30
Section 8.10. No Servicing Assignment........................................................30
Section 8.11. Bond Insurer Default...........................................................30
Section 8.12. Counterparts...................................................................30
Section 8.13. Third Party Beneficiary........................................................30
EXHIBIT A -- Form of Monthly Servicer's Report...........................................................A-1
EXHIBIT B -- Servicer Disk Information...................................................................B-1
</TABLE>
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This SERVICING AGREEMENT (as amended and supplemented from time to time,
(this "Agreement"), dated as of February 1, 1997, is entered into by and among
T & W Funding Company I, L.L.C. (herein, together with its permitted successors
and assigns, the "Transferor"), T & W Financial Corporation, as servicer and as
company (herein, together with its permitted successors and assigns, the
"Servicer" or "Company") and Norwest Minnesota National Association, as trustee
and as back-up servicer (herein, together with its permitted successors and
assigns, the "Trustee" or "Back-up Servicer").
PRELIMINARY STATEMENT
The Transferor has entered into a Trust and Security Agreement, dated as
of February 1, 1997 (the "Trust and Security Agreement"), with the Trustee, the
Back-up Servicer and the Servicer, pursuant to which a series of Certificates
will be issued.
The Transferor, T & W Financial Corporation (the "Company") and T & W
Funding Company V, L.L.C., and T & W Funding Company VI, L.L.C. (each, a
"Contributor," and, collectively, the "Contributors") have entered into a
Contribution Agreement dated as of February 1, 1997 (the "Contribution
Agreement"), providing for, among other things, the agreement by the Company and
the Contributors to repurchase certain Lease Assets that are being contributed
to the Transferor and conveyed to the Trust created pursuant to the Trust and
Security Agreement, for the benefit of the Certificateholders and the Bond
Insurer. As a precondition to the effectiveness of the Contribution Agreement,
the Contribution Agreement requires 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 Trust all of the
Transferor's rights derived under this Servicing Agreement and the Contribution
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
the Trustee, the Bond Insurer and the holders from time to time of the
Certificates. For its services under the Servicing Agreement, the Servicer will
receive a Servicer Fee as provided herein and in the Trust and Security
Agreement. For its services hereunder the Back-up Servicer will receive a
Back-up Servicer Fee as provided herein and in the Trust and Security Agreement.
ARTICLE I
DEFINITIONS
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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 Contribution Agreement.
"Back-up Servicer" shall initially mean Norwest Bank Minnesota, National
Association, a national banking association.
"Company" shall mean T & W Financial Corporation, a Washington
corporation.
"Contribution Agreement" shall mean the Contribution Agreement, dated as
of February 1, 1997, between the Company, the Contributors and the Transferor,
as amended and supplemented in accordance with its terms.
"Liquidated Lease Receivable" shall mean a Lease Receivable that has
been liquidated pursuant to Section 3.01(b) hereof.
"Local Bank" shall have the meaning specified in Section 3.03 hereof.
"Lock Box" shall have the meaning specified in Section 3.03 hereof.
"Local Bank Account" shall mean the account established in the name of
the Trustee pursuant to Section 3.03 hereof, into which account shall be
deposited payments related to the Lease Receivables.
"Monthly Servicer's Report" shall mean the report prepared by the
Servicer pursuant to Section 4.01 hereof.
"Officer's Certificate" shall mean 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.
"Reported Company" shall mean T & W Financial Corporation and its
Affiliates on a combined basis, and if the initial Servicer is no longer acting
as Servicer, then any successor Servicer appointed pursuant to this Agreement.
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"Reported Company's Financial Statements" shall include the Reported
Company's audited consolidating balance sheet and income statement, consolidated
statement of sources and uses/applications of cash, consolidated statement of
change in financial position, auditors opinion letter regarding audited
financial statements, and all notes to the audited financial statements.
"Servicer" shall initially mean T & W Financial Corporation 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" shall have the meaning set forth in Section 3.04
hereof.
"Servicer Default" shall mean 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" shall mean each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer State of Incorporation" means the State of Washington.
"Servicer Termination Notice" means the notice described in Section 6.01
hereof.
"Servicing Officer" shall mean 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, the Bond Insurer and the Certificateholders from
time to time.
"SIC Code" shall mean the Standard Industrial Classification Codes
established by the U.S. Office of Management and Budget as a guideline for
reporting business statistics.
"Substitution Criterion" shall have the meaning specified in the
Contribution Agreement.
"Trustee" shall initially mean Norwest Bank Minnesota, a national
banking association.
ARTICLE II
SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties. The Servicer makes the
following representations and warranties, which shall survive the Closing Date:
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(a) Organization and Good Standing. The Servicer has been duly
incorporated and is validly existing in good standing as a corporation
under the laws of the Servicer State of Incorporation, with requisite
corporate 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
the 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 By-laws, 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 or Leased Vehicles, which,
individually or in the aggregate, involve the possibility of materially
and adversely affecting the properties, business, prospects, profits or
condition (financial or otherwise) of the Servicer and its subsidiaries,
or the
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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) Net Worth. As of the Closing Date, the Tangible Net Worth
Requirement is met.
Section 2.02. Covenants. (a) The Servicer covenants as to the Lease
Assets:
(i) The Servicer shall not release or assign any Lien in favor of
the Trustee on any item of Equipment or Leased Vehicle related to any
Lease Contract in whole or in part, except as permitted herein or in the
Trust and Security Agreement.
(ii) The Servicer will in all material respects duly fulfill all
obligations on the Servicer's part to be fulfilled under or in
connection with the Lease Assets. The Servicer will not amend, rescind,
cancel or modify any Lease Contract or term or provision thereof, except
as permitted herein or in the Trust and Security Agreement, and the
Servicer will not do anything that would materially impair the rights of
the Certificateholders, the Trustee or the Bond Insurer in the Lease
Assets, except as contemplated herein or in the Trust and Security
Agreement.
(iii) In performing its servicing duties hereunder, the Servicer
shall collect all payments required to be made by the Customers under
the Lease Contracts, enforce all material rights of the Transferor under
the Lease Contracts and defend the Equipment and Leased Vehicles against
all Persons, claims and demands whatsoever. The Servicer shall not
assign, sell, pledge or exchange or in any way encumber or otherwise
dispose of the
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Equipment or Leased Vehicles, except as permitted hereunder or in the
Trust and Security Agreement.
(b) The Servicer will deliver each of the accountings, statements
and reports described in Article IV hereof to each party as set forth therein.
ARTICLE III
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS
Section 3.01. Responsibilities of Servicer. (a) The Servicer, for the
benefit of the Certificateholders, the Bond Insurer and the Trustee, shall be
responsible for, and shall, in accordance with its customary servicing
procedure, pursue the managing, servicing, administering, enforcing and making
of collections on the Lease Contracts, the Equipment, the Leased Vehicles and
any Insurance Policies, the enforcement of the Trustee's security interest in
the Lease Contracts, Lease Receivables, Equipment and Leased Vehicles granted
pursuant to the Trust and Security Agreement, and the sale or the releasing of
the Equipment and Leased Vehicles 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 Contribution
Agreement. The Servicer's responsibilities shall include collecting 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, the Bond Insurer, the Rating
Agencies and the Certificateholders with respect to payments, making Servicer
Advances, providing appropriate federal income tax information to the Trustee
for use in providing information to the Certificateholders or the Bond Insurer,
collecting and remitting sales and property taxes to taxing authorities, and
using its best efforts to maintain the perfected security interest of the
Trustee in the Trust Property. The Servicer (at its expense), acting alone or
through a subservicer, 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 and Leased Vehicles that it may deem necessary or desirable, including
the prudent delegation of such responsibilities. Without limiting the generality
of the foregoing, the Servicer, in its own name or in the name of a subservicer,
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 the
Lease Contract Files. The Servicer, acting alone or through a subservicer, 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, neither the Servicer, nor any
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subservicer, shall, 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, or at the request of the Servicer, any
subservicer, with any powers of attorney and other documents necessary or
appropriate to enable the Servicer or subservicer to carry out its servicing and
administrative duties hereunder, and the Trustee shall not be responsible for
the Servicer's or subservicer's application thereof. Notwithstanding the
appointment by the Servicer of a subservicer hereunder, the Servicer shall
remain primarily liable for the full performance of its obligations hereunder.
(b) The Servicer (or a subservicer) 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 Transferor,
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, equipment and vehicles that are similar to the Lease
Contracts, Lease Receivables, the Equipment and Leased Vehicles,
including, without limitation, the taking of appropriate actions to
foreclose or otherwise liquidate any such Defaulted Lease Contract,
together with the related Equipment or Leased Vehicles, to collect any
Guaranty Amounts, Insurance Proceeds and Recoveries, and to enforce the
Transferor's rights under the Contribution Agreement. All Recoveries or
Residual Proceeds in respect of any such Lease Receivable and the
related Equipment or Leased Vehicles received by the Servicer shall be
remitted to the Trustee for deposit in the Collection Account pursuant
to Section 3.03(a) hereof;
(ii) The Servicer may sue to enforce or collect upon Lease
Contracts as agent for the Transferor. 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 assignment 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 Transferor 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 name of the Transferor, as
beneficial owner of the Lease Contract, or the names of the
Certificateholders or the Bond Insurer, as third party beneficiaries
thereunder, and the Trustee shall be indemnified by the Servicer for any
such action taken;
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(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. In exercising recourse
rights, the Servicer is authorized on the Trustee's behalf to reassign
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 accept Substitute Lease Contracts that
do not comply with Section 3.10 hereof, Sections 3.03 and 3.04 of the
Contribution Agreement and Section 4.04 of the Trust and Security
Agreement;
(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 the Bond Insurer; provided, however, that (A) the
Servicer shall not forgive any payment of rent, and (B) the Servicer
shall not permit any modification with respect to any Lease Contract
that would decrease the 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 in the sixth month preceding the Stated
Maturity. The Servicer shall provide the Back-up Servicer, the Bond
Insurer and the Trustee with an amendment 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 or Leased Vehicles unless the Customer has paid an amount not
less than the Purchase 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
or any subservicer in the enforcement of any Lease Contract otherwise
(A) acquires title to any item of Equipment or Leased Vehicle with
respect to which title was held by the Customer or (B) reclaims
possession of Equipment or Leased Vehicle from the Customer, the
Servicer shall use its best efforts to sell or re-lease such item of
Equipment or Leased Vehicle promptly and consistent with the standard of
care set forth in Section 3.02 hereof. Any Recoveries or Residual
Proceeds related thereto shall be deposited in accordance with
Section 3.03(a) hereof; and
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(viii) Notwithstanding any provision to the contrary contained in
this Agreement, the Servicer or any subservicer 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; 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.
Section 3.02. Servicer Standard of Care. In managing, administering,
servicing, enforcing and making collections on the Lease Contracts, Equipment
and Leased Vehicles pursuant to this Agreement, the Servicer will exercise that
degree of skill and care consistent with that which the Servicer customarily
exercises with respect to similar lease contracts, equipment and vehicles owned
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 the Bond Insurer or the Certificateholders
in any Lease Contracts or payments thereunder.
Section 3.03. Servicer Remittances. (a) The Servicer, as agent of the
Transferor, 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 through 4:00 p.m.,
Minneapolis time, on the preceding Business Day, so long as such amounts exceed
$1,000:
(i) all payments made under the Lease Contract relating to the
Lease Receivables, including prepayments but excluding taxes, received
directly by the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Purchase Price of any Lease Contract purchased by the
Company, any of the Contributors or the Transferor, to the extent
received by the Servicer;
(iv) all Guaranty Amounts;
(v) all Servicing Charges; and
(vi) all Insurance Proceeds.
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The Servicer shall hold in trust for the benefit of the
Certificateholders and the Bond Insurer any payment it receives relating to
items (i) through (vi) above until such time as the Servicer transfers any such
payment to the Trustee for deposit in the Collection Account.
(b) On each Business Day, the Servicer, under authority given to it
hereby by the Trustee, will collect from a post office box in the name of
Norwest Bank Minnesota, National Association, as Trustee (the "Lock Box"),
amounts representing payments sent by Customers and deposit such amounts in an
account (the "Local Bank Account") in a local bank (the "Local Bank"). The
Servicer will cause the Local Bank to deposit amounts in the Local Bank Account
in to the Collection Account in accordance with Section 3.03(a). The authority
given to the Servicer by the Trustee to collect checks from the Lock Box may be
revoked at any time by the Trustee, the Back-up Servicer or the Bond Insurer and
shall be revoked in the event that a Trigger Event has occurred and is
continuing.
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 a Servicer Advance for each Lease Contract which is a Delinquent Lease
Contract on such date by remitting to the Trustee for deposit in the Collection
Account an amount equal to the Scheduled Payments, or portion thereof, which
were due in the prior Due Period but not received and deposited in the
Collection Account on or prior to such Determination Date; provided, 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 that is unlikely to be
eventually repaid from Scheduled Payments made by or on behalf of the related
Customer; further provided, that the Servicer may make a Servicer Advance with
respect to a Lease Contract once it has become a Defaulted Lease Contract if it
reasonably believes that such Servicer Advance will increase the Recoveries
available to the Trust. On each Determination Date, the Servicer shall deliver
to the Back-up Servicer, the Trustee and the Bond Insurer the Monthly Servicer's
Report listing the aggregate amount of Scheduled Payments not received for the
immediately prior Due 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.
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Section 3.06. Maintenance of Insurance Policy; Insurance Proceeds. The
Servicer shall have no duty or obligation to verify, monitor or enforce the
acquisition and/or maintenance of Insurance Policies by a Customer. Any
Insurance Proceeds shall be remitted to the Trustee for deposit in the
Collection Account pursuant to Section 3.03(a).
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 and Leased Vehicles, or the
acquisition or leasing or re-leasing thereof, as and when such taxes become due,
to the extent a Customer has paid amounts to the Servicer 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. 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 which the Servicer has or may have
against the Transferor, whether in respect of this Agreement, any Lease
Contract, Lease Receivable, Equipment, Leased Vehicle or otherwise.
Section 3.09. 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 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 the Bond Insurer purchases the last remaining Lease Contract.
The Servicer Fee shall be paid by the Transferor 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,
the Bond Insurer, the Rating Agencies and Certificateholders and shall not be
entitled to reimbursement for such expenses; provided, however, that the
Servicer will be entitled to prompt reimbursement from the Transferor 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 any 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 in
Section 6.02 hereof and in the Trust and Security Agreement.
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(c) The Servicer shall deposit in the Collection Account the amount of
any loss incurred in respect of any investment held therein immediately upon
realization of such loss, without any right to reimbursement therein from its
own funds.
Section 3.10. 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, unless the Transferor has
(i) pledged to the Trustee a Substitute Lease Contract and the related Equipment
or related Leased Vehicle and Lease Receivables under such Substitute Lease
Contract, and delivered to the Trustee the original executed counterpart of the
Substitute Lease Contract and the original Certificate of Title or
(ii) purchased such prepaid Lease Contract and the related Equipment or related
Leased Vehicle from the Trustee by remittance of the Purchase Price to the
Servicer for deposit in the Collection Account in accordance with
Section 3.03(a) hereof; provided, further, that purchases and substitutions of
Lease Contracts pursuant to this subparagraph (a) shall comply with the
requirements of Section 4.04 of the Trust and Security Agreement and the
criteria set forth in Section 3.04 of the Contribution Agreement.
(b) The Servicer shall permit the Transferor to (i) purchase any
Defaulted Lease Contract or Delinquent Lease Contract by remittance by the
Transferor to the Servicer for deposit in the Collection Account in accordance
with Section 3.03(a) hereof or (ii) substitute for any Defaulted Lease Contract
or Delinquent Lease Contract, a Substitute Lease Contract and the related
Equipment or related Leased Vehicle and Lease Receivables under such Substitute
Lease Contract, upon the delivery to the Trustee of the original executed
counterpart of the Substitute Lease Contract and the original Certificate of
Title or; provided that, purchases and substitutions of Lease Contracts pursuant
to this subparagraph (b) shall comply with the requirements of Section 4.04 of
the Trust and Security Agreement and the criteria set forth in Section 3.04 of
the Contribution 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 Leased
Vehicle 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 repurchased 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 or any of the Contributors is
required, as a result of the breach by it of certain representations or
warranties, to repurchase or substitute a Lease Contract pursuant to
Section 3.03 of the Contribution Agreement, the Servicer shall permit such
repurchase or substitution in accordance with the terms of Sections 3.03 and
3.04 thereof.
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Section 3.11. Titles. (a) The Servicer shall submit or shall have caused
to be submitted an Application for Certificate of Title to the applicable
governmental authority for each Leased Vehicle no later than the Closing Date.
The Contributor shall deliver each original Certificate of Title to the Servicer
immediately upon receipt. If the new Certificate of Title is not received within
120 days after the Closing Date, the Servicer shall notify the relevant
Contributor, the Trustee and the Bond Insurer that such Certificate of Title has
not been obtained.
(b) Upon receipt of any Certificate of Title, the Servicer shall
promptly verify that the information contained in the Certificate of Title is
materially correct, and that the Transferor is named as owner and the Trustee is
shown as the lienholder of the Leased Vehicle covered thereby and forward such
Certificate of Title to the Trustee. If the Servicer determines that such
information is not correct, the Servicer shall promptly so advise the Trustee
and the Bond Insurer. Certificates of Title will be held by the Trustee. The
Servicer may assist the Customer in retitling a Leased Vehicle which has been
permanently moved or transported to a different state.
Section 3.12. Errors and Omissions Insurance. The Servicer agrees to
maintain with a responsible company errors and omissions coverage in an amount
customarily maintained by prudent equipment and vehicle lease servicers having
servicing portfolios of a similar size.
ARTICLE IV
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 to the
Transferor, the Back-up Servicer, the Trustee, the Bond Insurer, the
Certificateholders and the Rating Agencies the Monthly Servicer's Report in the
form attached as Exhibit A with respect to the activity in the immediately
preceding Due Period. In the course of preparing the Monthly Servicer's Report,
the Servicer shall seek direction from the Transferor as to remittance of the
funds to be paid pursuant to Section 12.02(d)(xiv) of the Trust and Security
Agreement. Lease Contracts which have been substituted for or purchased by the
Company, either of the Contributors, the Servicer or the Transferor shall be
identified by Customer lease number. On each Payment Date, the Servicer shall
deliver to the Back-up Servicer and the Bond Insurer a computer disk or tape in
a format acceptable to the Back-up Servicer and the Bond Insurer containing the
information described on Exhibit B hereto, as well as any additional information
reasonably requested by the Back-up Servicer or the Bond Insurer 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
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the Trustee, the Bond Insurer, the Back-up Servicer, the Rating Agencies and to
the Certificateholders:
(i) within 120 days after the end of each fiscal year of the
Reported Company, four copies of the Reported Company's Financial
Statements, all in reasonable detail and accompanied by an opinion of
the Independent Accountants or a firm of independent certified public
accountants of recognized national standing stating that such financial
statements present fairly the financial condition of the Reported
Company (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 Company's 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 Contribution
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 Company during the period
covered by the Reported Company's 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
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(B) any pending or proposed court or administrative
proceeding which involves or may involve the possibility of
materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the
Servicer or the Transferor,
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
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;
and
(vi) quarterly, unaudited versions of the Reported Company's
consolidating balance sheet and income statement and consolidated
statement of sources and uses of cash.
(b) On or before each April 15, so long as the Certificates are
outstanding, the Servicer shall furnish to the Bond Insurer 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 Property 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 Property until the date such next Officer's
Certificate is due.
Section 4.03. Annual Independent Accountants' Servicing Reports; Annual
Federal Tax Lien Search. (a) Commencing with the 1997 fiscal year of the
Servicer, and each fiscal year thereafter, the Servicer, at its expense, shall
cause the Independent Accountant (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, the Bond Insurer and the Rating
Agencies, dated as of the close of such fiscal year, to the effect that the
Independent Accountant has 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 the Lease Contract Files (which procedures,
manuals, guides and records shall be described in one or more schedules to such
statement), that such Independent Accountant has compared the information
contained in the Monthly Servicer's Reports delivered in the relevant period and
one-half of the Funding Reports
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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 Accountant's 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 or in such Funding 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 (a) such exceptions as the Independent
Accountant shall believe to be immaterial and (b) such other exceptions as shall
be set forth in such statement. If any discrepancy is found in any Funding
Report, then the Independent Accountants shall verify the information in all of
the Funding Reports delivered during the related fiscal year of the Servicer.
The Servicer shall deliver to the Back-up Servicer, the Trustee, the
Certificateholders, the Bond Insurer and the Rating Agencies a copy of any such
statement within 120 days of the close of the relevant fiscal year.
(b) Promptly after the end of the Servicer's fiscal year, the Servicer,
at its expense, shall cause a search of any and all federal tax liens against
the affiliated group of which the Company, the Contributors and the Transferor
are members within the meaning of Section 1504 of the Code (the "Affiliated
Group") as of the end of such fiscal year to be conducted and shall deliver to
the Back-up Servicer, the Trustee, the Certificateholders and the Bond Insurer
on or before January 31 of each year, commencing January 31, 1998, an officer's
certificate signed by a Servicing Officer (i) stating that there are no
outstanding federal tax liens filed against any member of the Affiliated Group
or (ii) listing the outstanding federal tax liens filed against any member of
such Affiliated Group. In the event any such certificate shall disclose any such
federal tax liens, the Servicer shall promptly thereafter, satisfy any such
federal tax liens.
(c) Promptly after the end of the Servicer's fiscal year, the Servicer,
at its expense, shall cause a third party acceptable to the Bond Insurer to
perform an operational review of the Servicer and to deliver written results of
such review to the Bond Insurer on or before December 31, of each year,
commencing December 31, 1997. Such review may be performed in conjunction with
the review undertaken by the Liquidity Agent under the Liquidity Agreement. The
scope of such review shall be acceptable to the Bond Insurer.
Section 4.04. Access to Certain Documentation and Information. (a) The
Servicer shall provide to the Back-up Servicer, the Bond Insurer, the Trustee,
or the Certificateholders and their duly authorized representatives, attorneys
or accountants access to any and all
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documentation regarding the Trust Property (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 the
Certificateholders, the Trustee, the Back-up Servicer and the Bond Insurer a
list of all Lease Contracts then held as a part of the Trust Property, together
with a reconciliation of such list to that set forth in the Lease Schedule and
each of the Monthly Servicer's Reports, indicating the cumulative addition and
removal of Lease Contracts from the Trust Property.
(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 and after the time of the acquisition of the Lease Assets
by the Transferor and the grant of the security interest in the Lease Contracts,
Lease Receivables, Equipment and Leased Vehicles to the Trustee, the Servicer's
accounts and records (including any back-up computer archives) that refer to any
Lease Contract, Lease Receivable, Equipment or Leased Vehicles indicate clearly
that the Lease Contracts, Lease Receivables, Equipment and Leased Vehicles are
owned by the Transferor and pledged to the Trustee for the benefit of the
Certificateholders and the Bond Insurer. 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.
(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, the
Bond Insurer or the Certificateholders regarding the Customers and the Lease
Contracts, whether upon
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exercise of its rights under this Section 4.04 or otherwise, shall be maintained
by the Trustee, the Back-up Servicer, the Bond Insurer or the
Certificateholders, 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 Contributors, the
Transferor or the Servicer or unless ordered by a court of appropriate
jurisdiction or so required by any regulatory body having appropriate
jurisdiction; provided that the Bond Insurer may make disclosures with respect
to any of the above matters to the Rating Agencies, reinsurers or any entity
having regulatory authority over the Bond Insurer and provided, further, that
the Trustee may provide any such information to any Certificateholder.
Section 4.05. Other Necessary Data. The Servicer shall, on request of
the Back-up Servicer, the Trustee or the Bond Insurer, on reasonable notice (i)
furnish the Back-up Servicer, the Trustee or the Bond Insurer such data
necessary for the administration of the Trust Property as can be reasonably
generated by the Servicer's existing data processing systems, and (ii) on and
after a Servicer Event of Default, provide the Trustee and the Back-up Servicer
with access to the Servicer's existing data processing systems.
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 certificate 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 in accordance with the applicable provisions.
Upon receipt of such delivery request, the Trustee shall within 60 days of such
request by the Servicer release such Lease Contract to the Servicer in
accordance with the applicable provisions. 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 or Leased Vehicle 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' and the Bond Insurer's rights and remedies with respect to
Lease Contracts.
ARTICLE V
THE SERVICER AND THE TRANSFEROR
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Section 5.01. Servicer Indemnification. (a) The Servicer agrees (1) to
indemnify, defend, and hold harmless the Trustee, the Back-up Servicer, the Bond
Insurer and the Certificateholders from and against any and all costs, expenses,
losses, damages, claims and liabilities arising out of or resulting from the
use, ownership or operation by the Transferor or any Affiliate thereof of the
Equipment and Leased Vehicles;
(2) To indemnify, defend and hold harmless the Trustee, the Back-up
Servicer, the Bond Insurer and the Certificateholders from and against any taxes
that may at any time be asserted against the Trustee or the Certificateholders
with respect to the transactions contemplated herein, including, without
limitation, any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the
Certificateholders, not including any taxes asserted with respect to the
issuance and original sale of the Certificates or federal or other income taxes
arising out of distributions on the Certificates) and costs and expenses in
defending against the same;
(3) To indemnify, defend and hold harmless the Trustee, the Back-up
Servicer, the Bond Insurer and the Certificateholders from against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage or liability arose out of, or was
imposed upon the Trustee or the Certificateholders through the negligence,
willful misfeasance or bad faith of the Servicer in the performance of its
obligations and duties hereunder; and
(4) To indemnify, defend and hold harmless the Trustee, the Back-up
Servicer, the Bond Insurer and the Certificateholders from and against all
costs, expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of the duties
contained herein, except to the extent that such cost, expense, loss, claim,
damage or liability shall be due to the willful misfeasance, bad faith or gross
negligence of such Person.
(b) Indemnification under this Section 5.01 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the Servicer has made any indemnity payments to the Bond
Insurer, 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 Servicer State of Incorporation and will obtain and preserve its
qualification to do business as a foreign corporation in each
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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 Property or the
ability of the Servicer to perform its duties hereunder; provided, however, that
the Servicer may reincorporate 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 the Bond Insurer.
(b) The Servicer shall not (i) (other than pursuant to one or more
additional lease 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 such Person or the merged or consolidated entity acquires
substantially all the assets of the Servicer as an entirety, is reasonably
acceptable to the Bond Insurer and executes and delivers to the Transferor, the
Bond Insurer, the Backup Servicer and the Trustee an agreement, in form and
substance reasonably satisfactory to the Transferor, the Bond Insurer, the
Backup Servicer 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. The
Servicer shall provide prompt written notice of such event to the Rating
Agencies and the Bond Insurer.
Section 5.03. Limitation on Liability of the Servicer and Others. Except
as provided in Section 5.01, 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 the Bond Insurer.
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(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, the Bond
Insurer, the Trustee, the Back-up Servicer or the Certificateholders of any
provision of the Certificates or this Agreement.
Section 5.05. Transferor Indemnification. The Transferor shall indemnify
and hold harmless the Servicer (but solely from the amounts to be distributed as
set forth in Section 12.02(d)(xiv) of the Trust and Security Agreement) from and
against any loss, liability, expense, damage or injury suffered or sustained by
the Servicer, including but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other costs and expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim, which
arises out of the Servicer's activities hereunder; provided, however, that the
Transferor shall not indemnify the Servicer if the Servicer's activities
constituted fraud, willful misconduct, gross negligence (which includes
negligence with respect to the duties of the Servicer which are explicitly set
forth in this Agreement) or breach of fiduciary duty by the Servicer.
ARTICLE VI
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 the Certificateholders any proceeds or payments received from
a Customer or in respect of the Trust Property and when 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 second successive 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
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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
prohibit 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 Purchase 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 Purchase
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 Purchase 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 by the Servicer to make remittances or deliver
notices pursuant to Section 3.03 hereof, that continues unremedied until
10:00 a.m., Minneapolis time, of the third successive Business Day; or
(v) Any failure on the part of the Servicer 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 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
the interest or rights of the Bond Insurer, the Trustee, the Back up
Servicer 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, the Bond Insurer, the Transferor, or the
Back-up Servicer, or to a Servicing Officer of the Servicer, the Bond
Insurer and the Trustee by the Certificateholders; or
(vi) 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
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(vii) 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 the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official for the Servicer or for any substantial part of
its property, or the ordering of 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
(viii) 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, marshalling 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
(ix) 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), (v) or (vii) above, as
applicable, the Trustee, at the direction of the Bond Insurer shall, or if there
has been a Bond Insurer Default, the Trustee, the Transferor, or the Back-up
Servicer may, 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.
Notwithstanding the foregoing, a delay in or failure of performance under
Section 6.01(a)(v) hereof for a period of 30 or more days shall not constitute a
Servicer Event of Default if such delay or failure could not have been prevented
by the exercise of reasonable diligence by the Servicer and such delay or
failure was caused by acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Servicer from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of this Agreement, and the Servicer shall
provide the Trustee, the Back-up Servicer, the Bond Insurer, the Transferor and
the Certificateholders with prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations.
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(c) In the event of the occurrence of a Trigger Event, the Trustee
shall, at the direction of the Bond Insurer, or if there has been a Bond Insurer
Default, the Trustee, the Transferor, or the Back-up Servicer may, 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 termination, 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 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 (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 receives a Servicer Termination Notice pursuant to
Section 6.01, 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 or, for some other reason does not serve, as successor Servicer,
another firm acceptable to the Bond Insurer shall be appointed.
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(ii) The successor Servicer shall 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 or if there exists any requirement
that additional capital be maintained by the Servicer by applicable regulatory
authority 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 the Bond Insurer (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) Upon receipt of a Servicer Termination Notice, the Back-up Servicer
shall solicit written bids, with a copy to the Bond Insurer (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 the
Bond Insurer. The Transferor may also solicit additional bids from other such
entities. Any such written solicitation shall prominently indicate that any fees
and transfer costs in excess of the Servicer Fee shall be paid only pursuant to
Section 12.02(d) of the Trust and Security Agreement. 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 of the
Trust and Security Agreement, receive as compensation therefor a fee equal to
the greater of the Servicer Fee or the fee proposed in the bid so solicited
which provides for the lowest Servicer Fee, as reasonably determined by the Bond
Insurer.
(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 if the Trustee has previously reimbursed the Back-up Servicer
therefor) shall be reimbursed for all Transition Costs 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)(viii) of the Trust and Security Agreement.
(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
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Principal Balance for all Lease Contracts less the principal amount of the
Certificates then outstanding is less than $50,000; then the Back-up Servicer
shall be relieved of its obligation under Section 6.02(a)(i) hereof, and the
Bond Insurer, or if there is a Bond Insurer Default, the Transferor shall
appoint a successor Servicer. In such event, the Bond Insurer shall be
reimbursed for any Transition Costs incurred solely pursuant to Section 6.02(b)
in the manner and to the extent provided for in Section 12.02(d)(viii) of the
Trust and Security Agreement.
Section 6.03. Notification to Certificateholders. The Servicer shall
promptly notify the Back-up Servicer, the Bond Insurer, the Transferor 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 VI, the Trustee shall give prompt written
notice thereof to the Certificateholders.
Section 6.04. Waiver of Past Defaults. The Trustee shall, at the
direction of the Bond Insurer or at the direction of the Certificateholders,
with the written consent of the Bond Insurer, so long as there is no Bond
Insurer Default, and may, if a Bond Insurer Default is continuing, 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 III 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 the Certificateholders and the Bond Insurer. 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.
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.
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Section 6.06. No Effect on Other Parties. Upon any termination of the
rights and powers of the Servicer pursuant to Section 6.01, 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, the Insurance Agreement and the Contribution Agreement shall remain
unaffected by such termination or appointment and shall remain in full force and
effect thereafter.
ARTICLE VII
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 its 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) This Agreement, the Trust and Security Agreement and the
Insurance Agreement shall constitute a legal, valid, and binding
obligation of the Back-up Servicer enforceable in accordance with its
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
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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 and in which the Back-up Servicer is named as a party or
target of investigation (i) asserting the invalidity of this 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 (a) into which the Back-up
Servicer may be merged or consolidated, (b) which may result from any merger or
consolidation to which the Back-up Servicer shall be a party, or (c) 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 without 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 the Bond Insurer, 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 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 the Bond Insurer).
Section 7.04. Back-up Servicer Removal. The Back-up Servicer may be
removed by the Bond Insurer or if a Bond Insurer Default has occurred and is
continuing, by the Holders of 66-2/3% in principal amount of the Outstanding
Certificates by notice to the Back-up Servicer, at any time if one of the
following events have occurred:
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(i) the Back-up Servicer shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Back-up
Servicer or of its property shall be appointed or any public officer
shall take charge or control of the Back-up Servicer or of its property
or affairs for the purpose of rehabilitation, conservation or
liquidation, or
(ii) a material breach by the Back-up Servicer of its duties,
obligations, representations or warranties in this Agreement.
Section 7.05. Oversight of Servicing. (a) 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;
and
(ii) that the amounts credited to and withdrawn from the
Collection Account, and the balance of such account, as set forth in the
records of the Trustee, 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 disk or tape received from the Servicer pursuant to
Section 4.01 hereof, make sure such computer disk or tape is in readable form
and shall:
(i) calculate the Aggregate Implicit Principal Balance as of the
most recent Calculation Date;
(ii) calculate the Principal Distribution Amount for the most
recent Payment Date; and
(iii) calculate the Annualized Default Rate and the Delinquency
Rate for the related Due Period and compare such calculated amounts with
those set forth in the most recent Monthly Servicer's Report.
(c) In the event of any discrepancy between the information set forth in
subparagraphs (a) and (b) of this Section as calculated by the Servicer from
that determined or calculated by the Back-up Servicer, the Back-up Servicer
shall promptly notify the Servicer 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 Bond Insurer, the Rating Agencies and the Certificateholders
of such discrepancy.
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(d) Based solely on the information included in the Lease Schedule
delivered on the related Funding Date and the computer disks or tapes provided
pursuant to Section 4.01 hereof, the Back-up Servicer shall determine that any
Substitute Lease Contracts delivered under Section 3.10 satisfy the Substitution
Criterion.
(e) The Back-up Servicer will make a site visit to the offices of the
Servicer within 60 days of the end of each calendar year for the purpose of
reviewing the operations of the Servicer, commencing December 31, 1997. 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 Transferor or 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 7.06. Additional Back-up Servicer Duties. In addition to its
other duties enumerated herein and in the Trust and Security Agreement, the
Back-up Servicer shall recalculate the information set forth in each Funding
Report within ten Business Days of each related Funding Date to verify (i) that
the condition set forth in Section 4.02(h) of the Trust and Security Agreement
has been satisfied, (ii) compliance with the concentration limits set forth in
subsections 3.01(b)(i), (ii), (iii) and (xii) of the Contribution Agreement and
(iii)_the Aggregate Implicit Principal Balance set forth in each Funding Report.
Section 7.07. 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.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Termination of This Agreement. (a) Absent a termination
pursuant to Section 6.01 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
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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 Receivables, Equipment and Leased Vehicles 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 Property 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) 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 the Bond Insurer but without the consent 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, or to add or amend any other provisions with
respect to matters or questions arising under this Agreement; provided, however,
that such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to time by the Servicer
and the Back-up Servicer, with the consent of the Trustee, the Bond Insurer and
the Certificateholders, 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 shall, without the consent of the
Certificateholders, (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 Property (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 Property or any portion thereof; or (iii)
modify this Section 8.02 or Sections 5.02 or 5.04 hereof.
(c) Promptly after the execution of any amendment, the Servicer shall
send to the Trustee, the Bond Insurer, the Certificateholders and each Rating
Agency a conformed copy of each such amendment.
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(d) It shall not be necessary, in any consent of Certificateholders
under this Section 8.02, for the Certificateholders to approve the particular
form of any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consent and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe.
(e) Any amendment or modification effected contrary to the provisions of
this Section 8.02 shall be void.
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 via telecopy or overnight or
messenger delivery, or mailed by registered or certified United States mail,
postage prepaid, and addressed as follows:
(a) if to the Transferor, at 6416 Pacific Highway East, Tacoma,
Washington 98424, Attention: President;
(b) if to the Servicer, at 6416 Pacific Highway East, Tacoma,
Washington 98424, Attention: President;
(c) if to the Back-up Servicer, at 6th Street & Marquette
Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust
Services/Asset-Backed Administration;
(d) if to the Trustee, at 6th Street & Marquette Avenue,
Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust
Services/Asset-Backed Administration;
(e) if to the Bond Insurer, at 113 King Street, Armonk, New York
10504, Attention: Insured Portfolio Management--Structured Finance
(IPM-SF) (telephone number (914) 273-4545 and facsimile number (914)
765-3810); and
(f) if to the Rating Agencies, at Standard & Poor's, 26
Broadway, New York, New York 10004 and Moody's Investor Service, 99
Church Street, New York, New York 10007, Attention: ABS Surveillance
Group.
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Any of the Persons in subclauses (a) through (f) above may change the
address for notices hereunder by giving notice of such change to the other
Persons.
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, the Bond Insurer or the Certificateholders. 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 and the Bond Insurer. 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 assign to and
grant to the Trustee a security interest in its right, title and interest to
this Agreement. The Servicer and the Back-up Servicer consent to such assignment
and grant 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, the Bond Insurer and the
Certificateholders.
Section 8.10. No Servicing Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Sections 5.02 and 5.04 hereof,
this Agreement may not
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be assigned by the Transferor or the Servicer (except with respect to the
appointment of a subservicer) without the prior written consent of the Bond
Insurer and the Certificateholders.
Section 8.11. Bond Insurer Default. If a Bond Insurer Default occurs,
the Bond Insurer's right to consent hereunder and to direct the Trustee shall be
suspended until removed and, in such suspension, all provisions of this
Agreement wherein the Bond Insurer's consent or direction is required or
permitted, the consent or direction of the Certificateholders shall be required
or permitted.
Section 8.12. Counterparts. This Servicing Agreement may be executed in
one or more counterparts, all of which together shall constitute one original
document.
Section 8.13. Third Party Beneficiary. The Bond Insurer is an express
third party beneficiary to this Agreement.
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IN WITNESS WHEREOF, the Transferor, the Servicer, the Back-up Servicer and the
Trustee 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.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee and as Back-
up Servicer
By: /s/ EILEEN R. STELZNER
Name: Eileen R. Stelzner
Title: Corporate Trust Officer
T & W FUNDING COMPANY I, L.L.C.,
Transferor
By: /s/ MICHAEL A. PRICE
Name: Michael A. Price
Title: President
T & W FINANCIAL CORPORATION,
Servicer
By: /s/ THOMAS W. PRICE
Name: Thomas W. Price
Title: President
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EXHIBIT A
T & W FINANCIAL CORPORATION
MONTHLY SERVICER REPORT
To: Norwest Bank Minnesota, National Association,
as Back-up Servicer
MBIA Insurance Corporation
as the Bond Insurer
Dear Sirs:
In accordance with Section 4.01 of the Servicing Agreement, dated as of
February 1, 1997 (the "SV"), by and among T & W Financial Corporation as
Servicer, Norwest Bank Minnesota, National Association, as Back-up Servicer and
as Trustee, and T & W Funding Company I, L.L.C., as Transferor, this letter
constitutes the Monthly Servicer's Report for the Payment Date occurring on
______________. Unless otherwise expressly noted, all data contained herein has
been calculated as of the related Calculation Date and with respect to the
related Due Period. Reference is also made to the Trust and Security Agreement,
dated as of February 1, 1997, by and among the Transferor, the Trustee, the
Back-up Servicer and the Servicer (the "T&SA").
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DEPOSITS INTO COLLECTION ACCOUNT
<TABLE>
<CAPTION>
Deposits by or on behalf of the Servicer:
- -----------------------------------------
<S> <C>
Scheduled and Overdue Payments Received
under the Lease Contracts directly by the Servicer $___________
Prepayments $___________
Residual Proceeds $___________
Recoveries $___________
Purchase Price received $___________
Guaranty Amounts $___________
Insurance Proceeds $___________
Servicer Advances $___________
Other amounts received by Servicer $___________
Total $___________
Transfers made by Trustee to the Collection Account
- ---------------------------------------------------
Collection Account Investment Earnings $___________
Total $___________
Amounts from other sources (e.g., Servicer reimbursement of
losses on eligible investments) $___________
Total deposited into the Collection Account (other than payments
from the Bond Insurer) $___________
</TABLE>
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DISBURSEMENTS FROM COLLECTION ACCOUNT:
<TABLE>
<CAPTION>
Prior to Payment of Principal and Interest due
- ----------------------------------------------
<S> <C>
Servicer Fee $___________
Reinvestment Income (Collection Account) to Servicer $___________
Reimburse Servicer and Back-up Servicer pursuant to
Section 3.09 of SV (for costs associated with Defaulted Leases) $___________
Pay Servicer any tax amounts deposited in
Collection Account pursuant to Section 3.07 of SV $___________
Unreimbursed Servicer Advances now collected $___________
Non-recoverable Servicer Advances $___________
Trustee Fee $___________
Back-up Servicer Fee $___________
Bond Insurer Premium $___________
Back-up Servicer expenses approved by the Bond Insurer $___________
Total $___________
TOTAL BALANCE AVAILABLE FOR LENDER PAYMENTS $___________
Disbursements to Certificateholders
- -----------------------------------
Interest Distribution Amount (current and overdue) $___________
Principal Distribution Amount $___________
Portion covered by Policy, (for every Payment Date before
Stated Maturity Date, only Interest due; for Stated Maturity
Date, Interest due plus Outstanding Principal Balance) $___________
Preference Claim received under the Policy
(Article 8 of T&SA) $___________
Additional principal after Trigger Event (Section 12.02(d)(ix) of T&SA) $___________
TOTAL BALANCE AVAILABLE FOR OTHER PAYMENTS $___________
</TABLE>
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<PAGE> 42
<TABLE>
<CAPTION>
Other Disbursements
- -------------------
<S> <C>
Unpaid Bond Insurer amounts, if any $___________
Additional Servicer Fee, if any $___________
Successor Servicer and Trustee Transition Costs specified in 12.02(d)(viii) of
T&SA $___________
To the Servicer amounts specified in 12.02(d)(x) of T&SA $___________
To the Servicer any unreimbursed Servicer Advances $___________
To Bond Insurer, amounts specified in the Insurance Agreement $___________
To Back-Up Servicer, amounts specified in
12.02(d)(xii) of T&SA $___________
To the Transferor, any excess amount remaining
in the Collection Account $___________
Total deposited into the Collection Account,
including payments from Bond Insurer $___________
Total disbursed from Collection Account $___________
ENDING BALANCE IN THE COLLECTION ACCOUNT $___________
SERVICER ADVANCES
Amount of Scheduled Payments not received (includes both
Scheduled Payments on Delinquent Leases as well as leases
which have become Defaulted Leases in the current Monthly
Period) $__________
Cumulative unreimbursed Servicer Advances as of the previous Servicer
Remittance Date $__________
Plus Servicer Advances for the current Monthly Period $__________
Less Aggregate amount of Servicer Advance reimbursements for the current
Monthly Period $__________
Cumulative unreimbursed Servicer Advances $__________
</TABLE>
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<PAGE> 43
IMPLICIT PRINCIPAL BALANCE ADJUSTMENTS
<TABLE>
<CAPTION>
IMPLICIT
PRINCIPAL
BALANCE # of Contracts
--------- --------------
<S> <C> <C>
Beginning Aggregate Implicit Principal Balance $_______________ _____
Less Amortization of Scheduled Payments $_______________ _____
Less Unamortized Implicit Principal balance of:
Defaulted Contracts $_______________ _____
Matured Contracts $_______________ _____
Casualty Contracts (to extent $_______________ _____
of Insurance Proceeds)
Plus IPB of Substitute Contracts transferred $_______________ _____
into the Trust
Less IPB of Substituted Contracts transferred $_______________ _____
out of the Trust
Less IPB of Contracts repurchased by the Company or $_______________ _____
Transferor or purchased by the Servicer during the
current Due Period
Other $_______________ _____
Plus increases for Funding IPB $_______________ _____
Aggregate Implicit Principal Balance Adjustment $_______________ _____
Ending Aggregate Implicit Principal Balance $_______________ _____
</TABLE>
CERTIFICATES INFORMATION
<TABLE>
<S> <C>
Initial Certificates Balance $___________
Less Principal Payment $___________
Plus Funding Amount, if any $___________
Ending Certificates Balance $___________
</TABLE>
-43-
<PAGE> 44
REQUIRED COLLATERALIZATION AMOUNT
<TABLE>
<S> <C>
Collateralization Percentage [__]%
A) Collateralization Percentage multiplied by
the Aggregate Implicit Principal Balance $___________
B) Implicit Principal Balance of the
three largest Customers $___________
C) one-half of the Collateralization Percentage multiplied
by the Initial Aggregate Implicit Principal Balance $___________
Required Collateralization Amount equals the
greater of A), B) or C) $___________
Actual overcollateralization amount:
(Implicit Principal Balance) minus
the Outstanding Certificates Amount $___________
TRIGGER EVENT CALCULATIONS:
Calculate Annualized Default Rate:
- ----------------------------------
# of days delinquent to declare Defaulted Lease: 180
Implicit Principal Balance of Defaulted Lease Contracts during
current Due Period (including repurchased and Substitute Contracts) $___________
Less Recoveries received during the current Due Period $___________
Less Residual Proceeds $___________
Total $___________
Current Month Annualized Default Rate ____%
</TABLE>
Detail on Defaulted Contracts (excluding Repurchased or Substituted Contracts):
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IMPLICIT
PRINCIPAL
BALANCE Number
--------- ------
<S> <C> <C>
Servicer did not make Advance $______________ _______
Prior Advance Deemed Unrecoverable $______________ _______
180 days delinquent $______________ _______
Total Defaulted Contracts $______________ _______
</TABLE>
-44-
<PAGE> 45
Calculate Delinquency Rate:
- ---------------------------
<TABLE>
<CAPTION>
% OF AGGREGATE
-----------------------------------------------------
Implicit Implicit
Principal Principal Number of
Balance Balance Contracts
--------- --------- ---------
<S> <C> <C> <C>
30-59 days delinquent $__________ _______% _________
60-89 days delinquent $__________ _______% _________
90-119 days delinquent $__________ _______% _________
120-149 days delinquent $__________ _______% _________
150-179 days delinquent $__________ _______% _________
Total $__________
Current Month Delinquency Rate _______%
</TABLE>
Check Default and Delinquency Triggers:
- ---------------------------------------
<TABLE>
<CAPTION>
Monthly
Sum of Period
Current & Prior to
Immediately Immediately Immediately
AVERAGE Preceding Current Preceding Preceding
PAST 3 MONTHS Monthly Pd. Monthly Pd. Monthly Pd. Monthly Pd.
------------- ----------- ----------- ----------- -----------
Annualized
<S> <C> <C> <C> <C> <C>
Default Rate _______% _______% _______% _______% _______%
Delinquency
Rate _______% _______% _______% _______% _______%
Applicable Maximum Default Rate _______%
Applicable Maximum Delinquency Rate _______%
Tangible Net Worth: $____________
</TABLE>
-45-
<PAGE> 46
DETAIL ON SUBSTITUTIONS AND PURCHASES:
<TABLE>
<CAPTION>
Cumulative
IMPLICIT Implicit
PRINCIPAL Principal
BALANCE Balance
--------- ----------
<S> <C> <C> <C>
Leases Terminated or
Prepaid and Substituted
per 4.04(d) of T&SA $__________ $__________ (Less Than $________)
Delinquent Lease Contracts,
Substituted or Purchased
per 4.04(d) of T&SA $__________ $__________ (Less Than $________)
Defaulted Lease Contracts,
Substituted or Purchased
per 4.04(d) of T&SA $__________ $__________ (Less Than $________)
</TABLE>
TRANSITION COSTS:
Cumulative Transition Costs Paid to date
Pursuant to 12.02(d)(viii) of T&SA $__________
EXPLANATORY CERTIFICATES:_______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Contact:________________________________________________________________________
Phone:__________________________________________________________________________
The undersigned officer of the Servicer hereby certifies that the
information contained in this Monthly Servicer Report is true and accurate in
all respects.
T & W FINANCIAL CORPORATION
Servicer
By:
Name: Michael A. Price
Title: President
-46-
<PAGE> 47
EXHIBIT B
SERVICER DISK INFORMATION
FIELDS:
1. Acct #
2. lesse
3. eqcat
4. state
5. siccode
6. Yrs in Bus
7. Start Dt
8. FinalDt
9. Nxt date
10. basepmt
11. rec bal
12. cur recv
13. resid
14. securityop
15. lease term
16. pay term
17. status
18. zip code
19. Mos Del
-47-
<PAGE> 1
EXHIBIT 10.4
================================================================================
T&W LEASE BACKED TRUST 1997-1
LEASE BACKED CERTIFICATES
CERTIFICATE PURCHASE AGREEMENT
T&W FINANCIAL CORPORATION,
as Company,
T&W FUNDING COMPANY 1, L.L.C.,
as Transferor
and
CENTRE SQUARE FUNDING CORPORATION,
as Purchaser
Dated as of February 7, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Agreement to Purchase................................................. 2
Section 2. Delivery and Payment.................................................. 2
Section 3. Purchase Price........................................................ 2
Section 4. Representations, Warranties and Agreements of the Transferor.......... 3
Section 5. Representations, Warranties and Agreements of the Company............. 4
Section 6. Representations, Warranties and Agreements of the Purchaser........... 7
Section 7. Conditions of the Purchaser's Obligation to Make the Initial Purchase. 8
Section 8. Conditions to the Purchaser's Obligation to Make Additional Purchases. 10
Section 9. Intention of the Parties.............................................. 10
Section 10. Expenses.............................................................. 11
Section 11. Survival.............................................................. 11
Section 12. Notices............................................................... 11
Section 13. Severability of Provisions............................................ 12
Section 14. Counterparts.......................................................... 12
Section 15. Governing Law......................................................... 12
Section 16. Successors and Assigns................................................ 12
Section 17. Waiver: Prior Agreements.............................................. 12
Section 18. Further Agreements.................................................... 12
Section 19. General Interpretive Principles ...................................... 13
Section 20. Bankruptcy............................................................ 13
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 21. Limited Recourse...................................................... 14
Section 22. Amendments............................................................ 14
</TABLE>
-ii-
<PAGE> 4
T&W FUNDING COMPANY I, L.L.C.
T&W Lease Backed Trust 1997-1
Lease Backed Certificates
CERTIFICATE PURCHASE AGREEMENT
Dated: as of February 7, 1997
To the Purchaser named
on the signature page attached hereto
Ladies and Gentlemen:
T&W Funding Company I, L.L.C. (the "Transferor") proposes, subject
to the terms and conditions stated herein, to cause the Trust (as defined
herein) to sell to you (the "Purchaser"), up to $100,000,000 principal amount of
certificates (the "Commitment"), from time to time and as shall be agreed upon
by the parties hereto, entitled 8.275% Lease-Backed Certificates (the
"Certificates") issued by T&W Lease-Backed Trust 1997-1 (the "Trust"). The
Certificates will evidence undivided ownership interests in the Trust, the
corpus of which will include, among other things, the fight to receive certain
payments which are due after January 1, 1997, or such later date specified on an
Additional Purchase Certificate (as defined below) (each, a "Cut-Off Date")
under a pool of equipment and vehicle leases ("Asset Interests"), which will be
sold from time to time by the Transferor to the Trust pursuant to a Trust and
Security Agreement, dated as of February 1, 1997 (the "Trust and Security
Agreement"), among the Transferor, T&W Financial Corporation (the "Servicer"),
as Servicer, and Norwest Bank Minnesota, National Association (the "Trustee"),
as Trustee and as Backup Servicer. Such Trust and Security Agreement also will
convey to the Trust a security interest in the Lease Contracts and the Equipment
(as such terms are defined in the Trust and Security Agreement) leased pursuant
to the Lease Contracts (or an assignment of a security interest in such
Equipment). Each of the Transferor and the Servicer, in recognition of the
benefits expected to accrue to it from the consummation of the transactions
contemplated by the Trust and Security Agreement, makes the representations,
warranties and covenants set forth in this Agreement.
All capitalized terms used herein that are not otherwise defined
herein shall have the respective meanings set forth in the Trust and Security
Agreement.
<PAGE> 5
Section 1. Agreement to Purchase.
Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, on the date hereof, the
Transferor agrees to cause the Trust to sell to the Purchaser, and the Purchaser
agrees to purchase, the Certificates having the Percentage Interest as of the
initial Cut-Off Date in the amount set forth in Schedule I hereto (the "Initial
Purchase").
For a period of time not to exceed the Funding Period (as defined in
the Trust and Security Agreement), on any date occurring subsequent to the
Closing Date (as defined below), the Transferor may sell additional Asset
Interests to the Trust and cause the principal balance of the Certificates to
increase in a cumulative principal amount up to the Commitment (each, an
"Additional Purchase"). The Transferor shall, not later than five business days
prior to the intended Delivery Date (as defined below), notify the Purchaser of
its intention to cause an Additional Purchase to occur by delivery of an
Additional Purchase Certificate (each an "Additional Purchase Certificate"),
setting forth the amount of such Additional Purchase, the intended Delivery
Date, the related Cut-Off Date and the date that a new Lease Schedule will be
available. Upon receipt by the Purchaser of an Additional Purchase Certificate,
such Additional Purchase shall occur (in an aggregate principal amount not to
exceed the Commitment), subject to satisfaction of the terms and conditions
contained herein.
Section 2. Delivery and Payment.
Delivery of the Certificates shall be made at the offices of Chapman
and Cutler, 111 West Monroe, Chicago, Illinois 60603, at 10:00 a.m., Chicago
time, on February 6, 1997 (the "Closing Date"). The Closing Date and the date of
each Additional Purchaser are each referred to herein as a "Delivery Date."
Upon fulfillment of the foregoing and satisfaction of all conditions
specified in Section 7 of this Agreement, with respect to the Initial Purchase,
and Section 8 of this Agreement with respect to each Additional Purchase, the
Purchaser shall pay to the Transferor the Purchase Price set forth in Section 3
of this Agreement.
Section 3. Purchase Price.
The Purchase Price for the Certificates purchased by the Purchaser
shall be 100% of the principal amount thereof (or such other amount as the
Transferor and the Purchaser may agree in writing).
Payment of the Purchase Price shall be made by the Purchaser by wire
transfer of immediately available funds against delivery to the Purchaser of
such Certificates (or in the case of an Additional Purchase, following an
increase in the principal balance of the Certificates).
-2-
<PAGE> 6
Section 4. Representations, Warranties and Agreements of the Transferor.
The Transferor represents and warrants to, and agrees with, the
Purchaser that, as of each Delivery Date:
(a) Under generally accepted accounting principles, the
Transferor will report on its books the transfer of the Lease Receivables
to the Trust pursuant to the Trust and Security Agreement and the sale of
the Certificates as a sale of all of its right, title and interest in such
Lease Receivables. The Transferor has been advised by its independent
certified public accountants that they do not disagree with such treatment
based on Statement No. 125 of the Financial Accounting Standards Board;
(b) The Lease Schedule, created as of January 1, 1997 with
respect to the Initial Purchase, and each Additional Purchase Certificate
as of the related Cut-Off-Date set forth on such Additional Purchase
Certificate with respect to each Additional Purchase, which has been made
available to you by the Transferor was complete as of the date thereof and
includes in accurate description of the Lease Contracts in which a
security interest is being transferred to the Trust under the Trust and
Security Agreement;
(c) The Certificates will be duly and validly authorized and,
when the Certificates are executed, issued, authenticated and delivered
pursuant to the Trust and Security Agreement and this Purchase Agreement,
such Certificates will be duly and validly entitled to the benefits of the
Trust and Security Agreement and to the benefits of the Certificate
Guaranty Insurance Policy Number 23074 (the "Surety Bond"), issued by MBIA
Insurance Corporation ("MBIA");
(d) The representations and warranties made by the Transferor
in the Contribution Agreement, the Insurance Agreement and the Trust and
Security Agreement are true and correct in all material respects on the
related Delivery Date;
(e) Any taxes, fees and other governmental charges payable by
the Transferor in connection with the execution and delivery of the
Contribution Agreement, the Trust and Security Agreement and this Purchase
Agreement, the transfer of the Trust Property to the Trust, and the
execution, delivery and sale of the Certificates, have been or will be
paid at or prior to the related Delivery Date;
(f) Neither the Transferor nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of any
Certificate, any interest in any Certificate or any other similar
security, or solicited any offer to buy or accept a transfer, pledge or
other disposition of any Certificate, any interest in any Certificate or
any other similar security from, or otherwise approached or negotiated
with respect to any Certificate, any interest in any Certificate of any
other similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any
-3-
<PAGE> 7
other manner, or taken any other action which would constitute a
distribution of the Certificates under the Securities Act of 1933, as
amended (the "1933 Act"), or which would render the disposition of the
Certificates a violation of Section 5 of the 1933 Act or require
registration pursuant thereto, require qualification of the Trust and
Security Agreement under the Trust Indenture Act of 1939, or require
registration of the Trust under the Investment Company Act of 1940, nor
will the Transferor act, nor has it authorized or will it authorize any
person to act, in such manner with respect to any Certificate;
(g) The Transferor will own on each Delivery Date the Trust
Property being conveyed to the Trust under the Trust and Security
Agreement on such date (other than Equipment or Leased Leased Vehicles not
owned by the Company on such date), free and clear of any lien, mortgage,
pledge, charge, security interest or other encumbrance, and will not have
assigned, conveyed, pledged or otherwise transferred to any other person
any of its right, title or interest in such Trust Property or in such
Trust and Security Agreement or the Certificates being issued pursuant
thereto; the Transferor has full power and authority to convey all right,
title and interest of the Transferor in such Trust Property to the Trust
under the Trust and Security Agreement and has duly authorized each such
conveyance to the Trustee by all necessary corporate action; and
(h) On each Delivery Date, the Trust Property purported to be
transferred on such date will have been duly and validly conveyed by the
Transferor to the Trustee under the Trust and Security Agreement, and the
Trust and Security Agreement will convey to the Trustee, for the benefit
of the Holders of the Certificates, all right, title and interest of the
Transferor in and to such Trust Property and any distributions thereon and
income and proceed, thereof, free and clear of the claims of any persons
(including creditors of the Transferor) and the Transferor will have
granted to the Trustee a valid, perfected, first priority security
interest in the related Lease Contracts and granted or assigned to the
Trustee a valid security interest in each item of related Equipment or
Vehicle, perfected to the extent specified in Section 4.03 of the Trust
and Security Agreement, but such security interest may be subject to (a)
liens for taxes arising under the laws of the state in which a Contract
was originated or to which the related Equipment or Vehicle may have been
relocated and (b) other liens, security interests or encumbrances that are
given priority over a properly perfected security interest under the laws
of the state in which any Equipment or Vehicle shall be located from time
to time.
Section 5. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to, and agrees with, the
Purchaser that, as of each Delivery Date:
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Washington
with its chief executive office
-4-
<PAGE> 8
located at 6416 Pacific Heights E., Tacoma, Washington 98424, and has the
power to own its assets and to transact the business in which it is
presently engaged;
(b) The Company has the power, authority and legal right to
execute, deliver and perform the Contribution Agreement, the Trust and
Security Agreement, the Servicing Agreement, the Insurance Agreement, the
Interest Rate Hedge Assignment dated as of February 7, 1997 between the
Company and CoreStates Bank, N.A., as Collateral Agent (the "Hedge
Assignment") and this Purchase Agreement, and the execution, delivery, and
performance of the Contribution Agreement, the Trust and Security
Agreement, the Servicing Agreement, the Insurance Agreement, the Hedge
Assignment and this Purchase Agreement have been duly authorized by the
Company by all necessary corporate action;
(c) Each of the Contribution Agreement, the Trust and Security
Agreement, the Servicing Agreement, the Hedge Assignment, the Insurance
Agreement, and this Purchase Agreement, assuming due authorization,
execution and delivery by the other parties thereto, constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company 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) The consummation of the transactions contemplated by the
Contribution Agreement, the Trust and Security Agreement, the Servicing
Agreement, the Insurance Agreement, the Hedge Assignment and this Purchase
Agreement and the fulfillment of the terms therein will not conflict with
or 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 charter documents or By-Laws of the Company, or any 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, claim or encumbrance upon any of its material
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other such instrument, other than as created
pursuant to the Contribution Agreement and the Trust and Security
Agreement, or violate any law or any order, rule or regulation applicable
to the Company of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Company or any of its properties; and there are no
legal or governmental proceedings pending or, to the best knowledge of the
Company, threatened or contemplated that would result in a material
modification, suspension or revocation thereof,
-5-
<PAGE> 9
(e) There are no proceedings or investigations to which the
Company, or any of the Company's Affiliates, is a party pending, or, to
the knowledge of the Company, threatened, before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality (A) asserting the invalidity of the Contribution
Agreement, the Trust and Security Agreement, the Servicing Agreement, the
Insurance Agreement, the Hedge Assignment, this Purchase Agreement or the
Certificates, (B) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by the
Contribution Agreement, the Trust and Security Agreement, the Servicing
Agreement, the Insurance Agreement, the Hedge Assignment, this Purchase
Agreement or the Certificates or (C) seeking any determination or ruling
that would materially and adversely affect the performance by the Company
of its obligations under, or the validity or enforceability of, the
Contribution Agreement, the Trust and Security Agreement, the Servicing
Agreement, the Insurance Agreement, the Hedge Assignment, this Purchase
Agreement or the Certificates;
(f) All approvals, authorizations, consents, orders or other
actions of any person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with the
execution and delivery of the Contribution Agreement, the Trust and
Security Agreement, the Servicing Agreement, the Insurance Agreement, the
Hedge Assignment, and this Purchase Agreement or in connection with the
valid and proper authorization, issuance and sale of the Certificates
pursuant to this Purchase Agreement have been or will be taken or obtained
on or prior to each Delivery Date;
(g) Under generally accepted accounting principles, the
Company will report the contribution of the Lease Contracts and the
Equipment by the Contributors (as defined in the Contribution Agreement)
to the Transferor pursuant to the Contribution Agreement, the transfer of
the Lease Receivables from the Transferor to the Trust pursuant to the
Trust and Security Agreement, and the sale of the Certificates, as a sale
of all of its right, title and interest in such Lease Receivables and
Equipment. The Company has been advised by its independent certified
public accountants that they do not disagree with such treatment based on
Statement No. 125 of the Financial Accounting Standards Board;
(h) The Lease Schedule created as of January 1, 1997 with
respect to the Initial Purchase, and each Additional Purchase Certificate
as of the related Cut-Off Date set forth on such Additional Purchase
Certificate with respect to each Additional Purchase, which has been made
available to you by the Transferor was complete as of the date thereof and
includes an accurate description of the Lease Contracts in which a
security interest is being transferred to the Trust under the Trust and
Security Agreement;
(i) When the Certificates are executed, issued, authenticated
and delivered pursuant to the Trust and Security Agreement and this
Purchase Agreement,
-6-
<PAGE> 10
such Certificates will be duly and validly entitled to the benefits of the
Trust and Security Agreement and to the benefits of the Surety Bond;
(j) The representations and warranties made by the Company in
the Contribution Agreement, the Servicing Agreement, the Insurance
Agreement and the Trust and Security Agreement are true and correct in all
material respects on each Delivery Date;
(k) Any taxes, fees and other governmental charges payable by
the Company in connection with the execution and delivery of the
Contribution Agreement, the Trust and Security Agreement, the Servicing
Agreement, the Insurance Agreement, the Hedge Assignment, and this
Purchase Agreement, the contribution of the Lease Assets (as defined in
the Contribution Agreement) to the Transferor, and the execution, delivery
and sale of the Certificates, have been or will be paid at or prior to the
Delivery Date or;
(1) Neither the Company nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of any
Certificate, any interest in any Certificate or any other similar
security, or solicited any offer to buy or accept a transfer, pledge or
other disposition of any Certificate, any interest in any Certificate or
any other similar security from, or otherwise approached or negotiated
with respect to any Certificate, any interest in any Certificate or any
other similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or
taken any other action which would constitute a distribution of the
Certificates under the 1933 Act, or which would render the disposition of
the Certificates a violation of Section 5 of the 1933 Act or require
registration pursuant thereto, require qualification of the Trust and
Security Agreement under the Trust Indenture Act of 1939, or require
registration of the Trust under the Investment Company Act of 1940, nor
will the Company act, nor has it authorized or will it authorize any
person to act, in such manner with respect to any Certificate;
(m) On each Delivery Date, each of the Lease Contracts will
meet the criteria for selection described in the Contribution Agreement;
and
(n) To the extent, if any, that the rating provided with
respect to the Certificates by the Rating Agencies is conditional upon the
furnishing of documents or the taking of any other actions by the Company,
the Company shall furnish such documents and take any such action.
Section 6. Representations, Warranties and Agreements of the Purchaser.
The Purchaser hereby represents and warrants as of each Delivery
Date to the Company and the Transferor to the effect that:
-7-
<PAGE> 11
(a) The Purchaser understands that the Certificates have not
been registered under the 1933 Act or the securities laws of any state.
(b) The Purchaser is acquiring its Certificate for investment
for its own account only and not for any other person.
(c) The Purchaser considers itself a substantial,
sophisticated institutional investor having such knowledge and experience
in financial and business matters that it is capable of evaluating the
merits and risks of investment in the Certificates.
(d) The Purchaser has been furnished with all information
regarding the Certificates that it has requested from the Company, the
Trustee or the Transferor.
(e) Neither the Purchaser nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the
Certificates or any interest in the Certificates or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or
other disposition of the Certificates, any interest in the Certificates or
any other similar security from, or otherwise approached or negotiated
with respect to the Certificates, any interest in the Certificates or any
other similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or
taken any other action, that would constitute a distribution of the
Certificates under the 1933 Act or that would render the disposition of
the Certificates a violation of Section 5 of the 1933 Act or require
registration pursuant thereto, nor will it act, nor has it authorized or
will it authorize any person to act, in such manner with respect to the
Certificates.
Section 7. Conditions of the Purchaser's Obligation to Make the Initial
Purchase.
The Purchaser's obligation to purchase the Certificates on the
Closing Date shall be subject to the accuracy of the representations and
warranties of the Transferor and the Company herein as of the date thereof, to
the performance by the Transferor and the Company of their respective
obligations hereunder and to the following additional conditions:
(a) All of the respective representations and warranties of
the Company or the Transferor contained in the Contribution Agreement,
this Purchase Agreement, the Insurance Agreement, the Hedge Assignment,
the Swap Agreement, the Servicing Agreement and the Trust and Security
Agreement shall be true and correct as of the Closing Date, and no event
shall have occurred which, with notice or the passage of time, would
constitute a default under the Trust and Security Agreement, the Insurance
Agreement, the Hedge Assignment, the Swap Agreement, the Servicing
Agreement or the Contribution Agreement;
-8-
<PAGE> 12
(b) All conditions to closing required to be fulfilled
pursuant to Section 4.01 of the Trust and Security Agreement shall have
been fulfilled and the Purchaser shall have received all of the documents
and certificates (other than the original executed Lease Contracts) listed
in such Section;
(c) All conditions to issuance of the Surety Bond required to
be fulfilled pursuant to Section 3.02 of the Insurance Agreement shall
have been fulfilled and such Surety Bond shall have been issued;
(d) Chapman and Cutler, special counsel for the Company and
the Transferor, shall have furnished to the Purchaser its written
opinions, dated the Closing Date, in form and substance satisfactory to
the Purchaser, substantially in the forms attached hereto as Exhibit A;
(e) Chapman and Cutler, special counsel to the Company, shall
have rendered directly to the Purchaser, or furnished to the Purchaser, a
letter permitting the Purchaser's reliance on, each of its opinions
rendered to the Rating Agencies;
(f) Kenneth W. McCarthy, Jr., counsel to the Company and the
Transferor, shall have furnished to the Purchaser his written opinions,
dated the Closing Date, in form and substance satisfactory to the
Purchaser, substantially in the forms attached hereto as Exhibit C;
(g) Counsel to the Trustee, shall have furnished to the
Purchaser his written opinion, dated the Closing Date, in form and
substance satisfactory to the Purchaser, opining on such matters as the
Purchaser may reasonably request;
(h) Kutak Rock, counsel to MBIA, shall have furnished to the
Purchaser its written opinion, dated the Closing Date, in form and
substance satisfactory to you, opining on such matters as you may
reasonably request;
(i) The purchase of such Certificates by the Purchaser shall
not result in a lowering of the rating of the commercial paper notes
issued by the Purchaser and the Purchaser shall have received a letter
from each of Moody's Investors Service ("Moody's") and Standard & Poor's
Ratings Service, a division of the McGraw-Hill Companies ("S&P")
confirming their rating of such commercial paper notes;
(j) Any taxes, fees and other governmental charges which are
due and payable in connection with the execution, delivery and performance
of the Contribution Agreement, the Trust and Security Agreement, the
Insurance Agreement, the Hedge Assignment, the Swap Agreement, the
Purchase Agreement, the Servicing Agreement and the Certificates shall
have been paid at or prior to the Closing Date;
-9-
<PAGE> 13
(k) All other terms and conditions of this Purchase Agreement
shall have been complied with;
(1) The Purchaser shall have received a Certificate, dated the
Closing Date and signed by a duly authorized officer of the Transferor and
authenticated by the Trustee, registered in the Purchaser's name or in the
name of the Purchaser's nominee;
(m) On or prior to the Closing Date, the Transferor and
Company shall have filed the financing statements described in Section
4.01 of the Trust and Security Agreement, and all taxes and fees due in
connection with such filing shall have been paid in full or duly provided
for;
(n) All proceedings taken in connection with the sale of the
Certificates and all documents and papers relating thereto shall be
satisfactory to the Purchaser; and
(o) The Transferor shall have paid, at the closing on the
Closing Date, the fees and disbursements of the Purchaser's special
counsel, which are reflected in the statements of the Purchaser's special
counsel delivered on or before the Closing Date. Promptly upon receipt of
supplemental statements after the Closing Date, the Transferor will pay
such additional fees and disbursements of the Purchaser's special counsel
which were not reflected in the statements of the Purchaser's special
counsel on the Closing Date.
Section 8. Conditions to the Purchaser's Obligation to Make Additional
Purchases.
The Purchaser's obligation to make Additional Purchases on any
Delivery Date shall be subject to the accuracy of the representations and
warranties of the Transferor and the Company herein as of the date thereof, and
to the performance of the Transferor and the Company of their respective
obligations hereunder and to the following additional conditions:
(a) All other terms and conditions of this Purchase Agreement
shall have been complied with; and
(b) All conditions required to be fulfilled pursuant to
Section 4.02 of the Trust and Security Agreement shall have been fulfilled
and the Purchaser shall have received all of the documents and
certificates (other than the original executed Lease Contracts) listed in
such Section.
Section 9. Intention of the Parties.
The Trust and Security Agreement and the Certificates have been
structured with the intention that the Certificates will qualify under
applicable tax law as indebtedness of the
-10-
<PAGE> 14
Transferor, and the Transferor, the Trustee, the Servicer, any Subservicer and
the Purchaser by acceptance of its Certificate (and any person which is the
beneficial owner of any interest in a Certificate, by virtue of such person's
acquisition of a beneficial interest therein) agrees to treat the Certificates
for purposes of federal, state and local income or franchise taxes, and any
other tax imposed on or measured by income, as indebtedness of the Transferor.
The Purchaser agrees that it will cause any person acquiring an interest in a
Certificate through it to comply with this Agreement as to treatment as
indebtedness for such tax purposes.
Section 10. Expenses.
All costs and expenses incurred in connection with the transfer and
delivery of the Trust Property and the issuance of the Certificates, including
Trustee's fees, fees for financing statement filings and continuations and the
Company's, the Trustee's, MBIA's and the Transferor's attorney's and
accountant's fees and the Purchaser's attorney's fees shall be paid by the
Company and the Transferor.
Section 11. Survival.
The Company and the Transferor agree that the representations,
warranties and covenants made by each of them in this Agreement, in the
Contribution Agreement, in the Servicing Agreement, in the Trust and Security
Agreement, and in any document, certificate or other instrument delivered
pursuant hereto or thereto shall be deemed to be relied upon by the Purchaser,
notwithstanding any investigation heretofore or hereafter made by or on behalf
of the Purchaser, and that the representations, warranties and covenants made by
the Company and the Transferor in this Agreement, in the Trust and Security
Agreement, in the Servicing Agreement, in the Contribution Agreement, or in any
such document, certificate or other instrument shall survive the delivery of and
payment for the Certificates.
Section 12. Notices.
(a) All communications provided for or permitted under this
Agreement shall be in writing and shall be deemed to have been daily given if
personally delivered (including by express courier) or mailed by registered
mail, postage prepaid, or transmitted by telex or telegraph and confirmed by a
similar mailed writing, if to the Purchaser, addressed to the Purchaser, at the
address set forth in Schedule I hereto, if to the Transferor, addressed to the
Transferor at 6416 Pacific Heights E., Tacoma, Washington 98424, Attention:
President, and if to the Company, addressed to the Company at 6416 Pacific
Heights E., Tacoma, Washington 98424, Attention: President or to such other
addresses as the parties may have designated in writing to the other parties.
(b) The Transferor shall cause the instructions with respect to
payments on the Certificates and notification thereof to be reflected in the
Certificate Register, and all payments
-11-
<PAGE> 15
and notifications thereof to the Purchaser, pursuant to Section 2.08 of the
Trust and Security Agreement, to be made in accordance therewith.
Section 13. Severability of Provisions.
Any part, provision, representation, warranty or covenant of this
Agreement which is prohibited or which is held to be void or unenforceable shall
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
unenforceable or held to be void 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 as to this Agreement
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof.
Section 14. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
Section 15. Governing Law.
THE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Section 16. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
Section 17. Waiver: Prior Agreements.
No term or provision of this Agreement may be waived or modified
unless such waiver or modification is in writing and signed by the party against
whom such waiver or modification is sought to be enforced. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof.
Section 18. Further Agreements.
-12-
<PAGE> 16
The Purchaser, the Transferor and the Company agree to execute and
deliver to the other such additional documents, instruments or agreements as may
be necessary or appropriate to effectuate the purposes of this Agreement.
Section 19. General Interpretive Principles.
For purposes of this Agreement except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include the
other gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles as in effect on the date hereof;
(c) references herein to "Articles," "Sections,"
"Subsections," "paragraphs," and other subdivisions without reference to a
document are to designated Articles, Sections, Subsections, paragraphs and
other subdivisions of this Agreement;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same Section
in which the reference appears, and this rule shall also apply to
paragraphs and other subdivisions;
(e) the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular provision; and
(f) the term "include" or "Including" shall mean without
limitation by reason of enumeration.
Section 20. Bankruptcy.
(a) The Transferor and the Company under this Agreement agree that
it will not institute against, or join any person in instituting against, the
Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding, or other similar proceeding under the laws of any jurisdiction, for
one year and a day after the latest maturing commercial paper note relating to
the purchase of the Certificates issued by the Purchaser and outstanding is paid
in full. The obligations of the Transferor and the Company under this Section 20
shall survive termination of this Agreement.
(b) The Purchaser agrees that during the terms of the Trust and
Security Agreement and for one year and one day after the termination of the
Trust and Security
-13-
<PAGE> 17
Agreement, the Purchaser 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.
Section 2 1. Limited Recourse.
(a) The Purchaser agrees that the Certificates shall be limited
recourse obligations of the Transferor payable solely from the Trust Property.
(b) The obligations of the Purchaser under this Agreement are solely
the corporate obligations of the Purchaser. No recourse shall be had for the
payment of any amount owing by the Purchaser under this Agreement or for the
payment by the Purchaser of any sums in respect hereof or any other obligation
or claim of or against the Purchaser arising out of or based upon this
Agreement, or against any affiliate, employee, officer, director, incorporator
or stockholder of the Purchaser. The Transferor and the Company agree that the
Purchaser shall be liable for any claims that any such party may have against
the Purchaser only to the extent the Purchaser has Excess Funds (as defined in
that certain Liquidity Agreement, dated as of February 7, 1997, among the
Purchaser, CoreStates, N.A. and the Liquidity Banks parties thereto, relating to
the purchase of the Certificates).
Section 22. Amendments.
Any provision of this Certificate Purchase Agreement may be amended
or waived if, but only if such amendment or waiver is in writing and is signed
by the Purchaser, the Company and the Transferor and prior written notice is
given to S&P and Moody's; and then such amendment or waiver shall be effective
only in the specific instance and for the specific purpose for which given,
provided that such action will not cause either S&P or Moody's to reduce its
rating of the commercial paper notes issued by the Purchaser.
-14-
<PAGE> 18
IN WITNESS WHEREOF, the Purchaser, the Transferor and the Seller
have caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the date first above written.
Very truly yours,
T&W FUNDING COMPANY I, L.L.C.
By: /s/ MICHAEL A. PRICE
-------------------------------------------
Name: Michael A. Price
----------------------------------------
Title: President
----------------------------------------
T&W FINANCIAL CORPORATION
By: /s/ MICHAEL A. PRICE
-------------------------------------------
Name: Michael A. Price
----------------------------------------
Title: Chief Executive Officer
----------------------------------------
The foregoing Agreement is hereby
accepted and entered into as of the
date first written above,
CENTRE SQUARE FUNDING CORPORATION,
as Purchaser
By: /s/ FRANK BILOTTA
---------------------------------
Name: FRANK BILOTTA
-------------------------------
Title: VICE PRESIDENT
------------------------------
<PAGE> 19
SCHEDULE I
to
Certificate Purchase Agreement
<TABLE>
<CAPTION>
Percentage
Purchaser Interest
- --------- ---------
<S> <C>
CENTRE SQUARE FUNDING CORPORATION 100%
</TABLE>
(1) All payments on account of the Certificates shall be made by bank wire
transfer of federal or other immediately available funds (identifying each
payment a T&W Lease Backed Trust 1997-1, Lease Backed Certificates, and the
due date and application as among principal or interest to each of such
Certificates) for credit to:
Bank: CoreStates Bank, N.A.
ABA Number: 031000011
For The Benefit of: Centre Square Funding Corporation - Operating A/C
Account Number: 14116-03433
contact: Cindy Barton (215) 973-4338
(2) Address for all notices relating to payments and written confirmations of
such wire transfers and all other communications and notices.
Centre Square Funding Corporation
c/o CoreStates Capital Markets Group
FC 1-8-12-1
1345 Chestnut Street
Philadelphia, PA 19101-7618
Attention: CP Administration
(3) Taxpayer Identification No.: 13-3865061
-i-
<PAGE> 1
EXHIBIT 10.5
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (this "Assignment") is made as
of February 7, 1997 (the "Contribution Date"), by and between T & W Funding
Company V, L.C.C., a Delaware limited liability company ("Assignor"), and T & W
Funding Company I, L.L.C., a Delaware limited liability company ("Assignee"),
with reference to the following facts:
RECITALS:
A. In connection with the contribution of certain lease assets of
Assignor in conjunction with the issuance of certificates (the "Certificates")
by the trust created by the Assignee, Assignee and the Assignor have executed
the Contribution Agreement dated as of February 1, 1997 (the "Contribution
Agreement").
B. In connection with the Contribution Agreement, the Assignor desires
to assign and transfer to Assignee all of Assignor's right, title and interest
in and to each of the assets described in Schedule II hereto, as supplemented
from time to time, and the corresponding paragraphs below (the "Assigned
Interests").
C. Assignor desires to transfer and Assignee is willing to assume
certain indebtedness of Assignor listed on Schedule I hereto.
D. Assignee desires to accept the Assignment and transfer of the
Assigned Interests and assume all duties and obligations attendant thereto,
accruing after the Contribution Date.
E. Terms used but not defined herein have the meanings ascribed to them
in the Contribution Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignor and Assignee hereby agree as follows:
1. Assignment. The Assignor hereby assigns, conveys, grants and
transfers, without recourse except as provided in the Contribution Agreement, to
Assignee (and the successors and assigns of Assignee) the following property:
1.1. The Assignor's right, title and interest in and to the
Lease Contracts and related Lease Receivables described and listed on
Schedule II hereto.
<PAGE> 2
1.2. All of Assignor's right, title and interest in and to the
equipment or vehicle, as the case may be, subject to each such Lease
Contract (the "Equipment" or "Leased Vehicle," as applicable).
1.3. All of Assignor's other Lease Assets relating to each such
Lease Contract.
2. Assumption. The Assignee hereby agrees to assume the indebtedness of
Assignor listed on Schedule I hereto and to use the proceeds of the initial sale
of Certificates to pay such indebtedness. Assignee hereby accepts the foregoing
Assignment and hereby assumes all of the other obligations incident hereto and
thereto, subject to the terms and conditions of the Contribution Agreement.
3. Further Assurance. The Assignor and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignor and Assignee hereby acknowledge that
for all purposes the Assignor and Assignee are each separate and distinct legal
entities. Accordingly, the Assignor shall not be liable to any third party for
the debts, obligations and liabilities of the Assignee; and Assignee shall not
be liable to any third party for the debts, obligations and liabilities of the
Assignor to the extent that such debts, obligations and liabilities have not
been expressly assumed by Assignee hereunder.
5. Governing Law. This Assignment shall be governed by and interpreted
in accordance with the laws of the State of Delaware, and the parties hereto
hereby acknowledge and agree that this Assignment and Assumption Agreement and
the transactions contemplated hereunder were negotiated and entered into in the
State of Delaware.
6. Authority. The Assignor and Assignee each hereby represent
respectively that they have full power and authority to enter into this
Assignment.
7. Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
8. Successors and Assigns. The Assignor and Assignee each agree that
this Assignment will be binding and will inure to the benefit of the Assignor
and its successors and assigns and the Assignee and its successors and assigns.
-2-
<PAGE> 3
9. Third Party Beneficiary. The Assignor and Assignee each agree that
MBIA Insurance Corporation is an express third party beneficiary to this
Assignment.
-3-
<PAGE> 4
IN WITNESS WHEREOF, this Assignment has been executed as of the date first above
written.
T & W FUNDING COMPANY V, L.C.C.,
Assignor
By /s/ MICHAEL A. PRICE
Name: Michael A. Price
Title: President
T & W FUNDING COMPANY I, L.L.C.,
Assignee
By /s/ MICHAEL A. PRICE
Name: Michael A. Price
Title: President
-4-
<PAGE> 5
SCHEDULE I
[INTENTIONALLY LEFT BLANK.]
-5-
<PAGE> 6
SCHEDULE II
LEASE SCHEDULE
-6-
<PAGE> 1
EXHIBIT 10.6
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Assignment") is made as of
February 7, 1997 (the "Contribution Date"), by and between T & W Funding Company
VI, L.C.C., a Delaware limited liability company ("Assignor"), and T & W Funding
Company I, L.L.C., a Delaware limited liability company ("Assignee"), with
reference to the following facts:
RECITALS:
A. In connection with the contribution, from time to time, of certain
lease assets of Assignor in conjunction with the issuance of certificates (the
"Certificates") by the trust created by Assignee, Assignee and the Assignor have
executed the Contribution Agreement dated as of February 1, 1997 (the
"Contribution Agreement").
B. In connection with the Contribution Agreement, the Assignor desires
to assign and transfer to Assignee all of Assignor's right, title and interest
in and to each of the assets described in Schedule 11 hereto, as supplemented
from time to time, and the corresponding paragraphs below (the "Assigned
Interests").
C. Assignor desires to transfer and Assignee is willing to assume
certain indebtedness of Assignor listed on Schedule I hereto.
D. Assignee desires to accept the Assignment and transfer of the
Assigned Interests and assume all duties and obligations attendant thereto,
accruing after the Contribution Date.
E. Terms used but not defined herein have the meanings ascribed to them
in the Contribution Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignor and Assignee hereby agree as follows:
1. Assignment. The Assignor hereby assigns, conveys, grants and
transfers, without recourse except as provided in the Contribution Agreement, to
Assignee (and the successors and assigns of Assignee) the following property:
1.1. The Assignor's right, title and interest in and to the Lease
Contracts and related Lease Receivables described and listed on Schedule
II hereto.
1.2. All of Assignor's right, title and interest in and to the
equipment or vehicles subject to each such Lease Contract (the "Equipment"
or "Leased Vehicle, " as applicable).
<PAGE> 2
1.3. All of Assignor's other Lease Assets relating to each such
Lease Contract.
2. Assumption. The Assignee hereby agrees to assume the indebtedness of
Assignor listed on Schedule I hereto and to use the proceeds of the initial sale
of Certificates to pay such indebtedness. Assignee hereby accepts the foregoing
Assignment and hereby assumes all of the other obligations incident hereto and
thereto, subject to the terms and conditions of the Contribution Agreement.
3. Further Assurance. The Assignor and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignor and Assignee hereby acknowledge that
for all purposes the Assignor and Assignee are each separate and distinct legal
entities. Accordingly, the Assignor shall not be liable to any third party for
the debts, obligations and liabilities of the Assignee; and Assignee shall not
be liable to any third party for the debts, obligations and liabilities of the
Assignor to the extent that such debts, obligations and liabilities have not
been expressly assumed by Assignee hereunder.
5. Governing Law. This Assignment shall be governed by and interpreted
in accordance with the laws of the State of Delaware, and the parties hereto
hereby acknowledge and agree that this Assignment and Assumption Agreement and
the transactions contemplated hereunder were negotiated and entered into in the
State of Delaware.
6. Authority. The Assignor and Assignee each hereby represent
respectively that they have full power and authority to enter into this
Assignment.
7. Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
8. Successors and Assigns. The Assignor and Assignee each agree that
this Assignment will be binding and will inure to the benefit of the Assignor
and its successors and assigns and the Assignee and its successors and assigns.
9. Third Party Beneficiary. The Assignor and Assignee each agree that
MBIA Insurance Corporation is an express third party beneficiary to this
Assignment.
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Assignment has been executed as of the date first
above written.
T & W FUNDING COMPANY VI, L.L.C.,
Assignor
By /s/ MICHAEL A. PRICE
------------------------------------
Name: Michael A. Price
Title: President
T & W FUNDING COMPANY I, L.L.C.,
Assignee
By /s/ MICHAEL A. PRICE
------------------------------------
Name: Michael A. Price
Title: President
-3-
<PAGE> 4
SCHEDULE I
SCHEDULE OF EXISTING INDEBTEDNESS
<TABLE>
<CAPTION>
LENDER AMOUNT
------ ------
<S> <C>
Seafirst Bank N.A. $7,068,085.54
CoreStates Bank, N.A. $4,331,399.92
</TABLE>
<PAGE> 5
SCHEDULE II
LEASE SCHEDULE
<PAGE> 6
T and W Funding Company I - Lease Schedule February 5, 1997
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1019110 $13,935.2 SMITH & GREENE COMPANY WA 60 51
1032309 $25,717.6 LAING COMMUNICATIONS, IN WA 48 45
1094807 $76,280.6 PASCAL COMPANY WA 60 51
1145604 $57,956.9 OLYMPIC BRAKE SUPPLY WA 60 58
1149782 $4,108.9 CARDINAL TOOL CO INC. TX 60 4
1150302 $577.7 KVOS TV, INC WA 60 1
1160602 $4,240.1 DLB, INC./DAVE'S THRIFTWA WA 60 2
1163502 $9,919.3 WEST COAST GATEWAY HO WA 60 32
1174801 $7,113.3 AMERICAN DISPOSAL SERVI IL 72 6
1181104 $34,549.4 P & G PLANT CO., INC. OR 48 40
1204581 $904.0 HOLLEA WHITE DMD TX 60 1
1211001 $7,579.0 ALPHA CINE LABORATORY, I WA 60 4
1213901 $3,535.1 EIELSON FEDERAL CREDIT AK 60 2
1214101 $6,882.5 WEST COAST RIDPATH HOT WA 60 2
1214601 $2,482.1 FARMHOUSE INN, INC. WA 60 3
1214801 $1,141.3 JEROME D. JOHNSON TRUC OR 60 2
1215501 $2,843.7 PRESERVATIVE PAINT CO., I WA 60 3
1219812 $53,763.1 IGA FOOD CACHE AK 79 77
1228302 $17,522.2 QSI, A PARTNERSHIP WA 60 28
1236803 $1,264.6 SELTICE WAY STOP-N-GO ID 48 5
1245801 $2,824.5 S. J. RUSSO SCRAP METAL CA 60 8
1254001 $2,067.3 MARK'S SEWER & DRAIN CL CA 48 2
1267401 $14,972.4 KIT'S CAMERAS WA 60 12
1267402 $14,845.5 KIT'S CAMERAS WA 60 12
1267403 $13,697.3 KIT'S CAMERAS WA 60 12
1267406 $18,123.4 KIT'S CAMERAS WA 60 16
1267408 $19,296.7 KIT'S CAMERAS WA 60 16
1267701 $2,728.1 WILLOW LAKE NURSERY OR 60 13
1267801 $14,187.5 COLOR SPOT NURSERY CA 60 14
1267802 $15,048.1 COLOR SPOT NURSERY CA 60 14
1279105 $23,623.6 BIO TECHNIQUES LABORAT WA 36 35
1279106 $50,240.0 BIO TECHNIQUES LABORAT WA 36 36
1280102 $32,648.0 POWELL SANITATION SERVI PA 48 38
1282301 $12,703.9 A-1 AMBULANCE SERVICE, I TX 60 26
1282401 $5,052.3 WHITTED'S LIQUOR CA 60 17
1287302 $145,237.5 REED'S DAIRY, INC. WA 61 17
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1019110 319.81 Monthly 98032 5046 Telephones, Radios, Cash Registers,
1032309 654.34 Monthly 980523821 3669 Office Furniture & Fixtures, Signs, Se
1094807 1,779.19 Monthly 98008 3843 Computers & Related Equipment
1145604 1,199.00 Monthly 98057 5013 Telephones, Radios, Cash Registers,
1149782 1,045.00 Monthly 75042 3499 Machine Tools, Waste Oil Systems,
1150302 291.84 Monthly 98225 4833 Computers & Related Equipment
1160602 1,432.89 Monthly 98663 5411 Funeral Homes
1163502 346.50 Monthly 98188 7011 Telephones, Radios, Cash Registers,
1174801 1,214.33 Monthly 60521 4953 Licensed Vehicles, Forklifts, Trailers
1181104 1,372.00 Varies 97002 5261 Production Equipment, Greenhouse,
1204581 910.20 Monthly 75062 8011 Medical Equipment, High Tech Equip
1211001 552.50 Varies 98121 7819 Printing Equipment, Copiers, Fax, Re
1213901 1,194.64 Monthly 99702 6061 Computers & Related Equipment
1214101 2,325.89 Monthly 99204 7011 Telephones, Radios, Cash Registers,
1214601 631.25 Monthly 98273 5812 Waste Management Service, Sanitati
1214801 385.70 Monthly 97411 4731 Licensed Vehicles, Forklifts, Trailers
1215501 960.99 Monthly 98108 2851 Computers & Related Equipment
1219812 600.00 Varies 99737 5411 Funeral Homes
1228302 690.30 Monthly 98037 2431 Machine Tools, Waste Oil Systems,
1236803 258.18 Monthly 83854 5411 Machine Tools, Waste Oil Systems,
1245801 324.75 Monthly 90744 4953 Waste Management Service, Sanitati
1254001 466.71 Varies 93922 4959 Waste Management Service, Sanitati
1267401 1,208.08 Monthly 98032 5043 Printing Equipment, Copiers, Fax, Re
1267402 1,197.84 Monthly 98032 5043 Printing Equipment, Copiers, Fax, Re
1267403 1,105.20 Monthly 98032 5043 Printing Equipment, Copiers, Fax. Re
1267406 1,133.46 Monthly 98032 5043 Printing Equipment, Copiers, Fax, Re
1267408 1,206.84 Monthly 98032 5043 Printing Equipment, Copiers, Fax, Re
1267701 273.00 Varies 97303 5261 Production Equipment, Greenhouse,
1267801 250.00 Varies 94523 181 Office Furniture & Fixtures, Signs, Se
1267802 250.00 Varies 94523 181 Production Equipment, Greenhouse,
1279105 762.00 Monthly 98052 2879 Machine Tools, Waste Oil Systems,
1279106 1,580.72 Monthly 98052 2879 Machine Tools, Waste Oil Systems,
1280102 957.60 Monthly 16335 4959 Licensed Vehicles, Forklifts, Trailers
1282301 517.29 Monthly 75235 4119 Computers & Related Equipment
1282401 299.43 Monthly 92227 5921 Computers & Related Equipment
1287302 3,512.00 Varies 98321 241 Production Equipment, Greenhouse,
</TABLE>
p. 1 of 21
<PAGE> 7
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1292601 $1,517.1 COPELAND OIL CO., INC. OK 48 4
1294401 $3,041.1 VERSA-TECH CORP. TX 48 5
1294501 $4,929.1 GRAHAM ASSOCIATES INC. TX 48 5
1296201 $20,432.5 LEATONS RESTAURANT & D WA 60 17
1299102 $23,907.9 FORMOSA FOODS TX 60 18
1309401 $4,115.6 LONGBEACH KINKO'S, INC. CA 48 7
1313901 $2,374.3 LOCKENOUR-JONES MORTU NE 60 19
1314101 $1,396.7 LOCKENOUR-JONES MORTU NE 60 19
1316502 $45,612.5 ALPHA RECORDS, INC. FL 60 53
1322401 $7,384.2 ARTIES CUSTOM STYLING NJ 60 20
1327201 $6,536.7 BASS REDDY ROOTERS REN MA 60 21
1348001 $11,972.2 LACKOVIC'S AUTO, TRUCK & PA 60 24
1350803 $8,104.7 SPIC 'N' SPAN CLEANERS WA 36 36
1362301 $1,364.5 E. H. MEEKER TRUST FLBO TX 36 2
1368101 $3,740.9 EXECUTIVE BUSINESS CENT GA 36 3
1377301 $962.3 GENERAL-ELECTRIC-MECHA MI 36 3
1380701 $5,305.1 TESTING ENGINEERS & MI 36 4
1408803 $29,229.1 ROBBY'S SEPTIC TANK SER FL 36 27
1413102 $52,457.6 KAALAND MILL WA 60 53
1416203 $23,515.5 PRICE PLUS SUPERMARKET WA 36 34
1416801 $1,995.8 SNAPPER SANITATION INC. MA 36 10
1420601 $34,558.4 CHANNEL 32, INCORPORATE OR 48 21
1425804 $173,316.3 COLUMBIA WINERY WA 59 50
1429218 $9,965.6 CHARTER TITLE CORPORATI WA 36 27
1433502 $16,003.4 ARCADIA GREENHOUSES ID 60 57
1434411 $150,602.4 GRIMES AEROSPACE COMP OH 36 19
1437605 $43,839.3 TAKAUKI T. KIMURA WA 84 82
1437812 $50,997.9 HOLIDAY INN - EVERETT WA 53 51
1442801 $7,893.6 JOHN JAQUITH CONSTRUCTI WA 36 12
1442901 $5,365.5 MAHONEY'S TOO CAPE COD MA 36 11
1443003 $82,179.7 CHRISTIAN FAITH CENTER WA 48 39
1445801 $177,665.3 MAID O'CLOVER CORPORATI WA 84 59
1450412 $6,912.3 NATIONAL MUSIC SERVICE, I WA 60 57
1450440 $106,091.3 NATIONAL MUSIC SERVICE, I WA 12 11
1451803 $16,688.9 ARTESIAN WELL & PUMP WI 48 46
1458301 $5,272.9 THE TREEHOUSE MN 48 15
1459203 $2,602.7 WASHINGTON TITLE COMPA WA 59 49
1469205 $34,106.4 MAID O'CLOVER SOUTH, INC WA 82 69
1469211 $66,699.0 MAID O'CLOVER SOUTH, INC WA 60 59
1471403 $12,489.8 ED LEASK AK 60 58
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1292601 309.73 Monthly 74745 4932 Computers & Related Equipment
1294401 519.15 Monthly 75040 3645 Production Equipment, Greenhouse,
1294501 1,006.31 Monthly 76011 8711 Computers & Related Equipment
1296201 1,277.87 Monthly 98926 1978 Funeral Homes
1299102 1,346.87 Monthly 75247 5149 Funeral Homes
1309401 604.27 Monthly 90803 7334 Computers & Related Equipment
1313901 127.50 Monthly 69022 7261 Funeral Homes
1314101 75.00 Monthly 69022 7261 Funeral Homes
1316502 1,030.37 Monthly 33318 3652 Computers & Related Equipment
1322401 378.91 Monthly 7740 7539 Machine Tools, Waste Oil Systems,
1327201 321.25 Monthly 2745 4959 Licensed Vehicles, Forklifts, Trailers
1348001 523.00 Monthly 16403 7539 Machine Tools, Waste Oil Systems,
1350803 255.00 Monthly 98134 7216 Telephones, Radios, Cash Registers,
1362301 461.11 Monthly 761165736 1311 Computers & Related Equipment
1368101 1,264.21 Monthly 30136 6531 Telephones, Radios, Cash Registers,
1377301 244.74 Monthly 48386 1541 Licensed Vehicles, Forklifts, Trailers
1380701 1,349.22 Monthly 480990249 8734 Medical Equipment, High Tech Equip
1408803 1,151.50 Monthly 33809 4959 Licensed Vehicles, Forklifts, Trailers
1413102 11,185.00 Monthly 98255 5211 Machine Tools, Waste Oil Systems,
1416203 778.25 Monthly 98520 5411 Office Furniture & Fixtures, Signs, Se
1416801 189.03 Monthly 2724 1711 Waste Management Service, Sanitati
1420601 1,698.40 monthly 970053366 5941 Computers & Related Equipment
1425804 4,110.00 Monthly 98072 2084 Production Equipment, Greenhouse,
1429218 405.79 Monthly 980820489 6361 Printing Equipment, Copiers, Fax, Re
1433502 340.50 Monthly 83864 5261 Production Equipment, Greenhouse,
1434411 8,087.21 Monthly 43078 3728 Production Equipment, Greenhouse,
1437605 695.45 Monthly 98104 5411 Funeral Homes
1437812 1,189.49 Monthly 98020 7011 Computers & Related Equipment
1442801 280.72 Varies 98374 1542 Computers & Related Equipment
1442901 508.19 Monthly 2536 181 Production Equipment, Greenhouse,
1443003 2,410.42 Monthly 98198 8661 Computers & Related Equipment
1445801 3,625.84 Monthly 98902 5411 Funeral Homes
1450412 145.00 Monthly 99207 3659 Funeral Homes
1450440 10,048.28 Monthly 99207 3659 Telephones, Radios, Cash Registers,
1451803 424.62 Monthly 53153 1381 Licensed Vehicles, Forklifts, Trailers
1458301 250.00 Varies 56472 181 Production Equipment, Greenhouse,
1459203 61.72 Monthly 98055 6361 Printing Equipment, Copiers, Fax, Re
1469205 615.90 Monthly 98902 5411 Production Equipment, Greenhouse,
1469211 1,361.21 Monthly 98902 5411 Grocery/Restaurant Equipment, Flori
1471403 262.00 Monthly 99926 5411 Funeral Homes
</TABLE>
p. 2 of 21
<PAGE> 8
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1471404 $36,003.3 ED LEASK AK 11 10
1474010 $24,285.5 SCHERER TRUCK EQUIPME MO 36 35
1474101 $24,124.5 JOHN M. BURNS INCORPOR NY 48 27
1484706 $87,973.9 POULSBO RV, INC. WA 48 39
1495523 $58,936.2 MARESCO INTERNATIONAL NJ 36 17
1495525 $59,283.5 MARESCO INTERNATIONAL NJ 36 17
1498204 $4,262.9 CHEHALIS TRIBAL LUCKY WA 36 27
1499301 $12,686.4 AFFORDABLE GREASE TRAP HI 36 20
1518203 $48,438.0 MRS. FIELDS COOKIES3 CA 36 28
1522105 $207,336.0 MICHAEL R. MASTRO WA 60 45
1522202 $19,714.0 PAUL B. LUKE WA 83 70
1532802 $56,318.1 MRS. FIELDS COOKIES1 UT 36 33
1533405 $29,809.3 SUBCO EAST, INC. TN 60 51
1534703 $51,482.3 CASCADE GARDENS OR 48 39
1534704 $14,489.8 CASCADE GARDENS OR 48 46
1535504 $29,374.9 ACOUSTIC IMAGING AZ 27 18
1535505 $39,925.0 ACOUSTIC IMAGING AZ 48 39
1538103 $26,212.2 EARTHLY ARTS GREENHOU MI 48 47
1545003 $132,349.5 SUQUAMISH CLEARWATER WA 36 27
1559402 $6,181.0 P.V.P. I SUBWAY CORPORAT FL 23 21
1602702 $49,340.0 GROUP S. ASSOCIATES, INC. WV 60 51
1627302 $5,786.1 FORREST ENTERPRISES, IN MD 36 36
1634002 $45,429.5 KENTUCKY FRIED CHICKEN MO 60 58
1640101 $655.6 NATIONAL MUSIC SERVICE WA 22 12
1641701 $761.5 CHURCH-ARCHER-PASLEY F MO 37 27
1642501 $571.4 CONSALUS FUNERAL HOME MO 18 8
1642701 $229.9 COOPER-SORRELLS FUNER TX 12 2
1642901 $447.5 COX CHAPEL TX 16 6
1643201 $1,833.6 CURRAN-JONES FUNERAL H MA 57 47
1643301 $2,638.3 CURRAN-JONES FUNERAL H MA 57 47
1643901 $165.7 DAVIS FUNERAL HOME TX 11 1
1644101 $389.4 DAVIS-TURNER FUNERAL H OH 14 4
1644201 $2,638.3 DAY FUNERAL HOME MA 57 47
1650906 $84,020.2 INTEGRATED WASTE SERVI NY 36 32
1653401 $1,647.3 J. SUDLER LOFLAND FUNER DE 32 22
1659601 $384.9 GREUTZMACHER FUNERAL WI 16 6
1660401 $247.7 HAYWARD'S THOMSON & IR CN 12 3
1660701 $305.5 HINES FUNERAL HOMES, IN SC 13 3
1663801 $509.7 RUSH FUNERAL HOME PA 17 7
1663901 $229.9 SANDS FUNERAL CHAPEL CN 12 2
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1471404 3,410.00 Monthly 99926 5411 Funeral Homes
1474010 783.35 Monthly 64152 5012 Computers & Related Equipment
1474101 950.40 Monthly 13662 5812 Funeral Homes
1484706 2,580.37 Monthly 98383 5561 Office Furniture & Fixtures, Signs, Se
1495523 3,685.94 Monthly 8801 4731 Machine Tools, Waste Oil Systems,
1495525 3,707.66 Monthly 8801 4731 Machine Tools, Waste Oil Systems,
1498204 173.58 Monthly 98579 8699 Telephones, Radios, Cash Registers,
1499301 681.25 Monthly 96734 4959 Licensed Vehicles, Forklifts, Trailers
1518203 1,908.25 Monthly 92665 5461 Funeral Homes
1522105 5,375.00 Monthly 98661 6726 Production Equipment, Greenhouse,
1522202 356.00 Monthly 98011 8721 Licensed Vehicles, Forklifts, Trailers
1532802 1,914.00 Monthly 84041 5461 Funeral Homes
1533405 695.28 Monthly 37443 5812 Funeral Homes
1534703 1,477.12 Monthly 97702 781 Computers & Related Equipment
1534704 362.00 Monthly 97702 781 Production Equipment, Greenhouse,
1535504 1,654.86 Monthly 85044 3845 Computers & Related Equipment
1535505 1,145.52 Monthly 85044 3845 Computers & Related Equipment
1538103 200.00 Varies 48444 181 Production Equipment, Greenhouse,
1545003 5,389.15 Monthly 98392 7999 Office Furniture & Fixtures, Signs, Se
1559402 317.17 Monthly 33463 5812 Funeral Homes
1602702 1,150.82 Monthly 25901 5812 Funeral Homes
1627302 182.05 Monthly 20770 5812 Grocery/Restaurant Equipment, Flori
1634002 952.98 Monthly 65270 5812 Funeral Homes
1640101 52.90 Monthly 99207 7261 Funeral Homes
1641701 30.00 Monthly 64068 7261 Funeral Homes
1642501 65.70 Monthly 64735 7261 Funeral Homes
1642701 77.70 Monthly 75418 7261 Funeral Homes
1642901 65.70 Monthly 78550 7261 Funeral Homes
1643201 45.00 Monthly 1090 7261 Funeral Homes
1643301 64.75 Monthly 1090 7261 Funeral Homes
1643901 83.70 Monthly 76365 7261 Funeral Homes
1644101 79.50 Monthly 45142 7261 Funeral Homes
1644201 64.75 Monthly 1090 7261 Funeral Homes
1650906 2,855.47 Monthly 14203 4953 Licensed Vehicles, Forklifts, Trailers
1653401 77.70 Monthly 19963 7261 Funeral Homes
1659601 65.70 Monthly 54174 7261 Funeral Homes
1660401 83.70 Monthly 7261 Funeral Homes
1660701 77.70 Monthly 29550 7261 Funeral Homes
1663801 65.70 Monthly 15359 7261 Funeral Homes
1663901 77.70 Monthly 99999 7261 Funeral Homes
</TABLE>
p. 3 of 2l
<PAGE> 9
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1665001 $194.4 SHULER-MARSHALL FUNERA SC 13 2
1666801 $455.2 STARBUCK COMPANY TX 15 5
1667301 $2,957.6 STONE BROS. FUNERAL HO FL 32 22
1667501 $632.8 SULLIVAN FUNERAL HOME MA 19 9
1667601 $229.9 SULLIVAN FUNERAL HOMES MA 12 2
1668901 $632.8 WARD-LUMMIS FUNERAL HO IL 19 9
1671301 $602.7 OAKLEY FUNERAL HOME, IN FL 17 7
1673001 $509.7 PLAINVILLE MEMORIAL FUN CT 17 7
1673801 $264.8 QUEEN OF HEAVEN CEMETE FL 12 2
1673901 $439.4 QUERHAMMER FUNERAL HO IL 14 4
1674001 $852.2 ADAMS FUNERAL HOME, INC MO 24 14
1674101 $959.4 AHLGRIM FUNERAL HOME IL 26 16
1674401 $1,473.5 ALMON FUNERAL HOME GA 36 26
1675201 $568.2 AUSTIN & BELL FUNERAL HO TN 24 14
1675401 $1,572.2 BAIRD FUNERAL HOME OH 38 28
1675501 $852.2 BAKER FUNERAL HOME TX 24 14
1675601 $906.0 BAKER FUNERAL HOME TX 25 15
1675801 $1,272.1 BALDAUFF FUNERAL HOME, FL 32 22
1676801 $743.6 BECKER-DYER-STANTON FU KS 22 12
1677001 $1,117.3 BEHNER FUNERAL HOME, IN IA 29 19
1677601 $906.0 BOLLMAN FUNERAL HOME OR 25 15
1677701 $852.2 BOONE FUNERAL HOME, INC LA 24 14
1677801 $959.4 BRADLEY FUNERAL HOME, I WI 26 16
1677901 $1,373.5 BRAUN FUNERAL HOME MI 34 24
1678101 $2,554.7 BROADWAY FUNERAL HOME TX 56 45
1678301 $852.2 K.L. BROWN FUNERAL HOME AL 24 14
1679501 $906.0 CABALLERO WOODLAWN FU FL 25 15
1679601 $1,012.4 CABALLERO WOODLAWN FU FL 27 17
1679701 $906.0 CABALLERO WOODLAWN FU FL 25 15
1681201 $798.1 COCHRAN MORTUARY KS 23 13
1681401 $1,272.1 E. BLAKE COLLINS FUNERAL PA 32 22
1683501 $906.0 CUSTER-CHRISTIANSEN CA 25 15
1683601 $906.0 CUSTER-CHRISTIANSEN CO CA 25 15
1683701 $959.4 DAHL'S DITLEVSEN-MOORE WA 26 16
1683901 $1,117.3 DANEKAS FUNERAL HOME WA 29 19
1684601 $852.2 DESERT HOT SPRINGS MOR CA 24 14
1685501 $1,572.2 ELINE FUNERAL HOME MD 38 28
1685601 $1,117.3 EMBRY-BOSSE FUNERAL HO KY 29 19
1685901 $1,621.0 EVANS & MILLER FUNERAL OK 39 29
1686101 $1,621.0 EVANS-MCLEERY FUNERAL IA 39 29
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- -------- --------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
1665001 65.70 Monthly 29059 7261 Funeral Homes
1666801 77.70 Monthly 79536 7261 Funeral Homes
1667301 139.50 Monthly 34950 7261 Funeral Homes
1667501 65.70 Monthly 2339 7261 Funeral Homes
1667601 77.70 Monthly 2339 7261 Funeral Homes
1668901 65.70 Monthly 623660247 7261 Funeral Homes
1671301 77.70 Monthly 33525 7261 Funeral Homes
1673001 65.70 Monthly 6062 7261 Funeral Homes
1673801 89.50 Monthly 33068 7261 Funeral Homes
1673901 89.70 Monthly 600390439 7261 Funeral Homes
1674001 60.00 Monthly 65721 7261 Funeral Homes
1674101 60.00 Monthly 601263859 7261 Funeral Homes
1674401 60.00 Monthly 30117 7261 Funeral Homes
1675201 40.00 Monthly 37172 7261 Funeral Homes
1675401 60.00 Monthly 45373 7261 Funeral Homes
1675501 60.00 Monthly 77486 7261 Funeral Homes
1675601 60.00 Monthly 77422 7261 Funeral Homes
1675801 60.00 Monthly 32728 7261 Funeral Homes
1676801 60.00 Monthly 66002 7261 Funeral Homes
1677001 60.00 Monthly 52556 7261 Funeral Homes
1677601 60.00 Monthly 97338 7261 Funeral Homes
1677701 60.00 Monthly 71109 7261 Funeral Homes
1677801 60.00 Monthly 54409 7261 Funeral Homes
1677901 60.00 Monthly 49221 7261 Funeral Homes
1678101 65.00 Monthly 77550 7261 Funeral Homes
1678301 60.00 Monthly 36265 7261 Funeral Homes
1679501 60.00 Monthly 33135 7261 Funeral Homes
1679601 60.00 Monthly 33145 7261 Funeral Homes
1679701 60.00 Monthly 33176 7261 Funeral Homes
1681201 60.00 Monthly 67214 7261 Funeral Homes
1681401 60.00 Monthly 18705 7261 Funeral Homes
1683501 60.00 Monthly 91790 7261 Funeral Homes
1683601 60.00 Monthly 91722 7261 Funeral Homes
1683701 60.00 Monthly 986327152 7261 Funeral Homes
1683901 60.00 Monthly 99169 7261 Funeral Homes
1684601 60.00 Monthly 92240 7261 Funeral Homes
1685501 60.00 Monthly 21136 7261 Funeral Homes
1685601 60.00 Monthly 40217 7261 Funeral Homes
1685901 60.00 Monthly 74953 7261 Funeral Homes
1686101 60.00 Monthly 50138 7261 Funeral Homes
</TABLE>
p. 4 of 21
<PAGE> 10
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- -----------
<S> <C> <C> <C> <C> <C>
1686201 $1,323.0 EVANS-NORDBY FUNERAL H MN 33 23
1686301 $1,373.5 EVANS-NORDBY FUNERAL H MN 34 24
1687101 $74,100.9 VILLAGE MARKET NV 60 51
1687302 $48,114.8 BURRELL ENTERPRISES, LL VA 60 59
1687501 $1,012.4 HARVEY-DOUGLAS FUNERA OK 26 17
1687801 $852.2 HENRY FUNERAL HOME, INC VA 23 14
1688201 $1,117.3 HILLSIDE CHAPEL, INC. OR 28 19
1688301 $852.2 HOLCOMB-HENRY-BOOM MN 23 14
1688401 $743.6 HOUSER-MILLARD MO 21 12
1688601 $798.1 HUBBELL FUNERAL HOME FL 23 14
1688901 $1,907.0 HUMPHREY FUNERAL SERVI AR 44 35
1689201 $959.4 HURLEY FUNERAL HOME TX 25 16
1689301 $959.4 HURLEY FUNERAL HOME TX 25 16
1689701 $1,423.7 JOHNSON FUNERAL HOME MN 34 25
1690601 $1,117.3 KEY FUNERAL HOME OK 28 19
1690801 $906.0 KISTLER FUNERAL HOME SC 25 15
1691301 $798.1 LANGELAND CHAPELS, INC. MI 22 13
1691801 $798.1 HANSON-RUNSVOLD, INC. ND 22 13
1691901 $906.0 HARLEY FUNERAL HOME SC 24 15
1693501 $743.6 GIPSON FUNERAL HOME, IN TX 21 12
1694001 $1,012.4 GREEN-LARSEN FUNERAL H MN 26 17
1694101 $852.2 GRIMES FUNERAL CHAPELS TX 23 14
1694501 $1,373.5 HALLEY OLSEN FUNERAL H CA 33 24
1695401 $1,065.0 LOWELL-TIMS FUNERAL HO OK 27 18
1695501 $959.4 LUGINBUEL FUNERAL HOME AR 25 16
1695801 $798.1 LYONS FUNERAL HOME TX 22 13
1696101 $743.6 MANN-HARE FUNERAL HOM OH 21 12
1696201 $688.7 MAPLE HILL FUNERAL HOME KS 20 11
1696301 $1,012.4 MARSH FUNERAL CHAPEL, I MI 26 17
1696401 $1,473.5 MARTIN FUNERAL HOME, IN AL 35 26
1696701 $1,423.7 MAUPIN FUNERAL HOME MO 34 25
1696801 $1,669.5 MAUS FUNERAL HOME, INC. IN 39 30
1696901 $1,572.2 MAY FUNERAL SERVICE, INC MA 37 28
1697401 $1,765.5 MCCORRY BROTHERS FUNE NJ 41 32
1697501 $1,813.0 HARRY MCKNEELY & SON F LA 42 33
1697601 $27,827.7 RAY L. MCMULLEN MT 36 2
1697701 $959.4 MCMILLAN-SMALL FUNERAL SC 25 16
1697801 $1,473.5 MEMORIAL GARDENS FUNE WA 35 26
1697901 $1,272.1 MICHAELSON FUNERAL HOM MN 31 22
1698001 $743.6 D.L. MILLER FUNERAL HOME MI 21 12
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- -------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C>
1686201 60.00 Monthly 55429 7261 Funeral Homes
1686301 60.00 Monthly 55369 7261 Funeral Homes
1687101 1,728.35 Monthly 89429 5541 Machine Tools, Waste Oil Systems,
1687302 995.39 Monthly 22508 5812 Funeral Homes
1687501 60.00 Monthly 73402 7261 Funeral Homes
1687801 60.00 Monthly 24402 7261 Funeral Homes
1688201 60.00 Monthly 97045 7261 Funeral Homes
1688301 60.00 Monthly 55126 7261 Funeral Homes
1688401 60.00 Monthly 65109 7261 Funeral Homes
1688601 60.00 Monthly 34640 7261 Funeral Homes
1688901 60.00 Monthly 72801 7261 Funeral Homes
1689201 60.00 Monthly 78064 7261 Funeral Homes
1689301 60.00 Monthly 78061 7261 Funeral Homes
1689701 60.00 Monthly 56482 7261 Funeral Homes
1690601 60.00 Monthly 74362 7261 Funeral Homes
1690801 60.00 Monthly 29532 7261 Funeral Homes
1691301 60.00 Monthly 49007 7261 Funeral Homes
1691801 60.00 Monthly 58103 7261 Funeral Homes
1691901 60.00 Monthly 29646 7261 Funeral Homes
1693501 60.00 Monthly 75901 7261 Funeral Homes
1694001 60.00 Monthly 56549 7261 Funeral Homes
1694101 60.00 Monthly 78028 7261 Funeral Homes
1694501 60.00 Monthly 93554 7261 Funeral Homes
1695401 60.00 Monthly 73521 7261 Funeral Homes
1695501 60.00 Monthly 72753 7261 Funeral Homes
1695801 60.00 Monthly 75087 7261 Funeral Homes
1696101 60.00 Monthly 44830 7261 Funeral Homes
1696201 60.00 Monthly 66106 7261 Funeral Homes
1696301 60.00 Monthly 48453 7261 Funeral Homes
1696401 60.00 Monthly 35045 7261 Funeral Homes
1696701 60.00 Monthly 65251 7261 Funeral Homes
1696801 60.00 Monthly 47918 7261 Funeral Homes
1696901 60.00 Monthly 2062 7261 Funeral Homes
1697401 60.00 Monthly 7010 7261 Funeral Homes
1697501 60.00 Monthly 70401 7261 Funeral Homes
1697601 $14,687.72 Varies 59544 212 Production Equipment, Greenhouse,
1697701 60.00 Monthly 29572 7261 Funeral Homes
1697801 60.00 Monthly 98684 7261 Funeral Homes
1697901 60.00 Monthly 55060 7261 Funeral Homes
1698001 60.00 Monthly 49026 7261 Funeral Homes
</TABLE>
p. 5 of 21
<PAGE> 11
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1698301 $1,272.1 MITCHELL-HUGHES FUNERA IL 31 22
1698401 $1,117.3 MOBLEY-DODSON FUNERAL OK 28 19
1698501 $1,323.0 MOELLER FUNERAL HOME, I IN 32 23
1698601 $1,621.0 MOLESWORTH FUNERAL HO MD 38 29
1698701 $906.0 MOORE'S CHAPEL AR 24 15
1698801 $2,136.5 MORROW FUNERAL CHAPEL KY 49 40
1698901 $1,220.9 MORTIMER FUNERAL HOME, MS 30 21
1699001 $1,323.0 MOUNTAIN VIEW FUNERAL C WA 32 23
1699101 $1,473.5 MOUNTAIN VIEW FUNERAL H ID 35 26
1699201 $1,523.0 MURPHY-MUSGROVE FUNE OR 36 27
1699301 $1,813.0 MYERS FUNERAL HOME, INC TX 42 33
1699401 $959.4 BOB NEAL & SONS FUNERAL AR 25 16
1699601 $1,169.3 NELSON FUNERAL HOME, IN MI 30 20
1699701 $1,423.7 NEPTUNE SOCIETY CA 34 25
1699801 $1,012.4 NOBLES FUNERAL CHAPEL, I TX 26 17
1699901 $1,813.0 NORTH FUNERAL HOME, INC TN 42 33
1700001 $1,907.0 NORTH LITTLE ROCK FUNER AR 44 35
1700101 $1,813.0 W. & D. OLSON FUNERAL HO WI 42 33
1700201 $1,860.1 PACE-STANCIL FUNERAL HO TX 43 34
1700301 $1,765.5 PADGETT FUNERAL HOME NJ 41 32
1700401 $1,065.0 PALM SPRINGS MORTUARY CA 27 18
1700501 $1,373.5 PARENT-SORENSEN MORTU CA 33 24
1700801 $1,572.2 E.E. PICKLE FUNERAL HOME MS 37 28
1700901 $1,423.7 PLUMMER FUNERAL HOME, I ME 34 25
1701001 $1,813.0 PLUMMER FUNERAL HOMES IL 42 33
1701101 $1,473.5 PONGER-KAYS FUNERAL HO FL 35 26
1701201 $1,169.3 L. HAROLD POOLE FUNERAL NC 33 21
1701301 $1,572.2 PRITTS FUNERAL HOME MD 37 28
1701401 $1,572.2 PROKO FUNERAL HOME, INC WI 37 28
1701501 $1,473.5 ROBERT A. PUMPHREY FUN MD 35 26
1701701 $1,813.0 RADER FUNERAL HOME TX 42 33
1701801 $798.1 LEROY RADER FUNERAL HO TX 22 13
1701901 $1,523.0 RANSDELL FUNERAL HOME KY 36 27
1702001 $798.1 RASH FUNERAL HOME IA 22 13
1702101 $688.7 REED FUNERAL HOME OH 20 11
1702201 $1,012.4 EDWARD T. REID HOME FOR NJ 26 17
1702301 $1,423.7 REINBOLD & PFEFFER FAMIL WI 34 25
1702401 $1,523.0 REKUS FUNERAL HOMES, IN MO 36 27
1702501 $2,290.2 RELYEA FUNERAL CHAPEL ID 40 31
1702601 $959.4 REST HAVEN FUNERAL HOM TX 25 16
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- -------- --------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
1698301 60.00 Monthly 62959 7261 Funeral Homes
1698401 60.00 Monthly 74063 7261 Funeral Homes
1698501 60.00 Monthly 46383 7261 Funeral Homes
1698601 60.00 Monthly 20872 7261 Funeral Homes
1698701 60.00 Monthly 72702 7261 Funeral Homes
1698801 60.00 Monthly 42056 7261 Funeral Homes
1698901 60.00 Monthly 38701 7261 Funeral Homes
1699001 60.00 Monthly 99362 7261 Funeral Homes
1699101 60.00 Monthly 83501 7261 Funeral Homes
1699201 60.00 Monthly 97448 7261 Funeral Homes
1699301 60.00 Monthly 78160 7261 Funeral Homes
1699401 60.00 Monthly 72021 7261 Funeral Homes
1699601 60.00 Monthly 49735 7261 Funeral Homes
1699701 60.00 Monthly 93711 7261 Funeral Homes
1699801 60.00 Monthly 77868 7261 Funeral Homes
1699901 60.00 Monthly 38464 7261 Funeral Homes
1700001 60.00 Monthly 72114 7261 Funeral Homes
1700101 60.00 Monthly 54724 7261 Funeral Homes
1700201 60.00 Monthly 77535 7261 Funeral Homes
1700301 60.00 Monthly 8302 7261 Funeral Homes
1700401 60.00 Monthly 92234 7261 Funeral Homes
1700501 60.00 Monthly 94952 7261 Funeral Homes
1700801 60.00 Monthly 38821 7261 Funeral Homes
1700901 60.00 Monthly 4330 7261 Funeral Homes
1701001 60.00 Monthly 62056 7261 Funeral Homes
1701101 60.00 Monthly 33821 7261 Funeral Homes
1701201 60.00 Monthly 27545 7261 Funeral Homes
1701301 60.00 Monthly 21157 7261 Funeral Homes
1701401 60.00 Monthly 53144 7261 Funeral Homes
1701501 60.00 Monthly 20814 7261 Funeral Homes
1701701 60.00 Monthly 75662 7261 Funeral Homes
1701801 60.00 Monthly 75606 7261 Funeral Homes
1701901 60.00 Monthly 40330 7261 Funeral Homes
1702001 60.00 Monthly 51640 7261 Funeral Homes
1702101 60.00 Monthly 44710 7261 Funeral Homes
1702201 60.00 Monthly 7032 7261 Funeral Homes
1702301 60.00 Monthly 542204036 7261 Funeral Homes
1702401 60.00 Monthly 65486 7261 Funeral Homes
1702501 80.00 Monthly 83706 7261 Funeral Homes
1702601 60.00 Monthly 75087 7261 Funeral Homes
</TABLE>
p. 6 of 21
<PAGE> 12
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1702701 $1,373.5 REYNOLDS-LOVE FUNERAL NE 33 24
1702801 $1,669.5 RICH & THOMPSON FUNERA NC 39 30
1702901 $1,765.5 RIDGEWAY MORTICIANS TN 41 32
1703001 $1,373.5 RIGGIN-PILLATSCH FUNERA IL 33 24
1703101 $1,117.3 RINDT-ERDMAN FUNERAL H KS 28 19
1703201 $1,669.5 RISHER MONTEBELLO MORT CA 39 30
1703301 $1,572.2 ROBINSON FUNERAL HOME VA 37 28
1703401 $1,012.4 GENE RODEN'S SONS DIRCT TX 26 17
1703701 $1,523.0 ROSE CITY CEMETERY & FU OR 36 27
1703801 $1,523.0 ROTH FUNERAL CHAPEL, IN KY 36 27
1703901 $1,813.0 ROYCE-CHEDZOY FUNERAL NY 42 34
1704001 $1,621.0 RUDDER FUNERAL HOME, IN AL 38 29
1704101 $1,473.5 RUSHING-ESTES-KNOWLES TX 35 26
1704201 $1,473.5 RUSHING-ESTES KNOWLES TX 35 26
1704301 $1,669.5 RYAN FUNERAL HOME OF M WI 39 30
1704801 $1,523.0 SANTOS-ROBINSON MORTU CA 36 27
1705001 $1,813.0 SCHAUMAN-SULEWSKI NY 43 34
1705101 $1,669.5 HOWE MORTUARY CO 39 30
1705201 $1,272.1 SCHMITZ-FLOYD-ANDERSEN TX 31 22
1705301 $1,813.0 SCHROEDER-CRESS FUNER WI 42 33
1705401 $1,572.2 SCOTT'S FUNERAL HOME TX 37 28
1705601 $959.4 SEARCY FUNERAL HOME AL 25 16
1705801 $64,699.1 IT CAN BE DONE, INC. FL 63 54
1705901 $60,799.9 BAMA SUBS, INC. AL 63 54
1706001 $2,143.7 MITCHELL FUNERAL HOME, I AR 60 50
1706101 $1,686.8 MOORE FUNERAL SERVICE MS 59 49
1706201 $2,358.1 MUELLER CHAPEL OF THE F WA 60 50
1706301 $2,786.8 REARDON SIMI VALLEY MOR CA 60 50
1706401 $1,715.0 THOMAS MILLER MORTUARY CA 60 50
1706501 $1,500.6 AMBROSE-SQUIRES FUNER MI 60 50
1706601 $1,451.1 MOORE FUNERAL SERVICE MS 59 48
1706801 $2,358.1 EATON FUNERAL HOME MA 60 50
1706901 $3,331.3 AMBROSE-SQUIRES FUNER MI 60 50
1707001 $3,023.5 VIRGIL HUBER FUNERAL HO IN 59 49
1707301 $2,358.1 MUELLER-GREENLEE FUNE WA 60 50
1707401 $6,409.6 GEISENDORF-RUSH SMITH F KS 60 50
1707501 $6,909.5 GUNDERSON FUNERAL HOM WI 60 50
1707601 $8,292.0 HANSEN CHAPEL AZ 58 48
1707701 $4,287.4 HANSON-RUNSVOLD FUNER ND 60 50
1707801 $2,319.3 HARDWICK FUNERAL HOME SC 59 49
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- -------- --------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
1702701 60.00 Monthly 68850 7261 Funeral Homes
1702801 60.00 Monthly 27253 7261 Funeral Homes
1702901 60.00 Monthly 38242 7261 Funeral Homes
1703001 60.00 Monthly 62918 7261 Funeral Homes
1703101 60.00 Monthly 67005 7261 Funeral Homes
1703201 60.00 Monthly 90640 7261 Funeral Homes
1703301 60.00 Monthly 24522 7261 Funeral Homes
1703401 60.00 Monthly 754605898 7261 Funeral Homes
1703701 60.00 Monthly 97213 7261 Funeral Homes
1703801 60.00 Monthly 42001 7261 Funeral Homes
1703901 60.00 Monthly 14891 7261 Funeral Homes
1704001 60.00 Monthly 35772 7261 Funeral Homes
1704101 60.00 Monthly 78881 7261 Funeral Homes
1704201 60.00 Monthly 78801 7261 Funeral Homes
1704301 60.00 Monthly 53704 7261 Funeral Homes
1704801 60.00 Monthly 94577 7261 Funeral Homes
1705001 60.00 Monthly 14621 7261 Funeral Homes
1705101 60.00 Monthly 80302 7261 Funeral Homes
1705201 60.00 Monthly 76201 7261 Funeral Homes
1705301 60.00 Monthly 53704 7261 Funeral Homes
1705401 60.00 Monthly 76528 7261 Funeral Homes
1705601 60.00 Monthly 36330 7261 Funeral Homes
1705801 1,439.10 Monthly 33604 5812 Funeral Homes
1705901 1,352.37 Monthly 35594 5812 Funeral Homes
1706001 50.00 Monthly 72450 7261 Funeral Homes
1706101 40.00 Monthly 39401 7261 Funeral Homes
1706201 55.00 Monthly 99336 7261 Funeral Homes
1706301 65.00 Monthly 93065 7261 Funeral Homes
1706401 40.00 Monthly 91718 7261 Funeral Homes
1706501 35.00 Monthly 48706 7261 Funeral Homes
1706601 35.00 Monthly 39577 7261 Funeral Homes
1706801 55.00 Monthly 2192 7261 Funeral Homes
1706901 77.70 Monthly 48706 7261 Funeral Homes
1707001 71.70 Monthly 46323 7261 Funeral Homes
1707301 55.00 Monthly 99301 7261 Funeral Homes
1707401 149.50 Monthly 674022543 7261 Funeral Homes
1707501 161.16 Monthly 53716 7261 Funeral Homes
1707601 200.00 Monthly 85020 7261 Funeral Homes
1707701 100.00 Monthly 58103 7261 Funeral Homes
1707801 55.00 Monthly 29569 7261 Funeral Homes
</TABLE>
p. 7 of 21
<PAGE> 13
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- --------- -
<S> <C> <C> <C> <C> <C>
1707901 $1,500.6 GUNDERSON FUNERAL HOM WI 60 50
1708001 $1,373.5 SEAVER-SANDERS-MULLINS VA 33 24
1708101 $1,621.0 SEEFELD FAMILY OF FUNER WI 38 29
1708201 $1,621.0 SEEFELD FAMILY OF WI 38 29
1708301 $959.4 SHARP FUNERAL HOME MI 25 16
1708401 $959.4 SHARP FUNERAL HOMES, IN MI 25 16
1708501 $1,473.5 SHELBY FUNERAL HOME IN 35 26
1708601 $1,860.1 SHINN FUNERAL HOME AR 43 34
1708801 $1,065.0 SISCO FUNERAL CHAPEL AR 27 18
1708901 $1,860.1 SMITH & HEALD FUNERAL H NH 43 34
1709001 $1,572.2 STEEN FUNERAL HOME KY 37 28
1709101 $1,513.6 STEHN'S MILWAUKIE FUNER OR 52 43
1709301 $1,717.6 STITH FUNERAL HOME, INC. KY 40 31
1709401 $1,765.5 STONE-GOODWIN FUNERAL TX 41 32
1709501 $1,572.2 JOSEPH A. STRICKLAND FU GA 37 28
1709601 $1,813.0 STRINGER & GRIFFIN FUNER TX 42 33
1709701 $1,813.0 STRINGER & GRIFFIN FUNER TX 42 33
1709801 $1,572.2 STUESSY FUNERAL HOME, I WI 37 28
1709901 $1,765.5 SULLIVAN FUNERAL HOME TX 41 32
1710001 $1,717.6 SMITH FUNERAL HOME OF OK 40 31
1710101 $1,373.5 SMITH FUNERAL CHAPELS MT 33 24
1710201 $1,373.5 SMITH FUNERAL CHAPELS MT 33 24
1710301 $743.6 SMITH FUNERAL HOME MO 21 12
1710501 $1,669.5 SMITH-MCCRACKEN FUNER NJ 39 30
1710701 $1,621.0 SMITH-ROGERS FUNERAL H NM 38 29
1710801 $1,423.7 DWAYNE R. SPENCE FUNER OH 34 25
1710901 $1,220.9 STACY-WILKINS FUNERAL H TX 30 21
1711001 $1,572.2 SUNSET FUNERAL HOME KY 37 28
1711101 $1,220.9 SWARTZ FUNERAL HOME MI 30 21
1711201 $688.7 TENOLD FUNERAL HOME IA 20 11
1711501 $1,473.5 THOMPSON-STEVENS FUNE OH 35 26
1711601 $959.4 TINKLER FUNERAL CHAPEL CA 25 16
1711701 $1,813.0 W. A. TRAHAN FUNERAL CHA MI 42 33
1711801 $1,669.5 H. E. TURNER & CO., INC. NY 39 30
1711901 $633.5 NATIONAL MUSIC SERVICE WA 23 11
1712001 $1,523.0 ULLREY MEMORIAL CHAPEL, CA 36 27
1712101 $1,373.5 VAUGHAN-GUYNN-MCGRAD VA 33 24
1712301 $1,813.0 WAITE & SON FUNERAL CHA OH 42 33
1712401 $1,373.5 WAKEMAN FUNERAL HOME, MI 33 24
1712501 $1,669.5 R.W. WALKER FUNERAL HO NY 39 30
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- -------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
1707901 35.00 Monthly 53562 7261 Funeral Homes
1708001 60.00 Monthly 24143 7261 Funeral Homes
1708101 60.00 Monthly 54901 7261 Funeral Homes
1708201 60.00 Monthly 54901 7261 Funeral Homes
1708301 60.00 Monthly 48473 7261 Funeral Homes
1708401 60.00 Monthly 48473 7261 Funeral Homes
1708501 60.00 Monthly 47932 7261 Funeral Homes
1708601 60.00 Monthly 72801 7261 Funeral Homes
1708801 60.00 Monthly 72764 7261 Funeral Homes
1708901 60.00 Monthly 3055 7261 Funeral Homes
1709001 60.00 Monthly 41101 7261 Funeral Homes
1709101 40.00 Monthly 97222 7261 Funeral Homes
1709301 60.00 Monthly 41042 7261 Funeral Homes
1709401 60.00 Monthly 75647 7261 Funeral Homes
1709501 60.00 Monthly 30643 7261 Funeral Homes
1709601 60.00 Monthly 75979 7261 Funeral Homes
1709701 60.00 Monthly 75951 7261 Funeral Homes
1709801 60.00 Monthly 53566 7261 Funeral Homes
1709901 60.00 Monthly 76384 7261 Funeral Homes
1710001 60.00 Monthly 74426 7261 Funeral Homes
1710101 60.00 Monthly 59102 7261 Funeral Homes
1710201 60.00 Monthly 59101 7261 Funeral Homes
1710301 60.00 Monthly 63401 7261 Funeral Homes
1710501 60.00 Monthly 7860 7261 Funeral Homes
1710701 60.00 Monthly 88260 7261 Funeral Homes
1710801 60.00 Monthly 43110 7261 Funeral Homes
1710901 60.00 Monthly 76844 7261 Funeral Homes
1711001 60.00 Monthly 40601 7261 Funeral Homes
1711101 60.00 Monthly 48507 7261 Funeral Homes
1711201 60.00 Monthly 50421 7261 Funeral Homes
1711501 60.00 Monthly 45154 7261 Funeral Homes
1711601 60.00 Monthly 93701 7261 Funeral Homes
1711701 60.00 Monthly 48708 7261 Funeral Homes
1711801 60.00 Monthly 14020 7261 Funeral Homes
1711901 60.00 Monthly 99207 7261 Funeral Homes
1712001 60.00 Monthly 95991 7261 Funeral Homes
1712101 60.00 Monthly 24343 7261 Funeral Homes
1712301 60.00 Monthly 44212 7261 Funeral Homes
1712401 60.00 Monthly 486024700 7261 Funeral Homes
1712501 60.00 Monthly 12901 7261 Funeral Homes
</TABLE>
p. 8 of 21
<PAGE> 14
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- -----------
<S> <C> <C> <C> <C> <C>
1712601 $1,117.3 WALLACE FUNERAL HOME WV 28 19
1712701 $1,423.7 WALLACE-PENCE FUNERAL IA 34 25
1712801 $1,717.6 WALSH FUNERAL HOME, INC NY 40 31
1712901 $1,765.5 NATIONAL MUSIC SERVICE WA 42 33
1713001 $1,265.1 CASSDORPH & CURRY FUNE WV 59 49
1713101 $2,741.0 PINECASTLE MEMORIAL CH FL 59 49
1713201 $1,243.8 CAUTHEN FUNERAL HOME SC 59 49
1713501 $6,325.4 GEISENDORF-RUSH SMITH KS 59 49
1713601 $1,475.9 SUTFIN FUNERAL CHAPEL NY 59 49
1713701 $1,286.2 HALL FUNERAL HOME NY 60 50
1713801 $1,475.9 MACPHERSON FUNERAL HO NY 59 49
1713901 $3,275.5 WHITESIDE FUNERAL CHAP WA 57 47
1714001 $3,221.5 WHITESIDE MORTUARY WA 58 48
1714301 $1,265.1 BURNS MORTUARY OR 59 49
1714501 $2,770.5 CHAMBERS-WILCOX FUNER TX 59 49
1714701 $10,116.3 WELLMAN FUNERAL HOME OH 58 48
1714801 $1,451.1 WELLMAN FUNERAL HOME, I OH 58 48
1715001 $1,286.2 OWENS FUNERAL CHAPEL TX 60 50
1715101 $4,565.3 PINECASTLE MEMORIAL FL 59 49
1715401 $1,572.2 WARDS FUNERAL HOME, IN GA 37 28
1715501 $2,166.4 WATERS-POWELL FUNERAL SC 46 37
1715701 $1,323.0 WEAVER MORTUARY CA 32 23
1715801 $1,953.5 WEBB-FREER FUNERAL HO MO 45 36
1715901 $1,220.9 WELCH FUNERAL HOME, INC TX 30 21
1716101 $1,621.0 WHEELAN FUNERAL HOME, I IL 38 29
1716301 $1,765.5 WHITE'S FUNERAL HOME, IN TX 41 32
1716401 $1,065.0 WILKE-AMEY-CLAY FUNERAL TX 27 18
1716501 $1,012.4 WILLIAMS FUNERAL SERVIC VA 26 17
1716601 $1,117.3 WILSON FUNERAL HOME AL 28 19
1716701 $1,621.0 YOUNG FUNERAL HOME MI 38 29
1716801 $1,169.3 YOUNG'S FUNERAL HOME, I LA 29 20
1716901 $1,765.5 YURS FUNERAL HOME, INC. IL 41 32
1717001 $1,220.9 ZWICK-SEFTON-JAHN FUNE IN 31 21
1717201 $138,409.0 CATHEDRAL HILL ASSOCIAT CA 60 51
1717301 $25,494.0 WARREN BEVERAGE CORPO OH 60 51
1717501 $25,055.4 SUMMERVILLE DEVELOPME PA 60 51
1717601 $11,552.5 SUBWAY 5 NJ 28 19
1717701 $39,475.1 ROWE INTERNATIONAL, INC. TX 36 27
1717702 $3,859.6 ROWE INTERNATIONAL, INC. TX 36 27
1718201 $3,331.3 JONES & JONES FUNERAL DI WA 60 50
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- ---------- --------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
1712601 60.00 Monthly 25504 7261 Funeral Homes
1712701 60.00 Monthly 50208 7261 Funeral Homes
1712801 60.00 Monthly 11722 7261 Funeral Homes
1712901 60.00 Monthly 99207 7261 Funeral Homes
1713001 30.00 Monthly 25177 7261 Funeral Homes
1713101 65.00 Monthly 32809 7261 Funeral Homes
1713201 30.00 Monthly 29721 7261 Funeral Homes
1713501 150.00 Monthly 674022543 7261 Funeral Homes
1713601 35.00 Monthly 13812 7261 Funeral Homes
1713701 30.00 Monthly 13084 7261 Funeral Homes
1713801 35.00 Monthly 13811 7261 Funeral Homes
1713901 89.70 Varies 98520 7261 Funeral Homes
1714001 77.70 Monthly 98541 7261 Funeral Homes
1714301 30.00 Monthly 97838 7261 Funeral Homes
1714501 65.70 Monthly 76437 7261 Funeral Homes
1714701 244.00 Monthly 43113 7261 Funeral Homes
1714801 35.00 Monthly 43103 7261 Funeral Homes
1715001 30.00 Monthly 75496 7261 Funeral Homes
1715101 108.26 Monthly 32809 7261 Funeral Homes
1715401 60.00 Monthly 30501 7261 Funeral Homes
1715501 65.00 Monthly 29501 7261 Funeral Homes
1715701 60.00 Monthly 92223 7261 Funeral Homes
1715801 60.00 Monthly 64015 7261 Funeral Homes
1715901 60.00 Monthly 75601 7261 Funeral Homes
1716101 60.00 Monthly 61201 7261 Funeral Homes
1716301 60.00 Monthly 76086 7261 Funeral Homes
1716401 60.00 Monthly 78704 7261 Funeral Homes
1716501 60.00 Monthly 24450 7261 Funeral Homes
1716601 60.00 Monthly 35967 7261 Funeral Homes
1716701 60.00 Monthly 49651 7261 Funeral Homes
1716801 60.00 Monthly 71334 7261 Funeral Homes
1716901 60.00 Monthly 60174 7261 Funeral Homes
1717001 60.00 Monthly 46733 7261 Funeral Homes
1717201 $ 3,228.29 Monthly 94109 7011 Computers &
Related Equipment
1717301 594.63 Monthly 45152 5812 Funeral Homes
1717501 584.40 Monthly 16501 5812 Funeral Homes
1717601 650.82 Monthly 7719 5812 Funeral Homes
1717701 1,607.39 Monthly 75247 3651 Licensed Vehicles,
Forklifts,Trailers
1717702 157.16 Monthly 75247 3651 Licensed Vehicles,
Forklifts,Trailers
1718201 77.70 Monthly 98801 7261 Funeral Homes
</TABLE>
p. 9 of 21
<PAGE> 15
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1718301 $2,358.1 MERRITT FUNERAL HOME WA 60 50
1718401 $1,286.2 NICHOLSON & CARMON FUN CT 60 50
1718501 $2,686.2 CARMON-POQUONOCK FUN CT 59 49
1718601 $4,004.8 SAMSEL-CARMON FUNERAL CT 59 49
1718701 $2,108.5 CARMON FUNERAL HOMES, I CT 59 49
1718801 $2,872.5 COX & SON FUNERAL HOME, TN 60 50
1718901 $5,882.6 SUNSET LAWN FUNERAL CH CA 60 49
1719001 $1,500.6 PETERS FUNERAL HOME CA 60 50
1719101 $2,786.8 RALPH ROBINSON & SON FU AR 60 50
1719201 $2,939.2 MEMORIAL FUNERAL HOME TX 60 50
1719301 $2,786.8 MCCONNELL FUNERAL HOM AR 60 50
1719501 $54,962.7 SUBWAY1 TX 51 42
1719901 $7,040.4 BROADWAY FUNERAL HOME TX 55 45
1720601 $2,392.8 DAHL'S DITLEVSEN-MOORE WA 25 16
1721301 $2,568.7 LESTER R. GRUMMONS NY 38 29
1722301 $424.3 ANDREWS FUNERAL HOME CO 11 2
1722501 $1,602.1 APPLEYARD'S HOME FOR FU WI 20 11
1722701 $1,995.3 BECKER-DYER-STANTON FU KS 22 13
1722901 $1,163.6 BETZLER FUNERAL HOME, I MI 16 7
1723701 $148.5 CRAIN FUNERAL HOME, INC. LA 10 1
1723801 $296.9 CURRAN-JONES, INC. MA 10 1
1724001 $443.9 DAVIS-PLAYLE FUNERAL HO MO 11 2
1724301 $791.9 DRAUCKER FUNERAL HOME, NE 19 10
1724401 $722.3 DUFFUS FUNERAL DIRECTO CN 18 9
1724501 $510.8 EMERSON-NEWKIRK-WAREH OH 15 6
1724601 $4,052.5 EVANS & MILLER FUNERAL OK 38 29
1724801 $5,114.0 FLANNER & BUCHANAN MOR IN 47 38
1725001 $791.9 J.E. FOSTER FUNERAL HOM OH 19 10
1725101 $2,557.0 FOUND & SONS FUNERAL H VA 47 38
1725401 $46,352.6 TACOMA FIXTURES CO., INC. WA 60 50
1725501 $78,526.9 AUTOMATIC FUNDS WA 48 39
1725502 $31,984.3 AUTOMATIC FUNDS WA 48 42
1725701 $2,770.5 THOMPSN-WILSON FUNERA AR 59 49
1725801 $1,307.2 RIETH, ROHRER & EHRET, IN IN 60 51
1725901 $2,601.8 HICKS FUNERAL HOME GA 60 47
1726001 $2,816.8 PEEBLES FAYETTE COUNTY TN 59 50
1726101 $1,715.0 HUNT-STELLATO FUNERAL H NJ 60 50
1726201 $2,143.7 NELSON FUNERAL CHAPEL IL 60 50
1726301 $1,286.2 LIENHART FUNERAL HOME IN 60 50
1726401 $2,143.7 BUCKLER-JOHNSTON FUNE RI 60 50
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1718301 55.00 Monthly 98951 7261 Funeral Homes
1718401 30.00 Monthly 6078 7261 Funeral Homes
1718501 63.70 Monthly 6064 7261 Funeral Homes
1718601 94.97 Monthly 6074 7261 Funeral Homes
1718701 50.00 Monthly 6035 7261 Funeral Homes
1718801 67.00 Monthly 37762 7261 Funeral Homes
1718901 139.50 Monthly 95839 7261 Funeral Homes
1719001 35.00 Monthly 93280 7261 Funeral Homes
1719101 65.00 Monthly 71601 7261 Funeral Homes
1719201 69.70 Monthly 75831 7261 Funeral Homes
1719301 65.00 Monthly 72936 7261 Funeral Homes
1719501 1,481.43 Monthly 79912 5812 Funeral Homes
1719901 179.13 Monthly 77550 7261 Funeral Homes
1720601 149.65 Monthly 98626 7261 Funeral Homes
1721301 95.08 Monthly 13820 7261 Funeral Homes
1722301 143.39 Monthly 81212 7261 Funeral Homes
1722501 139.57 Monthly 54868 7261 Funeral Homes
1722701 150.00 Monthly 66002 7261 Funeral Homes
1722901 150.00 Monthly 49009 7261 Funeral Homes
1723701 75.00 Monthly 70438 7261 Funeral Homes
1723801 150.00 Monthly 1089 7261 Funeral Homes
1724001 150.00 Monthly 63501 7261 Funeral Homes
1724301 75.00 Monthly 69153 7261 Funeral Homes
1724401 75.00 Monthly 7261 Funeral Homes
1724501 75.00 Monthly 43033 7261 Funeral Homes
1724601 150.00 Monthly 74953 7261 Funeral Homes
1724801 150.00 Monthly 46224 7261 Funeral Homes
1725001 75.00 Monthly 43964 7261 Funeral Homes
1725101 75.00 Monthly 22701 7261 Funeral Homes
1725401 1,081.14 Monthly 98421 2434 Production Equipment, Greenhouse,
1725501 2,303.28 Monthly 98121 8930 Printing Equipment, Copiers, Fax, Re
1725502 879.73 Monthly 98121 8930 Printing Equipment, Copiers, Fax, Re
1725701 65.70 Monthly 72101 7261 Funeral Homes
1725801 30.00 Monthly 46526 7261 Funeral Homes
1725901 65.00 Monthly 30635 7261 Funeral Homes
1726001 65.70 Monthly 38068 7261 Funeral Homes
1726101 40.00 Monthly 7024 7261 Funeral Homes
1726201 50.00 Monthly 60640 7261 Funeral Homes
1726301 30.00 Monthly 46573 7261 Funeral Homes
1726401 50.00 Monthly 2891 7261 Funeral Homes
</TABLE>
p. 10 of 21
<PAGE> 16
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1726501 $2,723.9 BARHAM FUNERAL HOME MS 58 48
1726601 $3,221.5 BARHAM FUNERAL HOME MS 58 48
1726701 $1,500.6 HORAN FUNERAL HOME, INC WI 60 50
1726801 $8,574.8 VINYARD FUNERAL HOME TX 60 50
1726901 $1,286.2 SMITH FAMILY FUNERAL HO NV 60 50
1727001 $1,715.0 SHOSHONE FUNERAL SERVI ID 60 50
1727101 $6,409.6 SHOSHONE FUNERAL SERVI ID 60 50
1727301 $1,500.6 DAKOTA MEMORIAL CHAPEL ND 60 50
1727701 $5,543.2 HAWKINS FUNERAL HOME TX 42 30
1727801 $3,121.1 HEARTLAND FUNERAL HOM TX 25 16
1727901 $1,163.6 THE D.R. HENDERSON FUNE VA 16 7
1728101 $2,026.2 HINDLE FUNERAL HOME NY 38 29
1728301 $1,021.6 JACKSON LYTLE & INGLING OH 15 6
1728601 $722.3 DANIEL GEORGE & SON FUN NY 18 9
1728701 $439.3 GIRAGOSIAN FUNERAL HOM MA 14 5
1729001 $434.9 GREER'S WINSLOW MORTUA AZ 17 8
1729101 $3,247.4 LESTER R. GRUMMONS NY 38 29
1729401 $2,648.5 SIERRA VIEW FUNERAL CHA CA 60 47
1729801 $510.8 KRATZ FUNERAL HOME WI 15 6
1730101 $589.8 MALONE FUNERAL HOME KY 12 3
1730201 $1,859.0 MAPLE HILL FUNERAL HOME KS 21 12
1730401 $294.9 MCDONALD FUNERAL HOME KY 12 3
1730501 $5,431.4 MCFARLAND-SCHMIDT FUNE FL 39 30
1730701 $3,559.2 MEMORY CHAPEL, INC. AZ 34 25
1730801 $510.8 MILLER FUNERAL HOME WI 15 6
1731001 $997.6 CHARLES G. MOORE, INC. IN 22 13
1731301 $3,807.5 NALLEY-PICKLE-WELCH, INC TX 36 27
1731501 $31,756.6 C.J.'S CLEANERS WA 60 51
1731701 $61,242.7 SUBWAY7 ME 63 54
1732601 $443.9 PHANEUF FUNERAL HOMES, NH 11 2
1732901 $439.3 KENNETH H. POLLARD FUNE MA 14 5
1733001 $1,716.9 L. HAROLD POOLE FUNERAL NC 33 24
1733101 $878.7 RANSDELL FUNERAL CHAPE KY 14 5
1733501 $652.3 SAMPLE & O'DONNELL PA 17 8
1734401 $25,098.6 KEENAN WATER WELL & SE TX 24 14
1734501 $722.3 SIFTON FUNERAL HOME LIMI CN 18 9
1734701 $480.4 LOUIS N. SOLLON FUNERAL PA 12 3
1734901 $2,548.4 STONE BROS. FUNERAL HO FL 31 22
1735001 $929.5 ARTHUR E. & BRIAN A. STRA PA 21 12
1735101 $2,614.0 TIFFIN FUNERAL HOME, INC. MI 48 39
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1726501 65.70 Monthly 39301 7261 Funeral Homes
1726601 77.70 Monthly 39345 7261 Funeral Homes
1726701 35.00 Monthly 54729 7261 Funeral Homes
1726801 200.00 Monthly 78114 7261 Funeral Homes
1726901 30.00 Monthly 89406 7261 Funeral Homes
1727001 40.00 Monthly 83837 7261 Funeral Homes
1727101 149.50 Monthly 83832 7261 Funeral Homes
1727301 35.00 Monthly 58502 7261 Funeral Homes
1727701 199.22 Monthly 78596 7261 Funeral Homes
1727801 195.20 Monthly 76802 7261 Funeral Homes
1727901 150.00 Monthly 24370 7261 Funeral Homes
1728101 75.00 Monthly 14437 7261 Funeral Homes
1728301 150.00 Monthly 45503 7261 Funeral Homes
1728601 75.00 Monthly 11214 7261 Funeral Homes
1728701 75.00 Monthly 2172 7261 Funeral Homes
1729001 50.00 Monthly 86047 7261 Funeral Homes
1729101 120.20 Monthly 13820 7261 Funeral Homes
1729401 65.00 Monthly 95608 7261 Funeral Homes
1729801 75.00 Monthly 53933 7261 Funeral Homes
1730101 150.00 Monthly 41143 7261 Funeral Homes
1730201 150.00 Monthly 66106 7261 Funeral Homes
1730401 75.00 Monthly 40359 7261 Funeral Homes
1730501 195.20 Monthly 33990 7261 Funeral Homes
1730701 150.00 Monthly 86301 7261 Funeral Homes
1730801 75.00 Monthly 53040 7261 Funeral Homes
1731001 75.00 Monthly 47031 7261 Funeral Homes
1731301 150.00 Monthly 79720 7261 Funeral Homes
1731501 740.70 Monthly 98374 7210 Waste Management Service, Sanitati
1731701 1,362.22 Monthly 4901 5812 Funeral Homes
1732601 150.00 Monthly 3104 7261 Funeral Homes
1732901 75.00 Monthly 1844 7261 Funeral Homes
1733001 75.00 Monthly 27545 7261 Funeral Homes
1733101 150.00 Monthly 40330 7261 Funeral Homes
1733501 75.00 Monthly 16146 7261 Funeral Homes
1734401 1,767.03 Monthly 77510 1781 Licensed Vehicles, Forklifts, Trailers
1734501 75.00 Monthly 7261 Funeral Homes
1734701 122.19 Monthly 15317 7261 Funeral Homes
1734901 120.20 Monthly 34954 7261 Funeral Homes
1735001 75.00 Monthly 18505 7261 Funeral Homes
1735101 75.00 Monthly 48744 7261 Funeral Homes
</TABLE>
p. 11 of 21
<PAGE> 17
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1735201 $1,151.1 VERHOEVE FUNERAL HOME CN 18 9
1735301 $5,114.8 WARDS FUNERAL HOME, IN GA 37 28
1735501 $734.7 WEST FUNERAL HOME, INC. NM 13 4
1735801 $439.3 ZAHRBOCK CHAPEL MN 14 5
1736101 $3,245.5 SEYMOUR MEMORIAL FUNE TX 59 50
1736201 $6,431.1 THOMPSON-LARSON FUNER ND 59 50
1736301 $6,325.4 ROUTSONG FUNERAL HOME OH 59 50
1736401 $6,431.1 JONES & RICH, INC. ME 59 50
1736501 $1,286.2 VEIGA-ROBINSON MORTUAR CA 59 50
1736601 $2,786.8 RICHARDSON-PETERSON M CA 59 50
1736701 $2,816.8 CHAMBERS & GRUBBS FUNE KY 59 50
1737001 $1,715.0 PRYOR FUNERAL HOME MS 59 50
1737101 $7,385.7 ZELLER CHAPEL OF THE RO OR 60 51
1737201 $1,500.6 WHITEHURST-TERRY MORT CA 59 50
1737401 $6,431.1 FAULMANN-WALSH FUNERA MI 59 50
1737501 $5,642.7 KURTZ MEMORIAL CHAPEL, I IL 60 51
1737601 $2,816.8 PRUITT'S MORTUARY TX 59 50
1737701 $39,214.2 SUBWAY3 PA 60 52
1737901 $43,890.6 BUSHWACKER, INC. OR 48 39
1738501 $2,572.4 OWEN FUNERAL HOME, INC. GA 59 50
1738701 $2,743.9 BAKKER FUNERAL HOME TX 59 50
1739201 $1,525.1 STARR FUNERAL HOME TX 60 51
1739301 $1,525.1 STERNE FUNERAL HOME MO 60 51
1739401 $2,178.7 FLORAL HILLS FUNERAL HO MO 60 51
1739601 $2,832.3 MALLORY FUNERAL HOME, I OK 60 51
1739701 $7,167.8 MADDEN FUNERAL HOME, IN AR 60 51
1739801 $2,816.8 SHEEHAN FUNERAL HOME MA 59 50
1740001 $41,375.1 MRS. FIELDS COOKIE CO. GA 36 28
1740401 $60,230.1 IMMEDIATE CARE CENTER OR 48 39
1740801 $3,573.0 WHITE-EMERSON COMPANY CA 60 51
1740901 $1,500.6 GREEN ACRES MEMORIAL S CN 59 50
1741001 $2,786.8 HEITMYER FUNERAL HOME OH 59 50
1741101 $1,742.9 RIEMANN FUNERAL HOMES MS 60 51
1741201 $1,960.8 RYDER FUNERAL HOME MA 60 51
1741301 $1,307.2 D. W. NEWCOMER'S SONS MO 60 51
1741401 $2,862.8 H.L. YOUNG & COMPANY ME NH 60 51
1741501 $2,358.1 MARK B. SHAW CHAPEL CA 59 50
1741601 $2,832.3 HAMILTON'S FUNERAL HOM IA 60 51
1741701 $1,742.9 MCCAW FUNERAL SERVICE, CN 60 51
1741801 $3,385.6 WILLIAM SLATER & SONS, IN PA 60 51
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- -------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C>
1735201 119.52 Monthly 7261 Funeral Homes
1735301 195.20 Monthly 30501 7261 Funeral Homes
1735501 150.00 Monthly 88220 7261 Funeral Homes
1735801 75.00 Monthly 56256 7261 Funeral Homes
1736101 75.70 Monthly 76380 7261 Funeral Homes
1736201 150.00 Monthly 58701 7261 Funeral Homes
1736301 150.00 Monthly 45429 7261 Funeral Homes
1736401 150.00 Monthly 4101 7261 Funeral Homes
1736501 30.00 Monthly 90022 7261 Funeral Homes
1736601 65.00 Monthly 91762 7261 Funeral Homes
1736701 65.70 Monthly 41094 7261 Funeral Homes
1737001 40.00 Monthly 38916 7261 Funeral Homes
1737101 169.50 Monthly 97232 7261 Funeral Homes
1737201 35.00 Monthly 93960 7261 Funeral Homes
1737401 150.00 Monthly 48026 7261 Funeral Homes
1737501 129.50 Monthly 60441 7261 Funeral Homes
1737601 65.70 Monthly 77022 7261 Funeral Homes
1737701 899.96 Monthly 15703 5812 Funeral Homes
1737901 1,287.36 Monthly 97203 3714 Production Equipment,
Greenhouse,
1738501 60.00 Monthly 30120 7261 Funeral Homes
1738701 64.00 Monthly 76448 7261 Funeral Homes
1739201 35.00 Monthly 75948 7261 Funeral Homes
1739301 35.00 Monthly 63353 7261 Funeral Homes
1739401 50.00 Monthly 64133 7261 Funeral Homes
1739601 65.00 Monthly 74462 7261 Funeral Homes
1739701 164.50 Monthly 71822 7261 Funeral Homes
1739801 65.70 Monthly 2072 7261 Funeral Homes
1740001 1,630.00 Monthly 30327 5461 Funeral Homes
1740401 1,728.11 Monthly 97701 8011 Computers & Related Equipment
1740801 82.00 Monthly 90601 7261 Funeral Homes
1740901 35.00 Monthly 7261 Funeral Homes
1741001 65.00 Monthly 45831 7261 Funeral Homes
1741101 40.00 Monthly 39502 7261 Funeral Homes
1741201 45.00 Monthly 1703 7261 Funeral Homes
1741301 30.00 Monthly 64149 7261 Funeral Homes
1741401 65.70 Monthly 3235 7261 Funeral Homes
1741501 55.00 Monthly 92404 7261 Funeral Homes
1741601 65.00 Monthly 50309 7261 Funeral Homes
1741701 40.00 Monthly 7261 Funeral Homes
1741801 77.70 Monthly 15211 7261 Funeral Homes
</TABLE>
p. 12 of 21
<PAGE> 18
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1741901 $1,286.2 L.K. SHEETS FUNERAL HOM IN 59 50
1742101 $1,400.9 WILSON'S FUNERAL HOME, I MO 60 46
1742201 $3,445.2 JOHNSON FUNERAL HOME OK 60 50
1742301 $1,742.9 RALSTON-LIPPINCOTT-HASB NY 60 51
1742501 $55,089.7 HD VENTURES, INC. TX 60 52
1742801 $27,642.6 CENTRAL OREGON PAVERS, OR 36 28
1742901 $2,832.3 OWENS & BRUMLEY FUNER TX 60 51
1743001 $1,742.9 LIVINGSTON-BUTLER-VOLLA NE 60 51
1743101 $3,747.3 WARFORD-WALKER MORTU TX 60 51
1743301 $6,078.5 MOODY FUNERAL HOME, IN VA 60 51
1743501 $1,960.8 USERY-BROWN SERVICE FU AL 60 51
1743601 $6,078.5 FINCH & FINCH FUNERAL HO VA 60 51
1743901 $3,559.9 WACHOB-FORREST LAWN F FL 60 51
1744001 $6,078.5 RUSSELL COUNTY FUNERAL VA 60 51
1744201 $6,514.2 SPEAKS MEMORIAL CHAPEL MO 60 51
1744301 $1,525.1 BRACKETT FUNERAL HOME ME 60 51
1744401 $6,514.2 MCKNOWN FUNERAL HOME, NE 60 51
1744501 $2,818.0 NATIONAL MUSIC SERVICE WA 58 46
1744601 $6,732.1 MOODY FUNERAL HOME, IN NC 60 51
1744701 $6,514.2 NICHOLSON FUNERAL HOME NC 60 51
1744801 $6,078.5 DIAMOND HEAD MORTUARY HI 60 51
1744901 $6,078.5 KUKUI MORTUARY HI 60 51
1745001 $6,514.2 NUUANU MEMORIAL PARK M HI 60 51
1745101 $6,078.5 WINDWARD MORTUARY HI 60 51
1745201 $27,320.5 HELICOPTER TECHNOLOGY, FL 60 51
1745401 $39,764.1 SUBWAY6 NC 60 52
1745901 $1,742.9 WILCOX FUNERAL HOME MS 60 51
1746301 $2,832.3 VERMEULEN FUNERAL HOM MI 60 51
1746601 $1,307.2 GASS-HANEY FUNERAL HOM NE 60 51
1746701 $7,167.8 BROWN FUNERAL HOME, IN AR 60 51
1746801 $6,078.5 ALTMEYER FUNERAL HOME WV 60 51
1746901 $1,307.2 YOKLEY FUNERAL HOME, IN KY 60 51
1747001 $1,307.2 BERNARD P. SNYDER FUNE PA 60 51
1747101 $1,525.1 WESTBROOK FUNERAL HOM MS 60 51
1747201 $2,832.3 WILL & SCHWARZKOFF FUN MI 60 51
1747301 $1,500.6 NEAL-TARPLEY CHAPEL TN 59 50
1747401 $6,409.6 OSHEIM-CATRON FUNERAL SD 59 50
1747801 $144,752.6 CREATIVE CROISSANTS WI 48 40
1748601 $62,746.2 VAIL CONSTRUCTION OR 48 32
1748801 $3,908.5 PETERSON-BLICK FUNERAL PA 60 51
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1741901 30.00 Monthly 46723 7261 Funeral Homes
1742101 35.00 Monthly 63645 7261 Funeral Homes
1742201 81.70 Monthly 74056 7261 Funeral Homes
1742301 40.00 Monthly 10940 7261 Funeral Homes
1742501 1,264.30 Monthly 75172 5812 Funeral Homes
1742801 1,089.00 Monthly 97756 1611 Licensed Vehicles, Forklifts, Trailers
1742901 65.00 Monthly 76301 7261 Funeral Homes
1743001 40.00 Monthly 68901 7261 Funeral Homes
1743101 86.00 Monthly 79107 7261 Funeral Homes
1743301 139.50 Monthly 24171 7261 Funeral Homes
1743501 45.00 Monthly 35160 7261 Funeral Homes
1743601 139.50 Monthly 24517 7261 Funeral Homes
1743901 81.70 Monthly 324282314 7261 Funeral Homes
1744001 139.50 Monthly 24266 7261 Funeral Homes
1744201 149.50 Monthly 64051 7261 Funeral Homes
1744301 35.00 Monthly 4011 7261 Funeral Homes
1744401 149.50 Monthly 68601 7261 Funeral Homes
1744501 71.70 Monthly 99207 7261 Funeral Homes
1744601 154.50 Monthly 27030 7261 Funeral Homes
1744701 149.50 Monthly 28677 7261 Funeral Homes
1744801 139.50 Monthly 96816 7261 Funeral Homes
1744901 139.50 Monthly 96817 7261 Funeral Homes
1745001 149.50 Monthly 96817 7261 Funeral Homes
1745101 139.50 Monthly 96744 7261 Funeral Homes
1745201 627.00 Monthly 32431 7538 Licensed Vehicles, Forklifts, Trailers
1745401 912.58 Monthly 28031 5812 Funeral Homes
1745901 40.00 Monthly 39051 7261 Funeral Homes
1746301 65.00 Monthly 48170 7261 Funeral Homes
1746601 30.00 Monthly 68601 7261 Funeral Homes
1746701 164.50 Monthly 71601 7261 Funeral Homes
1746801 139.50 Monthly 26003 7261 Funeral Homes
1746901 30.00 Monthly 42167 7261 Funeral Homes
1747001 30.00 Monthly 15851 7261 Funeral Homes
1747101 35.00 Monthly 39339 7261 Funeral Homes
1747201 65.00 Monthly 48043 7261 Funeral Homes
1747301 35.00 Monthly 37040 7261 Funeral Homes
1747401 149.50 Monthly 57702 7261 Funeral Homes
1747801 4,153.21 Monthly 53704 5461 Funeral Homes
1748601 2,251.00 Varies 97838 1611 Licensed Vehicles, Forklifts, Trailers
1748801 89.70 Monthly 16365 7261 Funeral Homes
</TABLE>
p. 13 of 21
<PAGE> 19
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1748901 $2,832.3 BILLINGS FUNERAL HOME IN 60 51
1749001 $6,078.5 MILILANI MEMORIAL PARK & HI 60 51
1749101 $6,514.2 MILILANI MEMORIAL PARK & HI 60 51
1749201 $6,078.5 MILILANI DOWNTOWN MORT HI 60 51
1749301 $1,525.1 KOERPEL FUNERAL HOME WI 60 51
1749401 $6,514.2 WHITE & DAY FUNERAL CHA CA 60 51
1749601 $38,253.0 P. L. VANCE, LTD. IN 60 52
1749701 $91,493.1 HILL COUNTRY WATER WEL TX 48 40
1749801 $40,481.3 SUBWAY2 TN 60 52
1749901 $37,621.6 CAROLINA BEACH SUBWAY, NC 60 52
1750101 $43,639.2 PIPELINE VIDEO & CLEANIN WA 36 29
1750201 $2,832.3 KIRK & NICE, INC. PA 60 51
1750301 $7,167.8 OWENS & BRUMLEY FUNER TX 60 51
1750501 $2,988.3 MALECKI FUNERAL HOME, I NY 59 50
1750601 $2,816.8 MALECKI FUNERAL HOME, I NY 59 50
1750801 $5,980.9 JOHN QUINT & SONS FUNER OH 59 50
1751001 $36,005.8 BRECKNOCK BUILDERS PA 36 29
1756401 $38,675.2 J.W.P., INC. IL 60 53
1756501 $5,642.7 GARLAND FUNERAL HOME IL 58 51
1756601 $5,552.2 HAGER & CUNDIFF FUNERAL KY 57 50
1756701 $1,686.8 THE HOPSON MORTUARY CA 56 49
1757001 $4,649.3 JACKSON LYTLE & INGLING OH 44 37
1757101 $1,265.1 MADISON FUNERAL HOME TN 56 49
1757401 $2,723.9 OLMSTEAD FUNERAL HOME, AR 55 48
1757701 $2,723.9 PURATH-STRAND FUNERAL WI 55 48
1757801 $4,553.4 RICHARDSON-HORNE FUNE VA 58 51
1757901 $2,770.5 RICKS FUNERAL HOME TX 56 49
1758001 $5,642.7 ROBERSON FUNERAL HOME FL 58 51
1758101 $1,233.2 RODENBERGER FUNERAL H OH 19 12
1758201 $4,159.6 ROSEHAVEN CHAPEL & CEM GA 56 49
1761601 $2,213.4 SLETTEN-MCKEE-HANSON F WI 60 52
1761701 $3,351.1 SMITH & SONS FUNERAL HO IN 60 52
1761801 $10,718.4 MASTERS FUNERAL HOME, FL 58 50
1761901 $4,015.1 PORTER FUNERAL HOME TX 60 52
1762001 $1,328.0 JOHN P. ROWE FUNERAL HO MA 60 52
1762101 $1,992.1 KILGROE FUNERAL HOME AL 60 52
1762201 $2,656.1 SAUNDERS FUNERAL HOME, MA 60 52
1762301 $4,240.4 NICKERSON-BOURNE FUNE MA 60 52
1762401 $3,218.3 NICKERSON-BOURNE FUNE MA 60 52
1762501 $2,908.4 NICKERSON-BOURNE FUNE MA 60 52
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- ------- ------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
1748901 65.00 Monthly 46514 7261 Funeral Homes
1749001 139.50 Monthly 96797 7261 Funeral Homes
1749101 149.50 Monthly 96797 7261 Funeral Homes
1749201 139.50 Monthly 96813 7261 Funeral Homes
1749301 35.00 Monthly 54843 7261 Funeral Homes
1749401 149.50 Monthly 90254 7261 Funeral Homes
1749601 877.90 Monthly 46202 5812 Funeral Homes
1749701 2,569.48 Monthly 78608 1781 Licensed Vehicles, Forklifts, Trailers
1749801 929.04 Monthly 37804 5812 Funeral Homes
1749901 863.41 Monthly 28349 5812 Funeral Homes
1750101 1,665.44 Monthly 986659306 4959 Licensed Vehicles, Forklifts, Trailers
1750201 65.00 Monthly 19144 7261 Funeral Homes
1750301 164.50 Monthly 76307 7261 Funeral Homes
1750501 69.70 Monthly 13461 7261 Funeral Homes
1750601 65.70 Monthly 13476 7261 Funeral Homes
1750801 139.50 Monthly 43200 7261 Funeral Homes
1751001 1,374.12 Monthly 17517 1542 Production Equipment, Greenhouse,
1756401 873.66 Monthly 62906 5812 Funeral Homes
1756501 129.50 Monthly 61376 7261 Funeral Homes
1756601 129.50 Monthly 40356 7261 Funeral Homes
1756701 40.00 Monthly 93305 7261 Funeral Homes
1757001 139.50 Monthly 455031109 7261 Funeral Homes
1757101 30.00 Monthly 37115 7261 Funeral Homes
1757401 65.70 Monthly 72543 7261 Funeral Homes
1757701 65.70 Monthly 53402 7261 Funeral Homes
1757801 104.50 Monthly 24073 7261 Funeral Homes
1757901 65.70 Monthly 75860 7261 Funeral Homes
1758001 129.50 Monthly 33952 7261 Funeral Homes
1758101 99.50 Monthly 43534 7261 Funeral Homes
1758201 98.64 Monthly 30134 7261 Funeral Homes
1761601 50.00 Monthly 54601 7261 Funeral Homes
1761701 75.70 Monthly 46787 7261 Funeral Homes
1761801 250.00 Monthly 32177 7261 Funeral Homes
1761901 90.70 Monthly 76667 7261 Funeral Homes
1762001 30.00 Monthly 1752 7261 Funeral Homes
1762101 45.00 Monthly 35125 7261 Funeral Homes
1762201 60.00 Monthly 1851 7261 Funeral Homes
1762301 95.79 Monthly 2563 7261 Funeral Homes
1762401 72.70 Monthly 2532 7261 Funeral Homes
1762501 65.70 Monthly 2532 7261 Funeral Homes
</TABLE>
p. 14 of 21
<PAGE> 20
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ----------
<S> <C> <C> <C> <C> <C>
1762601 $4,287.4 OLTHOP FUNERAL HOME, IN NY 58 50
1762701 $3,268.0 BRAGDON-KELLEY-CAMPBE ME 59 51
1762801 $1,770.7 ROBERT W. GARDINIER FUN PA 60 52
1762901 $1,426.1 JOHNSON FUNERAL HOME TN 60 48
1763001 $1,549.4 KIMBRO FUNERAL HOME MS 60 52
1763101 $2,642.8 DUNKUM FUNERAL HOME VA 60 52
1763201 $6,431.1 COFFELT FUNERAL SERVICE ID 58 50
1763501 $1,742.9 LENTS FUNERAL HOME MI 59 51
1763601 $4,103.0 JERRY SPEARS FUNERAL H OH 59 51
1763701 $6,536.0 ROTHERMEL FUNERAL HOM PA 59 51
1763801 $6,536.0 REDMON FUNERAL HOME, I OH 59 51
1763901 $1,960.8 WALLIS-WILLBANKS FUNERA GA 59 51
1764201 $1,742.9 L. M. WILLIAM & SONS FUNE TX 59 51
1764301 $2,178.7 WILKINSON & WISEMAN FUN TN 59 51
1764501 $6,078.5 POPE FUNERAL HOME, INC. SC 59 51
1764901 $6,536.0 COEN-BEATY FUNERAL HOM IA 59 51
1765001 $6,536.0 PRICE-HELTON FUNERAL CH WA 59 51
1765201 $6,175.4 WISE FUNERAL SERVICE OH 60 52
1765401 $6,536.0 DONNELL-WIEGAND FUNERA IL 59 51
1765501 $6,431.1 RIPLINGER FUNERAL HOME, WA 58 50
1765601 $6,536.0 CROWN HILL FUNERAL HOM IN 59 51
1765701 $2,656.1 JORDAN FUNERAL HOME MS 60 52
1765801 $2,833.2 KAATZ FUNERAL HOME MI 60 52
1765901 $2,877.4 STEPHENVILLE FUNRAL HO TX 60 52
1766001 $6,175.4 HOOPER FUNERAL HOME FL 60 52
1766101 $6,536.0 VERMEULEN FUNERAL HOM MI 59 51
1766201 $6,536.0 VERMEULEN FUNERAL HOM MI 59 51
1766301 $1,770.7 WATSON-KING FUNERAL HO NC 60 52
1766401 $3,439.6 SHANNON-DONEGAN CHAPE CA 60 52
1766501 $3,439.6 BROWNING FUNERAL HOME MS 60 52
1766601 $6,175.4 MARTIN-ALTMEYER FUNERA OH 60 52
1766901 $10,365.1 ARIZONA RUFFNER WAKELI AZ 56 48
1767401 $5,552.2 THE WORLEY FUNERAL HOM OK 57 50
1770001 $40,659.3 SUBWAY SANDSICHES & SA CA 63 56
1770201 $62,313.0 T. V. SUBWAY, INC. FL 60 53
1770301 $8,853.6 MERCY FUNERAL SYSTEMS, TX 60 52
1770501 $2,877.4 KNIGHT FUNERAL HOME NJ 60 52
1770601 $3,174.0 MARTIN FUNERAL HOME, IN TX 60 52
1770701 $1,549.4 BALLARD FUNERAL HOME WY 60 52
1770901 $1,307.2 BROTHERS MORTUARY CA 59 51
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- -------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
1762601 100.00 Monthly 14904 7261 Funeral Homes
1762701 75.00 Monthly 4605 7261 Funeral Homes
1762801 40.00 Monthly 16323 7261 Funeral Homes
1762901 35.00 Monthly 38059 7261 Funeral Homes
1763001 35.00 Monthly 38646 7261 Funeral Homes
1763101 59.70 Monthly 23936 7261 Funeral Homes
1763201 150.00 Monthly 83864 7261 Funeral Homes
1763501 40.00 Monthly 48184 7261 Funeral Homes
1763601 95.70 Monthly 43204 7261 Funeral Homes
1763701 150.00 Monthly 17078 7261 Funeral Homes
1763801 150.00 Monthly 44224 7261 Funeral Homes
1763901 45.00 Monthly 30728 7261 Funeral Homes
1764201 40.00 Monthly 77701 7261 Funeral Homes
1764301 50.00 Monthly 37148 7261 Funeral Homes
1764501 139.50 Monthly 29180 7261 Funeral Homes
1764901 150.00 Monthly 50801 7261 Funeral Homes
1765001 150.00 Monthly 98001 7261 Funeral Homes
1765201 139.50 Monthly 44820 7261 Funeral Homes
1765401 150.00 Monthly 62246 7261 Funeral Homes
1765501 150.00 Monthly 99207 7261 Funeral Homes
1765601 150.00 Monthly 46208 7261 Funeral Homes
1765701 60.00 Monthly 39090 7261 Funeral Homes
1765801 64.00 Monthly 48097 7261 Funeral Homes
1765901 65.00 Monthly 76401 7261 Funeral Homes
1766001 139.50 Monthly 34450 7261 Funeral Homes
1766101 150.00 Monthly 48185 7261 Funeral Homes
1766201 150.00 Monthly 48170 7261 Funeral Homes
1766301 40.00 Monthly 28380 7261 Funeral Homes
1766401 77.70 Monthly 92666 7261 Funeral Homes
1766501 77.70 Monthly 38841 7261 Funeral Homes
1766601 139.50 Monthly 43920 7261 Funeral Homes
1766901 250.00 Monthly 86303 7261 Funeral Homes
1767401 129.50 Monthly 74344 7261 Funeral Homes
1770001 877.72 Monthly 91911 5812 Funeral Homes
1770201 1,407.63 Monthly 33715 5812 Funeral Homes
1770301 200.00 Monthly 77701 7261 Funeral Homes
1770501 65.00 Monthly 8009 7261 Funeral Homes
1770601 71.30 Monthly 76031 7261 Funeral Homes
1770701 35.00 Monthly 84214 7261 Funeral Homes
1770901 30.00 Monthly 90803 7261 Funeral Homes
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1771001 $1,992.1 MANNING-HEFFERN FUNERA RI 60 52
1771101 $1,549.4 PREDDY FUNERAL HOME VA 60 52
1771201 $6,175.4 BARKER FUNERAL HOME IA 60 52
1771301 $2,434.7 MACKENZIE FUNERAL HOME CN 60 52
1771401 $7,060.8 MASTERS FUNERAL HOME FL 60 52
1771501 $38,238.6 SUBWAY11 CA 60 53
1771601 $71,971.9 KILGORE, INC. SC 60 53
1771801 $11,067.0 HOOPER FUNERAL HOME FL 60 52
1771901 $6,536.0 NICKERSON-BOURNE FUNE MA 59 51
1772001 $6,111.9 SUNSET LAWN CHAPEL OF T CA 55 47
1772101 $3,268.0 WHITE & DAY FUNERAL CHA CA 59 51
1772201 $1,328.0 FARMER FUNERAL HOME, IN TX 60 52
1772301 $1,525.1 HARRISON-PYLES FUNERAL OH 59 51
1772401 $3,215.5 HUNTT FUNERAL HOME, INC. MD 58 50
1772501 $3,705.2 HURD-HENDRICKS FUNERAL IL 60 52
1772601 $6,536.0 BURG FUNERAL HOME, INC. PA 59 51
1772701 $2,213.4 PAYTON MORTUARY CA 60 52
1772801 $13,082.0 PARADISE FUNERAL HOME, I TX 59 51
1774101 $3,385.6 BEAUREGARD-VERNON LA 60 52
1774201 $2,862.8 BEAUREGARD-VERNON LA 60 52
1774901 $30,825.8 T.I. OF HAWAII, INC. HI 36 29
1775201 $66,132.3 SUBWAY9 FL 60 54
1775202 $58,176.6 SUBWAY9 FL 60 54
1775401 $65,580.3 MASTER MACHINE CORPOR CA 60 54
1775501 $37,040.0 TWO PATS, INC. NC 60 54
1775801 $38,415.7 SUBWAY12 CA 60 54
1776101 $38,920.6 CAGLE SERVICES, INC. GA 60 54
1778201 $49,788.2 DIAMOND LAKE IMPROVEME OR 60 53
1794402 $43,519.1 FINCH RENTAL, INC. OH 36 36
1802903 $47,575.6 FORTUNE OIL COMPANY, IN WA 60 57
1832702 $15,047.5 THE SPROUT HOUSE NE 36 34
1836003 $154,018.0 H. O. SPORTS, INC. WA 60 60
1844601 $232.7 VASE FUNERAL HOME WY 11 7
1844701 $422.3 WAITT FUNERAL HOME NJ 14 10
1844801 $232.7 WHITE FUNERAL HOME IA 11 7
1845001 $271.5 WINTER PARK FUNERAL HO FL 11 7
1846501 $41,064.7 KALIDA TRUCK EQUIPMENT, OH 60 55
1846602 $42,591.2 JOS. A. BANK CLOTHIERS, IN MD 48 47
1847902 $5,287.8 PUGLIA ENGINEERING, INC. WA 36 33
1848002 $70,395.6 CHECK X CHANGE WA 60 59
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1771001 45.00 Monthly 2860 7261 Funeral Homes
1771101 35.00 Monthly 22942 7261 Funeral Homes
1771201 139.50 Monthly 51002 7261 Funeral Homes
1771301 55.00 Monthly 7261 Funeral Homes
1771401 159.50 Monthly 32177 7261 Funeral Homes
1771501 850.54 Monthly 92024 5812 Funeral Homes
1771601 1,625.82 Monthly 29483 5812 Funeral Homes
1771801 250.00 Monthly 34450 7261 Funeral Homes
1771901 150.00 Monthly 2532 7261 Funeral Homes
1772001 150.00 Monthly 95838 7261 Funeral Homes
1772101 75.00 Monthly 90277 7261 Funeral Homes
1772201 30.00 Monthly 77656 7261 Funeral Homes
1772301 35.00 Monthly 45694 7261 Funeral Homes
1772401 75.00 Monthly 20604 7261 Funeral Homes
1772501 83.70 Monthly 61448 7261 Funeral Homes
1772601 150.00 Monthly 17356 7261 Funeral Homes
1772701 50.00 Monthly 93030 7261 Funeral Homes
1772801 300.23 Monthly 77088 7261 Funeral Homes
1774101 77.70 Monthly 70634 7261 Funeral Homes
1774201 65.70 Monthly 70634 7261 Funeral Homes
1774901 1,141.00 Monthly 96813 6541 Computers & Related Equipment
1775201 1,470.98 Monthly 32407 5812 Funeral Homes
1775202 1,294.02 Monthly 32407 5812 Funeral Homes
1775401 1,458.70 Monthly 919501098 3728 Computers & Related Equipment
1775501 823.88 Monthly 28605 5812 Funeral Homes
1775801 854.48 Monthly 94553 5812 Funeral Homes
1776101 865.71 Monthly 30209 5812 Funeral Homes
1778201 50.00 Varies 97731 7011 Telephones, Radios, Cash Registers,
1794402 1,957.49 Varies 45404 7359 Production Equipment, Greenhouse,
1802903 998.00 Monthly 98558 5411 Machine Tools, Waste Oil Systems,
1832702 498.00 Monthly 68866 181 Production Equipment, Greenhouse,
1836003 3,143.24 Monthly 98052 3949 Production Equipment, Greenhouse,
1844601 30.00 Monthly 82935 7261 Funeral Homes
1844701 40.00 Monthly 7751 7261 Funeral Homes
1844801 30.00 Monthly 50644 7261 Funeral Homes
1845001 35.00 Monthly 32792 7261 Funeral Homes
1846501 886.47 Monthly 45853 5012 Computers & Related Equipment
1846602 1,064.06 Monthly 21074 5611 Computers & Related Equipment
1847902 175.00 Monthly 98421 3731 Printing Equipment, Copiers, Fax, Re
1848002 1,456.33 Monthly 98001 6099 Computers & Related Equipment
</TABLE>
p. 16 of 21
<PAGE> 22
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1849702 $41,582.9 ANNIVERSARY SUBS, INC. NY 60 58
1852707 $59,203.9 CASCADE-OLYMPIC LEASIN WA 59 58
1853802 $299,581.4 DVM, L.L.C. WA 60 57
1857102 $34,815.4 CASCADE PHILLIPS CO. OR 36 34
1857804 $148,001.7 THE CAJUN HOUSE, INC. AZ 60 58
1858101 $24,154.5 MRS. FIELDS COOKIES4 CA 25 21
1858201 $46,801.9 DIXIE LEE SUBWAY TN 60 57
1858301 $1,880.0 PENZIEN & STEELE FUNERA MI 60 56
1858401 $7,620.3 JONES FUNERAL HOME OK 60 56
1858501 $7,026.5 COLES-STROMMER-MONRO OR 60 56
1858601 $12,982.7 ALAMOGORDO FUNERAL HO NM 60 56
1858801 $11,749.9 LAWTON-RITTER-GRAY OK 60 56
1858901 $11,749.9 MUSIC FUNERAL HOME GA 60 56
1859001 $72,774.4 A.M.L. MANAGEMENT, INC. AZ 60 57
1859101 $26,962.5 TOLLAND SUBWAY 16347 CT 51 48
1859201 $13,889.3 WINDSOR LOCKS RT 75 SUB CT 27 24
1859301 $89,834.7 SUBWAY 18656, INC. FL 63 60
1859501 $7,113.1 WESCRAFT, INC. WA 24 20
1859601 $88,712.0 SUBWAY OF POCAHONTAS, AR 60 57
1859701 $12,283.7 THE TRANE COMPANY NY 36 33
1859801 $14,859.6 BOB'S BACKHOE SERVICE WA 36 33
1859901 $32,496.5 UTEC OF LAFAYETTE, INC. LA 60 56
1860001 $63,201.9 EMMARY, INC. IL 60 57
1860201 $87,329.2 THE LIMERICK GROUP, INC. MI 60 57
1860301 $10,811.4 C.H.D.S., INC. CA 36 33
1860401 $43,540.1 ROTO-ROOTER SEWER & DR NJ 60 57
1861501 $43,068.3 ECDC ENVIROMENTAL, LC TX 24 21
1861801 $42,179.3 J & J SUBS, INC. MD 60 58
1861802 $31,634.5 J & J SUBS, INC. MD 60 58
1862302 $7,434.0 3 D'S SUBWAY, INC. MS 18 18
1862303 $20,866.9 3 D'S SUBWAY, INC. MS 59 59
1862401 $7,841.9 SCHROEDER FUNERAL HOM IA 60 57
1862501 $2,145.2 ARNER FUNERAL CHAPEL, I WV 60 57
1862601 $3,132.0 HAASE-DERRICK-LOCKWOO WI 60 57
1862701 $9,032.7 E. J. FIELDING FUNERAL HO LA 60 57
1862801 $3,098.6 R. J. FIELDING FUNERAL HO LA 60 57
1862901 $7,050.0 ALAMOGORDO FUNERAL HO NM 59 56
1863001 $10,845.2 KIMBRELL-STERN FUNERAL GA 60 57
1863101 $7,365.2 MASON-GELDER FUNERAL H PA 60 57
1863201 $7,050.0 HARRISON ROSS MORTUARI CA 59 56
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1849702 872.29 Monthly 14534 5812 Funeral Homes
1852707 1,383.27 Varies 98507 7359 Funeral Homes
1853802 6,374.11 Monthly 99207 3659 Funeral Homes
1857102 1,123.00 Monthly 97015 4959 Waste Management Service, Sanitati
1857804 3,104.65 Monthly 85251 6411 Telephones, Radios, Cash Registers,
1858101 1,239.46 Monthly 90041 5461 Funeral Homes
1858201 995.79 Monthly 37772 5812 Funeral Homes
1858301 40.00 Monthly 48708 7261 Funeral Homes
1858401 164.50 Monthly 74578 7261 Funeral Homes
1858501 149.50 Monthly 97814 7261 Funeral Homes
1858601 276.23 Monthly 88310 7261 Funeral Homes
1858801 250.00 Monthly 73501 7261 Funeral Homes
1858901 250.00 Monthly 31502 7261 Funeral Homes
1859001 1,548.40 Monthly 85003 5812 Funeral Homes
1859101 661.72 Monthly 6084 5812 Funeral Homes
1859201 629.92 Monthly 6095 5812 Funeral Homes
1859301 1,833.37 Monthly 33176 5812 Funeral Homes
1859501 365.00 Monthly 98424 7532 Licensed Vehicles, Forklifts, Trailers
1859601 1,887.50 Monthly 72455 5812 Funeral Homes
1859701 406.53 Monthly 14607 7623 Telephones, Radios, Cash Registers,
1859801 505.01 Monthly 98236 1794 Licensed Vehicles, Forklifts, Trailers
1859901 691.42 Monthly 70506 5013 Computers & Related Equipment
1860001 1,344.73 Monthly 62254 5812 Funeral Homes
1860201 1,858.08 Monthly 48021 5812 Funeral Homes
1860301 367.43 Monthly 92069 1781 Licensed Vehicles, Forklifts, Trailers
1860401 926.39 Monthly 7724 1711 Licensed Vehicles, Forklifts, Trailers
1861501 2,210.00 Monthly 78550 4953 Production Equipment, Greenhouse,
1861801 884.80 Monthly 20603 5812 Funeral Homes
1861802 663.60 Monthly 20603 5812 Funeral Homes
1862302 440.58 Monthly 38664 5812 Grocery/Restaurant Equipment, Flori
1862303 431.69 Monthly 38664 5812 Grocery/Restaurant Equipment, Flori
1862401 164.50 Monthly 500360116 7261 Funeral Homes
1862501 45.00 Monthly 26034 7261 Funeral Homes
1862601 65.70 Monthly 53121 7261 Funeral Homes
1862701 189.48 Monthly 70433 7261 Funeral Homes
1862801 65.00 Monthly 70433 7261 Funeral Homes
1862901 150.00 Monthly 88310 7261 Funeral Homes
1863001 227.50 Monthly 31707 7261 Funeral Homes
1863101 154.50 Monthly 15644 7261 Funeral Homes
1863201 150.00 Monthly 90001 7261 Funeral Homes
</TABLE>
p. 17 of 21
<PAGE> 23
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1863301 $7,050.0 HARRISON ROSS MORTUARI CA 59 56
1863401 $7,365.2 CROLEY FUNERAL HOME, IN TX 60 57
1863501 $3,023.5 BRITTON-WALLACE FUNERA MA 52 49
1863601 $7,126.8 BAGGERLEY-GREENLAWN OK 60 57
1863801 $57,245.8 HELENA'S FLOWERS TN 48 12
1864501 $8,712.8 SUBWAY OF ABBEVILLE AL 60 58
1864601 $48,274.0 DADSTONE, INC. OH 60 58
1864901 $42,130.1 J. TUCKER PUMP SERVICE, TX 36 34
1865101 $7,841.9 HUNTSVILLE FUNERAL HOM TX 60 57
1865201 $3,575.3 ARNOLD & MULLEN FUNERA NE 60 57
1865301 $2,115.0 MORRISON FUNERAL HOME TX 59 56
1865401 $6,650.1 BANFIELD FUNERAL HOME FL 60 57
1865601 $2,383.5 OSTRANDER'S FUNERAL HO CN 60 57
1865701 $7,150.6 BRACKETT FUNERAL HOME ME 60 57
1865801 $6,650.1 SAN FERNANDO MORTUARY CA 60 57
1865901 $3,098.6 COOPER FUNERAL HOME, IN OK 60 57
1866001 $59,334.6 GATE 4 SUBWAY KY 60 58
1866101 $40,374.0 DELMI CORPORATION NY 60 58
1866201 $27,982.2 MODERNE CAFES, INC. TX 63 61
1866302 $155,958.3 PACIFIC COAST COAL COMP WA 48 46
1866401 $11,334.0 BROOKHAMPTON BACKHOE NY 36 34
1866601 $8,835.6 WILSON SANITATION KY 36 34
1866701 $11,870.6 LLOYD'S BODY SHOP INC. AL 36 34
1866801 $15,931.4 NORTH AMERICAN DRILLING CA 24 22
1866901 $1,787.6 PALMER FUNERAL HOME NE 79 76
1867001 $3,909.0 COLEMAN MORTUARY CA 60 57
1867101 $8,795.3 BUTHERUS-MASER & LOVE NE 60 57
1867301 $9,534.2 SCHUETTE-DANIELS, INC. WI 60 57
1867501 $6,556.5 COSTANTINO FUNERAL HOM NJ 59 56
1867601 $7,250.6 SANDOZ CHAPEL OF THE PI NE 60 58
1867701 $73,676.7 CONNECTICUT HEROES, INC CT 63 62
1867901 $30,714.9 G. BROWN, INC. TX 63 61
1868001 $7,296.8 VAN'S BODY & FRAME, INC. KS 36 34
1868101 $68,488.8 SUBWAY SANDWICHES & SA NY 63 62
1868301 $42,423.4 WILLAPA FOOD CONCESSIO WA 60 58
1868501 $7,227.0 PHELPS-SHERIDAN FUNERA KY 60 58
1868701 $7,126.8 J. M. DAY FUNERAL HOME, I TX 60 57
1868901 $32,076.9 CANDITO AND ASSOCIATES, FL 60 59
1869001 $4,020.5 CREPE DE PARIS, INC. WA 36 34
1869901 $19,555.7 COMFORT WORLD, INC. WA 42 42
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1863301 150.00 Monthly 90001 7261 Funeral Homes
1863401 154.50 Monthly 75647 7261 Funeral Homes
1863501 71.70 Monthly 1501 7261 Funeral Homes
1863601 149.50 Monthly 73131 7261 Funeral Homes
1863801 4,987.00 Monthly 37355 181 Production Equipment, Greenhouse,
1864501 182.77 Monthly 36310 5812 Funeral Homes
1864601 1,012.65 Monthly 44035 5812 Funeral Homes
1864901 1,394.30 Monthly 78028 1799 Licensed Vehicles. Forklifts, Trailers
1865101 164.50 Monthly 77342 7261 Funeral Homes
1865201 75.00 Monthly 69120 7261 Funeral Homes
1865301 45.00 Monthly 76450 7261 Funeral Homes
1865401 139.50 Monthly 32708 7261 Funeral Homes
1865601 50.00 Monthly 7261 Funeral Homes
1865701 150.00 Monthly 4011 7261 Funeral Homes
1865801 139.50 Monthly 91340 7261 Funeral Homes
1865901 65.00 Monthly 74873 7261 Funeral Homes
1866001 1,244.67 Monthly 42262 5812 Funeral Homes
1866101 835.25 Monthly 10458 5812 Funeral Homes
1866201 257.57 Varies 75208 5812 Funeral Homes
1866302 3,968.09 Monthly 98010 1221 Licensed Vehicles, Forklifts, Trailers
1866401 375.10 Monthly 11946 1794 Licensed Vehicles, Forklifts, Trailers
1866601 285.00 Monthly 40505 4959 Waste Management Service, Sanitati
1866701 392.86 Monthly 36310 7532 Licensed Vehicles, Forklifts, Trailers
1866801 751.43 Monthly 92268 1781 Licensed Vehicles, Forklifts, Trailers
1866901 30.00 Monthly 68638 7261 Funeral Homes
1867001 82.00 Monthly 90631 7261 Funeral Homes
1867101 184.50 Monthly 68510 7261 Funeral Homes
1867301 200.00 Monthly 53105 7261 Funeral Homes
1867501 139.50 Monthly 8009 7261 Funeral Homes
1867601 150.00 Monthly 69201 7261 Funeral Homes
1867701 676.63 Varies 6410 5812 Funeral Homes
1867901 282.08 Varies 77445 5812 Funeral Homes
1868001 241.49 Monthly 67701 7538 Machine Tools, Waste Oil Systems,
1868101 630.43 Varies 13323 5812 Funeral Homes
1868301 889.92 Monthly 98577 5411 Funeral Homes
1868501 149.51 Monthly 41224 7261 Funeral Homes
1868701 149.50 Monthly 77864 7261 Funeral Homes
1868901 663.60 Monthly 33908 5812 Funeral Homes
1869001 133.06 Monthly 98101 5812 Funeral Homes
1869901 537.88 Monthly 99218 5712 Office Furniture & Fixtures, Signs, Se
</TABLE>
p. 18 of 21
<PAGE> 24
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1870101 $7,081.6 ALL TEMP MECHANICAL WA 24 22
1870301 $39,499.6 SUBWAY8 MA 60 59
1870601 $106,721.5 WEST ROME SUBWAY NY 63 62
1870701 $29,189.8 WOOD RIVER VALLEY MARK ID 36 34
1870801 $27,939.2 SHELL MERCANTILE OR 60 59
1870901 $26,025.4 LARIAT DRILLING & CONSUL TX 24 22
1871201 $7,325.5 DORRELL FUNERAL HOME MI 60 59
1871301 $14,512.4 PINE REST FUNERAL HOME, AL 60 58
1871401 $6,835.5 CHARBONNEAU FUNERAL H MA 60 59
1871501 $7,851.9 CALDWELL & COWAN FUNER GA 60 56
1871601 $6,743.1 McCARTHY FUNERAL HOME, GA 60 58
1871701 $6,743.1 WALLER-THORNTON FUNER TX 60 58
1871801 $7,250.6 OSCAR JOHNSON MORTUAR TX 60 58
1871901 $8,434.9 CUTLER FUNERAL HOME IA 60 58
1872001 $25,687.4 FRANCO'S HIDDEN HARBOR WA 48 46
1872801 $32,330.7 SAHOTA MART, INC. WA 18 17
1872901 $7,518.5 HOLM TOWN NURSERY, INC. AK 24 6
1873101 $11,289.7 FORKS AUTO BODY & PAINT WA 36 35
1873201 $29,047.5 JOSE EBER SALONS, INC. CA 36 35
1873202 $55,031.6 JOSE EBER SALONS, INC. CA 36 35
1873203 $74,717.7 JOSE EBER SALONS, INC. CA 36 35
1873301 $5,291.4 CHC, INC. WA 18 16
1873401 $36,759.8 NO. 1168531 ONTARIO, INC. CN 60 58
1873501 $20,735.8 CASCADE PALLET CO. INC. WA 36 35
1873601 $38,167.9 SUBWAY OF HEBRON #18710 CT 60 59
1873701 $74,846.0 1771 CORP. OR 60 59
1873801 $2,900.3 COOPER FUNERAL HOME OK 60 58
1873901 $7,570.5 DAVID C. BROWN FUNERAL MI 60 59
1874101 $34,745.7 3 CRABS, INC. WA 60 59
1874201 $6,835.5 YOUNGMAN-MCCULLOUGH F MI 60 59
1874301 $6,835.5 STEBBINS-MCCULLOUGH FU MI 60 59
1874401 $3,675.0 HUBER-BENSON FUNERAL H OK 60 60
1874501 $6,835.5 COLLINS & JOHNSON FUNER TX 60 60
1875001 $30,808.1 POLLOCK WELL DRILLING, IN FL 42 41
1875101 $63,854.7 SUB-STANTIAL CORP. VA 63 62
1875701 $16,296.1 HENRY J. BRIST WA 36 1
1875901 $16,493.1 MADISON CONTRACTING IN WA 36 34
1876001 $4,369.3 PALMER SEWER SERVICE IN 24 24
1876201 $6,743.1 SASSER-MORGAN-MCCLELL FL 60 59
1876301 $6,835.5 BEVIS COLONIAL FUNERAL FL 60 59
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1870101 348.03 Monthly 98372 5075 Licensed Vehicles, Forklifts, Trailers
1870301 817.16 Monthly 2760 5812 Funeral Homes
1870601 980.11 Varies 13440 5812 Funeral Homes
1870701 966.04 Monthly 83313 5411 Printing Equipment, Copiers, Fax, Re
1870801 578.00 Monthly 97885 5411 Funeral Homes
1870901 1,279.04 Monthly 79512 1781 Licensed Vehicles, Forklifts, Trailers
1871201 149.50 Monthly 49431 7261 Funeral Homes
1871301 300.23 Monthly 36536 7261 Funeral Homes
1871401 139.50 Monthly 1082 7261 Funeral Homes
1871501 169.50 Monthly 30209 7261 Funeral Homes
1871601 139.50 Monthly 31833 7261 Funeral Homes
1871701 139.50 Monthly 75862 7261 Funeral Homes
1871801 150.00 Monthly 77022 7261 Funeral Homes
1871901 174.50 Monthly 51503 7261 Funeral Homes
1872001 641.75 Monthly 98109 5812 Telephones, Radios, Cash Registers,
1872801 2,022.00 Monthly 98499 5411 Funeral Homes
1872901 1,369.00 Varies 99707 181 Production Equipment, Greenhouse,
1873101 364.16 Monthly 98331 7532 Licensed Vehicles, Forklifts, Trailers
1873201 936.95 Monthly 92626 7231 Office Furniture & Fixtures, Signs, Se
1873202 1,775.09 Monthly 92626 7231 Office Furniture & Fixtures, Signs, Se
1873203 2,410.08 Monthly 92626 7231 Office Furniture & Fixtures, Signs, Se
1873301 350.43 Monthly 98115 1521 Licensed Vehicles, Forklifts, Trailers
1873401 760.48 Monthly 5812 Funeral Homes
1873501 668.85 Monthly 99301 5093 Licensed Vehicles, Forklifts, Trailers
1873601 789.61 Monthly 6248 5812 Funeral Homes
1873701 1,548.40 Monthly 97355 5812 Funeral Homes
1873801 60.00 Monthly 74354 7261 Funeral Homes
1873901 154.50 Monthly 48111 7261 Funeral Homes
1874101 709.10 Monthly 98382 5411 Telephones, Radios, Cash Registers,
1874201 139.50 Monthly 48850 7261 Funeral Homes
1874301 139.50 Monthly 48829 7261 Funeral Homes
1874401 75.00 Monthly 73036 7261 Funeral Homes
1874501 139.50 Monthly 77305 7261 Funeral Homes
1875001 847.38 Monthly 32404 1781 Licensed Vehicles, Forklifts, Trailers
1875101 586.43 Varies 23511 5812 Funeral Homes
1875701 9,150.00 Varies 98926 191 Machine Tools, Waste Oil Systems,
1875901 532.00 Monthly 98033 1521 Production Equipment, Greenhouse,
1876001 198.16 Monthly 47201 4959 Waste Management Service, Sanitati
1876201 139.50 Monthly 323353119 7261 Funeral Homes
1876301 139.50 Monthly 32303 7261 Funeral Homes
</TABLE>
p. 19 of 21
<PAGE> 25
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1876401 $6,835.5 ADAMS FUNERAL HOME FL 60 59
1876501 $36,782.7 SUBWAY4 NY 60 60
1876601 $135,713.0 MRS. FIELDS COOKIES2 FL 36 36
1876701 $47,886.5 PROSOURCE OF ALBANY NY 60 60
1876801 $3,807.3 EMANUEL-PATTERSON FUN SD 60 59
1876901 $12,347.9 MCKOON FUNERAL HOME, I GA 60 59
1877001 $14,711.2 MCKOON FUNERAL HOME, I GA 60 59
1877101 $6,835.5 BIGGS FUNERAL HOME FL 60 59
1877201 $57,845.0 APOSTOLIC ASSEMBLLY OF IL 36 36
1877301 $45,831.4 AUBURN LAWN & GARDEN, I WA 60 59
1877401 $4,681.3 BUDDY G'S MT 36 35
1877501 $68,625.9 LENBROOK SQUARE FOUND GA 60 59
1877601 $11,487.3 T & N QUALITY BUILDERS WA 36 36
1877701 $155,697.5 AERO PLASTICS, INC. WA 60 59
1878001 $27,381.3 HATCHETT CREEK FARMS FL 48 47
1878101 $82,320.1 MPS INVESTMENTS, INC. LA 60 60
1878301 $43,355.0 QUAD DEVELOPMENT GROU PA 60 60
1878401 $14,000.8 GARY FAULL ESCROW SERV WA 48 47
1878701 $7,403.2 MERANTE PLUMBING INC. PA 36 35
1879201 $5,900.1 CUSTOM POOLS & SPAS OF TN 18 17
1879401 $75,008.1 ZIMMERMANN & JANSEN, IN TX 37 35
1879501 $18,726.7 NC SUBS, INC. NC 60 60
1879601 $6,835.5 YATES-GOODING FUNERAL FL 60 59
1879701 $6,835.5 HELM FUNERAL HOME FL 60 59
1880301 $4,835.0 STANLEY G. MEISSINGER KS 36 6
1880401 $125,187.5 SUBWAY 1292, INC. FL 60 60
1881001 $41,082.9 INDIAN WATERS, INC. CA 60 60
1881101 $64,616.0 VERDE RIVER, INC. AZ 60 60
1881201 $225,603.9 EBENEZER SEVENTH DAY NY 84 83
1881301 $47,587.7 SUBWAY14 FL 63 63
1881401 $19,509.2 RAYMOND CONCRETE WA 48 48
1881501 $68,284.1 THE HEAD GROUP, INC. AL 60 60
1881601 $99,831.1 SUBWAY-TCBY CA 60 60
1881701 $25,784.5 SUBARS SUBWAYS, INC. FL 49 49
1881801 $6,743.1 A.L. JINWRIGHT FUNERAL S NC 59 59
1881901 $3,185.0 BRAINARD FUNERAL HOME WI 60 60
1882001 $7,815.5 WHEELER FUNERAL HOME, I GA 60 60
1882101 $14,711.2 WHEELER FUNERAL HOME, I GA 60 60
1882201 $3,185.0 BURCHAM FUNERAL HOME OH 60 60
1882301 $11,316.5 HALL FUNERAL HOME, INC. KY 60 60
</TABLE>
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1876401 139.50 Monthly 32424 7261 Funeral Homes
1876501 750.67 Monthly 10011 5812 Funeral Homes
1876601 4,269.99 Monthly 33157 5461 Funeral Homes
1876701 977.28 Monthly 14623 5713 Computers & Related Equipment
1876801 77.70 Monthly 57252 7261 Funeral Homes
1876901 252.00 Monthly 30263 7261 Funeral Homes
1877001 300.23 Monthly 30263 7261 Funeral Homes
1877101 139.50 Monthly 32055 7261 Funeral Homes
1877201 1,820.00 Monthly 60643 8661 Office Furniture & Fixtures, Signs, Se
1877301 948.15 Monthly 98001 5261 Funeral Homes
1877401 151.00 Monthly 59821 5411 Computers & Related Equipment
1877501 1,419.72 Monthly 30319 8059 Licensed Vehicles, Forklifts, Trailers
1877601 361.43 Monthly 98198 1541 Licensed Vehicles, Forklifts, Trailers
1877701 3,221.04 Monthly 98055 3599 Production Equipment, Greenhouse,
1878001 684.07 Monthly 32641 191 Production Equipment, Greenhouse,
1878101 1,680.01 Monthly 70601 5812 Funeral Homes
1878301 884.80 Monthly 15537 5812 Grocery/Restaurant Equipment, Flori
1878401 343.61 Monthly 98055 6162 Computers & Related Equipment
1878701 232.93 Monthly 15219 1521 Waste Management Service, Sanitati
1879201 369.00 Monthly 37324 4959 Waste Management Service, Sanitati
1879401 2,360.01 Monthly 77347 3492 Machine Tools, Waste Oil Systems,
1879501 382.18 Monthly 27705 5812 Grocery/Restaurant Equipment, Flori
1879601 139.50 Monthly 32693 7261 Funeral Homes
1879701 139.50 Monthly 32043 7261 Funeral Homes
1880301 897.26 Varies 67741 191 Machine Tools, Waste Oil Systems,
1880401 2,554.86 Monthly 33411 5812 Grocery/Restaurant Equipment, Flori
1881001 838.43 Monthly 92201 7032 Licensed Vehicles, Forklifts, Trailers
1881101 1,318.70 Monthly 86322 7032 Licensed Vehicles, Forklifts, Trailers
1881201 3,547.30 Monthly 11520 8661 Grocery/Restaurant Equipment, Flori
1881301 436.05 Varies 32927 5812 Grocery/Restaurant Equipment, Flori
1881401 478.80 Monthly 98584 1771 Licensed Vehicles, Forklifts, Trailers
1881501 1,393.56 Monthly 36618 5812 Grocery/Restaurant Equipment, Flori
1881601 2,037.38 Monthly 93239 5812 Grocery/Restaurant Equipment, Flori
1881701 621.91 Monthly 34232 5812 Grocery/Restaurant Equipment, Flori
1881801 139.50 Monthly 28269 7261 Funeral Homes
1881901 65.00 Monthly 54403 7261 Funeral Homes
1882001 159.50 Monthly 30209 7261 Funeral Homes
1882101 300.23 Monthly 30210 7261 Funeral Homes
1882201 65.00 Monthly 45324 7261 Funeral Homes
1882301 230.95 Monthly 41649 7261 Funeral Homes
</TABLE>
p. 20 of 21
<PAGE> 26
<TABLE>
<CAPTION>
Lease Implicit Original Remaining
Contract Principal Contract Contract
Number Balance Customer State Term Term
- -------- --------- -------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
1882401 $6,835.5 J. SCOTT EARLY FUNERAL H CN 60 60
1882501 $5,826.3 DRINKWINE MORTUARY CO 58 58
1882601 $15,779.1 DRINKWINE MORTUARY CO 58 58
1882701 $6,835.5 FREEMAN-HARRIS FUNERAL GA 60 60
1882801 $7,325.5 LONG BEACH COLONIAL MO CA 60 60
1883701 $35,334.7 1 SUBWAY L.L.C. LA 60 60
1883801 $23,034.7 KING COPPER, INC. MI 36 35
1883901 $58,140.7 HAWAII AIR AMBULANCE INC HI 60 60
1884201 $132,774.7 SUBWAY10 FL 60 60
1884601 $209,312.8 WESTCOAST PARAMOUNT H WA 60 60
6100504 $1,186.2 CT COMPU-TECH WA 60 2
15637012 $3,529.6 BRIGGS-GAMEL-WILCOX FU TX 60 49
</TABLE>
Total Number of Contracts: 808
Aggregate IPB: $12,483,137.36
<TABLE>
<CAPTION>
Lease
Contract Scheduled Payment Equipment
Number Payment Frequency Zip Code SIC Code Type
- -------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1882401 139.50 Monthly 7261 Funeral Homes
1882501 122.22 Monthly 80104 7261 Funeral Homes
1882601 331.00 Monthly 80104 7261 Funeral Homes
1882701 139.50 Monthly 30153 7261 Funeral Homes
1882801 149.50 Monthly 90802 7261 Funeral Homes
1883701 721.12 Monthly 71203 5812 Grocery/Restaurant Equipment, Flori
1883801 724.75 Monthly 49918 7011 Grocery/Restaurant Equipment, Flori
1883901 1,186.55 Monthly 96819 4522 Machine Tools, Waste Oil Systems,
1884201 2,709.70 Monthly 32351 5812 Grocery/Restaurant Equipment, Flori
1884601 4,271.71 Monthly 98101 7011 Telephones, Radios, Cash Registers,
6100504 599.25 Monthly 98405 7379 Computers & Related Equipment
15637012 83.70 Monthly 76550 7261 Funeral Homes
</TABLE>
p. 21 of 21
<PAGE> 1
EXHIBIT 10.7
EXECUTION COPY
MBIA INSURANCE CORPORATION,
as Insurer
T & W FINANCIAL CORPORATION,
as Company
T & W FINANCIAL CORPORATION,
as Servicer
T & W FUNDING COMPANY I, L.L.C.,
as Transferor
K & P FINANCE CORP. I
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Back-up Servicer
INSURANCE AGREEMENT
T & W LEASE-BACKED TRUST
8.275% LEASE-BACKED CERTIFICATES
Dated as of February 1, 1997
<PAGE> 2
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall not
be deemed to be a part of this Insurance Agreement. All capitalized terms used
in this Agreement and not otherwise defined shall have the meanings set forth in
Article I of this Agreement.)
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
Page
----
<S> <C> <C>
Section 1.01. General Definitions....................................................... 1
Section 1.02. Generic Terms............................................................. 4
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Company, the Transferor and
the Servicer............................................................ 4
Section 2.02. Affirmative Covenants of the Company, the Transferor and the
Servicer ................................................................. 6
Section 2.03. Negative Covenants of the Company, the Servicer and the
Transferor.............................................................. 11
ARTICLE III
THE CERTIFICATE INSURANCE POLICY; SECURITY
Section 3.01. Agreement To Issue the Certificate Insurance Policy. ..................... 11
Section 3.02. Conditions Precedent to Issuance of the Certificate Insurance
Policy.................................................................. 11
Section 3.03. Premium................................................................... 13
Section 3.04. Indemnification........................................................... 13
Section 3.05. Payment Procedure......................................................... 15
Section 3.06. Subrogation............................................................... 15
Section 3.07. Reimbursement and Additional Payment Obligation........................... 15
Section 3.08. Reimbursement of Insurer Following Redemption
at the Option of the Transferor......................................... 16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE IV
FURTHER AGREEMENTS
Page
----
<S> <C> <C>
Section 4.01. Effective Date; Term of Agreement......................................... 17
Section 4.02. Waiver of Rights; Further Assurances and Corrective Instruments........... 17
Section 4.03. Obligations Absolute...................................................... 17
Section 4.04. Assignments; Reinsurance; Third-Party Rights.............................. 17
Section 4.05. Liability of Insurer...................................................... 18
Section 4.06. Control by Insurer........................................................ 18
Section 4.07. Representations, Warranties and Covenants of the Trustee and
Back-up Servicer........................................................ 19
Section 4.08. Covenants of K & P Finance Corp. I........................................ 20
Section 4.09. Trustee, Back-up Servicer, Transferor, Company and Servicer To
Join in Enforcement Action.............................................. 21
ARTICLE V
DEFAULTS, REMEDIES
Section 5.01. Defaults.................................................................. 21
Section 5.02. Remedies; No Remedy Exclusive............................................. 22
Section 5.03. Waivers................................................................... 23
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Changes and Modifications..................................... 23
Section 6.02. Notices................................................................... 24
Section 6.03. Severability.............................................................. 25
Section 6.04. Governing Law............................................................. 25
Section 6.05. Consent to Jurisdiction and Venue, Etc.................................... 25
Section 6.06. Consent of Insurer ....................................................... 26
Section 6.07. Counterparts.............................................................. 26
Section 6.08. Recitals.................................................................. 26
Section 6.09. Headings.................................................................. 26
Section 6.10. Parties Not To Institute Insolvency Proceedings........................... 27
Section 6.11. Trial by Jury Waived...................................................... 27
Section 6.12. Entire Agreement.......................................................... 27
TESTIMONIUM............................................................................... 25
SIGNATURES................................................................................ 25
</TABLE>
ii
<PAGE> 4
INSURANCE AGREEMENT
THIS INSURANCE AGREEMENT is made as of February 1, 1997 by and among MBIA
INSURANCE CORPORATION (the "Insurer"), T & W FINANCIAL CORPORATION, in its
capacity as Company (the "Company"), T & W FINANCIAL CORPORATION, in its
capacity as Servicer (the "Servicer"), T & W FUNDING COMPANY I, L.L.C., in its
capacity as Transferor (the "Transferor"), K & P FINANCE CORP. I and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, in its capacities as Trustee (the
"Trustee") and Back-up Servicer (the "Back-up Servicer") under the Trust and
Security Agreement (as defined below).
RECITALS:
1. The Trustee is authenticating up to $100,000,000 aggregate principal
amount of 8.275% Lease-Backed Certificates (the "Certificates"), provided that
the terms and conditions of this Agreement and the other Transaction Documents
have been satisfied, pursuant to a trust and security agreement (the "Trust and
Security Agreement"), as more specifically defined below, The Certificates will
be secured by the Trust Property pledged pursuant to the Trust and Security
Agreement.
2. The Company and the Transferor have requested that the Insurer issue a
Certificate Insurance Policy to guarantee payment of Insured Payments (as
defined in the Certificate Insurance Policy), upon such terms and conditions as
were mutually agreed upon by the parties and subject to the terms and conditions
of the Certificate Insurance Policy.
3. The parties hereto desire to specify the conditions precedent to the
issuance of the Certificate Insurance Policy by the Insurer, the indemnity and
reimbursement to be provided by the Company and the Transferor in respect of
amounts paid by the Insurer under the Certificate Insurance Policy, the security
to be provided to the Insurer by the Company as an inducement for the Insurer to
deliver the Certificate Insurance Policy and to provide for certain other
matters.
NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained, the Insurer, the Company, the Transferor, the Servicer, the
Back-up Servicer, K & P Finance Corp. I and the Trustee agree as follows
ARTICLE I
DEFINITIONS
Section 1.0 1. GENERAL DEFINITIONS. The terms defined in this Article I
shall have the meanings provided herein for all purposes of this Agreement,
unless the context clearly requires otherwise, in both singular and plural form,
as appropriate. Capitalized terms used in this Agreement but not otherwise
defined herein will have the meanings ascribed to such terms in the Trust and
Security Agreement.
"Adverse Selection Procedure" means any method of selecting or identifying
Lease Contracts eligible to be included in the Trust Property for inclusion
therein, other than as outlined in the
<PAGE> 5
Commitment, that materially and adversely affects the representative nature of
the sample of Lease Contracts so selected and decreases the probability that the
Trustee will receive an uninterrupted flow of payments of principal and interest
under the Lease Contracts.
"Agreement" means this Insurance Agreement dated as of February 1, 1997,
including any amendments or any supplements hereto as herein permitted.
"Bond Insurer Premium" means the amount set forth in the first paragraph
of Paragraph 1(a) of the Commitment.
"Bond Insurer Premium Rate" means the rate set forth in the second
paragraph of Paragraph 1(a) of the Commitment.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which the Insurer or banking institutions in New York City or in the city in
which the Corporate Trust Office of the Trustee is located, are authorized or
obligated by law or executive order to close.
"Certificate Insurance Policy" means the financial guaranty insurance
policy issued with respect to the Certificates, and any endorsement thereto
issued by the Insurer to the Trustee.
"Closing Date" means February 7, 1997.
"Commitment" means the Commitment Letter dated as of February 7, 1997
between the Company and the Insurer.
"Contribution Agreement" means the Contribution Agreement dated as of
February 1, 1997 among the Transferor, the Contributors and the Company, as the
same may be amended or supplemented from time to time in accordance with the
terms thereof.
"Contributor" means each of T & W Funding Company V, L.L.C. and T & W
Funding Company VI, L.L.C.
"Event of Default" means any event of default set forth in Section 5.01
hereof.
"Initial Premium" means the amount set forth in the first paragraph of
Paragraph 1(a) of the Commitment.
"Insurer" means MBIA Insurance Corporation.
"Insurer Default" means the occurrence and continuance of any failure of
the Insurer to make payments under the Certificate Insurance Policy in
accordance with its terms.
"Insurer Insolvency" means (i) the entry of a decree or order of a court
or agency having jurisdiction in respect of the Insurer in an involuntary case
under any present or future federal or state bankruptcy, insolvency or similar
law or appointing a conservator or receiver or liquidator or rehabilitator or
other similar official of the Insurer or of any substantial part of its
property, or the
2
<PAGE> 6
entering of an order for the winding up or liquidation of the affairs of the
Insurer and the continuance of any such decree or order undischarged or
unstayed and in force for a period of 90 consecutive days; (ii) the Insurer
shall consent to the appointment of a conservator or receiver or liquidator or
other similar official in any insolvency, readjustment of debt, marshalling of
assets and liabilities, rehabilitation or similar proceedings of or relating to
the Insurer or of or relating to all or substantially all of its property, or
(iii) the Insurer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of or otherwise
voluntarily commence a case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations.
"Late Payment Rate" means the rate of interest equal to the "Prime" rate,
as set forth in The Wall Street Journal, plus 2%. The Late Payment Rate shall be
computed on the basis of a year of 365 days calculating the actual number of
days elapsed. In no event shall the Late Payment Rate exceed the maximum rate
permissible under law applicable to this Agreement limiting interest rates.
"Material Adverse Change" means, in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person or (ii) the ability of such Person to perform its
obligations under any of the Transaction Documents.
"Person" shall mean 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.
"Reported Company's Financial Statements" shall have the meaning set forth
in the Trust and Security Agreement.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc., its successors and their assigns, and, if such corporation
shall for any reason no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized rating
agency designated by the Company with the approval of the Insurer.
"State" means the State of New York.
"Term of the Agreement" shall be determined as provided in Section 4.01.
"Transaction" means the transactions contemplated by the Transaction
Documents.
"Transaction Documents" means this Agreement, the Assignment and
Assumption Agreements, the Trust and Security Agreement, the Servicing
Agreement, the Contribution Agreement, the Certificate Purchase Agreement dated
as of February 7, 1997 among the Company, the Transferor and Centre Square
Funding Corporation, the Certificates and the Certificate Insurance Policy.
"Trust and Security Agreement" means the Trust and Security Agreement
dated as of February 1, 1997 among the Servicer, the Transferor, the Trustee and
the Back-up Servicer, including any amendments and supplements thereto as
therein and herein permitted.
3
<PAGE> 7
Section 1.02. GENERIC TERMS. All words used herein shall be construed to
be of such gender or number as the circumstances require. This "Agreement" shall
mean this Agreement as a whole and as the same may, from time to time hereafter,
be amended, supplemented or modified. The words "herein," "hereby," "hereof,"
"hereto," "hereinabove" and "hereinbelow," and words of similar import, refer to
this Agreement as a whole and not to any particular paragraph, clause or other
subdivision hereof, unless otherwise specifically noted.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE
TRANSFEROR AND THE SERVICER. As of the Closing Date, the Company, the Transferor
and the Servicer represent and warrant to, and covenant with, the other parties
hereto (in each case only as to matters concerning itself) as follows:
(a) Representations and Warranties of Company, the Transferor and
Servicer Contained in Other Transaction Documents. All of the
representations and warranties made by the Company, the Transferor or the
Servicer, as the case may be, in any of the Transaction Documents are
incorporated as if fully set forth herein for the benefit of the Insurer
and are true and correct.
(b) Due Qualification. Each of the Company, the Transferor and the
Servicer have obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") required to be
obtained by the Company, the Transferor and the Servicer which failure to
obtain would render any portion of the Transaction Documents unenforceable
by the Company, the Transferor, the Servicer or any other party to the
Transaction Documents, as the case may be, and would have a material
adverse effect on the Insurer or the Certificateholders.
(c) Pending Litigation or Other Proceeding. There is no pending
action, proceeding or investigation before any court, governmental or
administrative agency or arbitrator against or affecting the Company, the
Transferor or the Servicer or, to the Company's, the Transferor's or the
Servicer's knowledge, any threatened action or proceeding before any of
the foregoing, which, if decided adversely to the Company, the Transferor
or the Servicer, would materially and adversely affect the ability of the
Company, the Transferor or the Servicer to perform their respective
obligations under the Transaction Documents or would have a materially
adverse effect on the Insurer or the Certificateholders.
(d) Valid and Binding Agreement. The Transaction Documents to which
the Company, the Transferor or the Servicer, respectively, is a party
constitute, and when executed (if not previously) will constitute, the
legal, valid and binding agreements of the Company, the Transferor and the
Servicer, respectively, enforceable against the Company, the Transferor
and the Servicer in accordance with their respective terms, except as the
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or limiting creditors' rights
generally or general equitable principles, as such relate to the
4
<PAGE> 8
Company, the Transferor or the Servicer. The Company, the Transferor and
the Servicer hereby agree and covenant that each will not at any time in
the future deny that the Transaction Documents to which the Company, the
Transferor or the Servicer, respectively, is a party constitute the valid,
legal and binding agreements of the Company, the Transferor and the
Servicer, respectively, except to the extent that the Company, the
Transferor or the Servicer is compelled to do so by law or regulation.
(e) Financial Statements. The Reported Company's Financial
Statements, copies of which have been furnished to the Insurer, (i) are,
as of the dates and for the periods referred to therein, complete and
correct in all material respects, (ii) present fairly the financial
condition and results of operations of the companies reported therein as
of the dates and for the periods indicated and (iii) have been prepared in
accordance with generally accepted accounting principles consistently
applied, except as noted therein and subject to year-end adjustments with
respect to interim statements. Since the date of the most recent Reported
Company's Financial Statements, there has been no Material Adverse Change
in such condition or operations.
(f) Compliance With Law, Regulations, Etc. None of the Company, the
Transferor or the Servicer has notice or any reason to believe that any
practice, procedure or policy employed by the Company, the Transferor or
the Servicer in the conduct of its business violates any law, regulation,
judgment or agreement applicable to the Company, the Transferor or the
Servicer which, if enforced, would have a material adverse effect on the
ability of the Servicer, the Company or the Transferor, as the case may
be, to perform its respective obligations under the Transaction Documents.
None of the Transferor, the Company and the Servicer is in breach of or in
default under any applicable law or administrative regulation of the State
of Washington or Delaware or any department, division, agency or
instrumentality thereof or of the United States or any applicable Judgment
or decree or any loan agreement, note, resolution, certificate, agreement
or other instrument to which the Company, the Transferor or the Servicer,
as the case may be, is a party or is otherwise subject which, if enforced,
would have a material adverse effect on the ability of the Servicer, the
Company or the Transferor, as the case may be, to perform its respective
obligations under the Transaction Documents.
(g) Delivery of Information. The Company alone represents and
warrants that none of the Transaction Documents nor any other information
furnished to the Insurer by or on behalf of the Company contain any
statement of a material fact by the Company which was untrue or misleading
in any material respect when made. Since the furnishing of such
information, there has been no change nor any development or event
involving a prospective change which would render any of the Transaction
Documents or other information furnished to the Insurer untrue or
misleading in a material respect.
(h) Securities Laws Compliance. The Company, the Servicer and the
Transferor represent and warrant that neither the offer nor the sale of
the Certificates has been or will be in violation of the Securities Act of
1933, and none of the Company, the Transferor or the
5
<PAGE> 9
Servicer is required to be registered as an "investment company" under the
Investment Company Act of 1940, as amended.
(i) Federal Reserve Board Regulations. No part of the proceeds of
the Certificates will be used by the Company or the Transferor to purchase
or carry any "margin stock" within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System.
(j) Transferor Activity. From the date of its formation until the
date of this Agreement, the Transferor has not conducted any business or
trade, has not entered into any contracts, written or oral, has not had
any employees, has no liabilities or creditors, and no liens or
encumbrances have existed or exist with respect to the Transferor or its
assets.
Section 2.02. Affirmative Covenants of the Company, the Transferor and the
Servicer. The Company, the Transferor and the Servicer hereby covenant and agree
that during the term of this Agreement:
(a) Compliance With Agreements. The Company, the Transferor and the
Servicer shall comply in all material respects with the terms and
conditions of the Transaction Documents to which each, respectively, is a
party and, unless the Insurer shall otherwise consent, none of the
Company, the Transferor or the Servicer shall agree to any waiver,
amendment to or modification of the terms of any of the Transaction
Documents to which each, respectively, is a party.
(b) Corporate Existence. The Company, the Transferor and the
Servicer shall maintain their respective existences and continue to be
duly organized, duly qualified and duly authorized.
(c) The Company To Provide Financial Statements; Accountants'
Reports; Other information. The Company and the Servicer shall keep or
cause to be kept in reasonable detail books and records of account of the
Company's or the Servicer's books and records relating to its obligations
assumed under the Transaction Documents, in accordance with its operating
rules and procedures. The Company and the Servicer shall each furnish or
cause to be furnished to the insurer:
(i) Financial Statements. All reports required to be furnished
under Section 4.02(a) of the Servicing Agreement.
(ii) Initial and Monthly Reports. On or before the Closing
Date, the Company will provide the Insurer with the initial Lease
Schedule for the Certificates. Thereafter, not later than 12:00 noon
New York City time on each Determination Date, the Servicer shall
deliver to the Insurer the report required by Section 4.01 of the
Servicing Agreement setting forth, among other things, (A) the
outstanding Aggregate Implicit Principal Balance of all Lease
Contracts, (B) the Required Collateralization Amount and (C) the
Outstanding Principal Balance of the Certificates.
6
<PAGE> 10
(iii) Other Reports and Information. The Company shall also
furnish, with reasonable promptness, such other financial data,
financial reports relating to the Company prepared by third parties
and other data relating to the Company which are commonly prepared
and can be provided without undue effort, as the Insurer may
reasonably request. Unless an Event of Default, a Trigger Event or a
Funding Period Trigger Event has occurred, costs associated with
providing such information shall, if requested by the Company, be
paid by the Insurer.
(iv) Computer Diskette. Beginning in June 1997, the Servicer
will deliver to the Insurer, at its request, on a quarterly basis, a
computer diskette containing a quarterly summary of the information
provided to the Insurer pursuant to clause (ii) of this subsection
2.02(c) and also containing information similar to the information
provided in the Lease Schedule.
(d) The Transferor Member Meetings. The Transferor shall have annual
meetings of its members and shall prepare income and franchise tax returns
as appropriate. The Transferor shall deliver to the Insurer copies of the
minutes of such meetings no later than April 30 of each year and such tax
returns promptly upon filing but in no event later than August 31 of each
year, beginning in 1997.
(e) Certificate of Compliance. The Servicer shall deliver to the
Insurer concurrently with the delivery of the financial statements
required pursuant to paragraph (c) above the reports to the Trustee and
other statements required to be delivered under Sections 4.02, 4.03 and
4.05 of the Servicing Agreement.
(f) Access to Records: Discussions With Officers and Accountants.
The Company, the Transferor and the Servicer shall, upon the request of
the Insurer, permit the Insurer, or its authorized agent, at reasonable
times and upon reasonable notice:
(i) to inspect such books and records of the Company, the
Transferor or the Servicer, as the case may be, as may relate to the
Certificates, the Lease Contracts, the obligations of the Company,
the Transferor or the Servicer, as the case may be, under the
Transaction Documents and the transactions consummated in connection
herewith;
(ii) to discuss the affairs, finances and accounts of the
Company, the Transferor or the Servicer as such relate to the
performance by it of its obligations under the Transaction Documents
with an appropriate officer of the Company, the Transferor or the
Servicer, as the case may be; and
(iii) to discuss the affairs, finances and accounts of the
Company, the Transferor or the Servicer as such relate to the
performance by it of its obligations under the Transaction Documents
with the Company's, the Transferor's or the Servicer's independent
public accountants, as the case may be, provided that an appropriate
officer of the Company, the Transferor or the Servicer, as the case
may be,
7
<PAGE> 11
shall have the right to be present during such discussions and,
provided further, that, unless an Event of Default, a Trigger Event
or a Funding Period Trigger Event has occurred, the Insurer shall
pay any fees of such accountants associated with such discussions.
Such inspections and discussions shall be conducted during normal business
hours and shall not unreasonably disrupt the business of the Company, the
Transferor or the Servicer. The books and records of the Company will be
maintained at the address of the Company designated herein for receipt of
notices, unless the Company shall otherwise advise the parties hereto in
writing, the books and records of the Transferor will be maintained at the
address of the Transferor designated herein for receipt of notices, unless the
Transferor shall otherwise advise the parties hereto in writing, and the books
and records of the Servicer will be maintained at the address of the Servicer
designated herein for receipt of notices, unless the Servicer shall otherwise
advise the parties hereto in writing.
The Insurer shall keep confidential any matter of which it becomes aware
through such inspections or discussions (unless readily available from public
sources), except as may be otherwise required by regulation, law or court order
or requested by appropriate governmental authorities or as necessary to preserve
its rights or security under or to enforce any of the provisions of the
Transaction Documents, provided that the foregoing shall not limit the right of
the Insurer to make such information available to its regulators, securities
rating agencies, reinsurers, credit and liquidity providers, counsel and
accountants.
(g) Inform Insurer of Material Events. Each of the Company, the
Transferor and the Servicer shall promptly inform the Insurer and the
Trustee in writing of the following:
(i) any default or any fact or event which results, or which
with notice or the passage of time, or both, would result in an
Event of Default, Funding Period Trigger Event, Trigger Event or
Servicer Event of Default under any Transaction Document or would
constitute a material breach of a representation, warranty or
covenant by it under any Transaction Document;
(ii) the submission of any claim or the initiation of any
legal process, litigation or administrative or Judicial
investigation against it in any federal, state or local court or
before any governmental body or agency, or before any arbitration
board, or any such proceedings threatened by any governmental
agency, which, if adversely determined, would have a material
adverse effect upon its ability to perform its obligations under any
Transaction Document;
(iii) the submission of any claim or the initiation of any
legal process, litigation or administrative or judicial
investigation in any federal, state or local court or before any
arbitration board, or any such proceeding threatened by any
governmental agency, which, if adversely determined, would have a
material adverse effect on the Trust Property;
8
<PAGE> 12
(iv) the commencement of any proceedings under any applicable
bankruptcy, reorganization, liquidation, insolvency or other similar
law now or hereafter in effect or of any proceeding in which a
receiver, liquidator, trustee or other similar official shall have
been, or may be, appointed or requested; and
(v) the receipt of notice from any agency or governmental body
having authority over the conduct of its business that it is to
cease and desist, or to undertake any practice, program, procedure
or policy employed by it in the conduct of the business of any of
them, and such cessation or undertaking will materially adversely
affect its ability to perform its obligations under the Transaction
Documents.
(h) Further Assurances. The parties hereto agree to reasonably
cooperate with S&P and Moody's in connection with any review which may be
undertaken by S&P and Moody's after the date hereof and to provide all
information reasonably requested by S&P or Moody's.
(i) Redemption of Certificates. The Transferor shall, on or before
the fifteenth day preceding the date on which any party exercises its
right to cause the redemption of all Certificates pursuant to Section
10.01 of the Trust and Security Agreement, deliver written notice to the
Insurer of such election containing the information required to be
delivered to the Certificateholders pursuant to Section 10.03 of the Trust
and Security Agreement.
(j) Servicing of Lease Contracts. The Servicer shall perform such
actions with respect to the Lease Contracts as are provided in Articles
III and IV of the Servicing Agreement. The parties hereto, with the
exception of the Trustee and the Back-up Servicer, will provide the
Insurer with written notice of any change or amendment to any Transaction
Document as currently in effect and agree not to make any change or
amendment to any Transaction Document without the prior written consent of
the Insurer.
(k) Third-Party Rights. Subject to the prior rights of the
Certificateholders, the Company agrees that the Insurer shall have all of
the rights of a third-party beneficiary of, and pursuant to, the
Company's agreements under the Contribution Agreement, and the Servicer
and Transferor agree that the Insurer shall have all of the rights of a
third-party beneficiary of, and pursuant to, the Servicer's and the
Transferor's agreements under the Trust and Security Agreement and the
Servicing Agreement.
(l) Maintenance of Trust Property. On or before each April 15, so
long as any of the Certificates are outstanding, the Servicer shall
furnish to the Insurer and the Trustee an officer's certificate either
stating that such action has been taken with respect to the recording,
filing, rerecording and refiling of any financing statements and
continuation statements as is necessary to maintain the interest of the
Trustee created by the Trust and Security Agreement with respect to the
Trust Property and reciting the details of such action or stating that no
such action is necessary to maintain such interests. 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 Property
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until the date such next officer's certificate is due. The Servicer will
use its best efforts to cause any necessary recordings or filings to be
made with respect to the Trust Property.
(m) Servicer's Indemnity. Notwithstanding anything in
subsection 3.07(a) hereof, the Servicer shall pay to the Insurer an
amount equal to any amount paid by the Insurer because of the Servicer's
failure to deposit into the Collection Account any amount required to be
so deposited by it pursuant to the Trust and Security Agreement or the
Servicing Agreement, together with interest on any and all amounts
remaining unreimbursed (to the extent permitted by law, if in respect to
any unreimbursed amounts representing interest) from the date such
amounts became due until paid in full (after as well as before judgment)
at a rate of interest equal to the Late Payment Rate.
(n) Maintenance of Licenses. The Servicer, the Company and the
Transferor, respectively, or any successors thereof shall maintain all
licenses, permits, charters and registrations which are material to the
conduct of its business.
(o) Closing Documents. The Servicer, the Company and the
Transferor shall provide or cause to be provided to the Insurer an
executed original of each document executed in connection with the
Transaction with 30 days after the Closing Date.
(p) Preference Payments. With respect to any Preference Amount
(as defined in the Certificate Insurance Policy), the Servicer shall
provide to the Insurer upon the request of the Insurer:
(i) a certified copy of the final nonappealable order
of a court having competent jurisdiction ordering the recovery
by a trustee in bankruptcy as voidable preference amounts
included in previous distributions under Section 12.02(d) of the
Trust and Security Agreement to any Holder pursuant to the
United States Bankruptcy Code, 11 U.S.C. Sections 101 et seq.,
as amended (the "Bankruptcy Code");
(ii) an opinion of counsel satisfactory to the Insurer,
and upon which the Insurer shall be entitled to rely, stating
that such order is final and is not subject to appeal;
(iii) an assignment in such form as reasonably required
by the Insurer, irrevocably assigning to the Insurer all rights
and claims of the Servicer, the Trustee and any Holder relating
to or arising under the Lease Contract against the debtor which
made such preference payment or otherwise with respect to such
preference amount; and
(iv) appropriate instruments to effect (when executed
by the affected party) the appointment of the Insurer as agent
for the Trustee and any Holder in any legal proceeding relating
to such preference payment being in a form satisfactory to the
Insurer.
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Section 2.03. Negative Covenants of the Company, the Servicer and the
Transferor. The Company, the Servicer and the Transferor agree and covenant with
the Insurer that at all times during the Term of the Agreement:
(a) Adverse Selection Procedure. The Company and the Transferor will
not use any Adverse Selection Procedure in selecting the Lease Contracts
to be pledged to the Trustee from the outstanding Lease Contracts that
qualify under the Trust and Security Agreement for inclusion in the Trust
Property.
(b) Impairment of Rights. The Company, the Servicer and the
Transferor each agree and covenant with the Insurer that at all times
during the Term of the Agreement the Company, the Servicer and the
Transferor shall not take any action, or decline to take any action if
reasonably requested by the Insurer, if such action or failure to take
action will interfere with the enforcement of any rights under any of the
Transaction Documents.
(c) Limited Liability Company Agreement. The Transferor shall not
amend its limited liability company agreement without the Insurer's prior
written consent.
(d) Lease Contracts: Charge-off Policy. Except as otherwise
permitted in the Servicing Agreement, the Servicer, the Company and the
Transferor shall not alter or amend any Lease Contract, their respective
collection policies or their respective charge-off policies in a manner
that materially adversely affects the Insurer unless the Insurer shall
have previously given its prior written consent.
ARTICLE III
THE CERTIFICATE INSURANCE POLICY; SECURITY
Section 3.01. AGREEMENT TO ISSUE THE CERTIFICATE INSURANCE POLICY. The
Insurer agrees, subject to the conditions set forth in Section 3.02 hereof, to
issue the Certificate Insurance Policy on the Closing Date.
Section 3.02. CONDITIONS PRECEDENT TO ISSUANCE OF THE CERTIFICATE
INSURANCE POLICY. The Company and the Transferor shall have complied with the
terms and satisfied the conditions precedent set forth below.
(i) Payment of the premium in accordance with Section 3.03 hereof;
(ii) Payment of or satisfactory arrangements for payment by the
Company or the Transferor of (a) rating agency fees of S&P and Moody's;
and (b) the fees and expenses incurred by the Insurer in connection with
the issuance of the Certificate Insurance Policy and the offer and sale of
the Certificates, including fees and expenses of counsel to the Insurer
and accountants for the Insurer, all in accordance with the terms of the
Commitment. The fees for any other rating agency shall be paid by the
party requesting such other agency's rating, unless such other agency is a
substitute for S&P or Moody's in the event that S&P or Moody's is no
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longer rating securities, in which case the cost for such agency shall be
paid by the Company or the Transferor,
(iii) Receipt by the Insurer of a fully executed copy of the
Transaction Documents;
(iv) Receipt by the Insurer of certified copies of the resolutions
of the board of directors of the Company authorizing the execution and
delivery and performance of the Transaction Documents and the other
matters contemplated thereby, and of all other documents evidencing any
other action of the Company necessary to enter into the Transaction
Documents, all in form and substance acceptable to the Insurer and its
counsel,
(v) Receipt by the Insurer of certified copies of the resolutions of
the board of directors of the Transferor authorizing the execution and
delivery and performance of the Transaction Documents and the other
matters contemplated thereby, and of all other documents evidencing any
other action of the Transferor necessary to enter into the Transaction
Documents, all in form and substance acceptable to the Insurer and its
counsel;
(vi) Receipt by the Insurer of favorable opinions of counsel,
including counsel to the Company, the Transferor, the Trustee and
transaction counsel, addressed to the Insurer in form and substance
reasonably acceptable to the Insurer and its counsel;
(vii) Receipt by the Insurer of true and correct copies of any
governmental approvals necessary for the transactions contemplated by the
Transaction Documents;
(viii) The Insurer shall have received a certificate of an
authorized officer of the Company certifying the name and true signatures
of the officers of the Company executing the Transaction Documents;
(ix) The Insurer shall have received a certificate of an authorized
officer of the Transferor certifying the name and true signatures of the
officers of the Transferor executing the Transaction Documents;
(x) The Insurer shall have received a certificate of the Company to
the effect that (i) the Reported Company's Financial Statements which have
been furnished to the Insurer are, as of the date thereof, complete and
correct in all material respects; present fairly the financial condition
of the Company, as of the date thereof, and have been prepared in
accordance with generally accepted accounting principles consistently
applied (except as noted therein and subject to year-end adjustments for
interim statements) and (ii) there has been no material adverse change in
such conditions or operations;
(xi) The Insurer shall have received copies of any agreements
relating to the placement of the Certificates and specifically be entitled
to rely on such agreements;
(xii) The Insurer shall have received copies of each of the
documents, and specifically be entitled to rely on the documents, required
to be delivered to the Trustee pursuant to Section 4.01 of the Trust and
Security Agreement, except that the Insurer shall not
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receive copies of the original executed counterparts of each Lease
Contract or the related Lease Contract File;
(xiii) Delivery of such other documents, customary closing
certificates, instruments, approvals or opinions as are reasonably
requested by the Insurer;
(xiv) Compliance with all other terms, conditions and requirements
of the Commitment;
(xv) The Insurer and its counsel shall have determined that all the
Lease Contracts, documents, certificates and opinions to be delivered in
connection with the Certificates conform to the terms of the Trust and
Security Agreement, the Commitment and this Agreement; and
(xvi) Each of Moody's and S&P shall have informed the Insurer that
the risk to the Insurer in insuring the Certificates is of at least
investment-grade quality.
Issuance of the Certificate Insurance Policy will be conclusive evidence
of satisfaction or waiver of any of the conditions set forth in this
Section 3.02.
Section 3.03. PREMIUM. In consideration of the issuance by the Insurer of
the Certificate Insurance Policy, the Transferor shall pay to the Insurer on the
Closing Date the Initial Premium. The Bond Insurer Premium shall be payable in
accordance with Section 12.02(d)(iv) of the Trust and Security Agreement
commencing on the applicable dates set forth in the Commitment. The Initial
Premium and the Bond Insurer Premium shall be nonrefundable without regard to
whether the Insurer makes any payment under the Certificate Insurance Policy or
any other circumstances relating to the Certificates or provision being made for
payment of the Certificates prior to maturity.
Section 3.04. INDEMNIFICATION. (a) In addition to any and all rights of
indemnification or any other rights of the Insurer pursuant hereto or under law
or equity, the Company, the Sevicer and the Transferor agree to pay, and to
protect, indemnify and save harmless, the Insurer and its officers, directors,
shareholders, employees, agents, including each person, if any, who controls the
Insurer within the meaning of either Section 15 of the Securities Act of 1933,
as amended, or Section 20 of the Securities and Exchange Act of 1934, as
amended, from and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or reasonable
expenses (including, without limitation, reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of investigations) or
obligations whatsoever (herein collectively referred to as "Liabilities") of any
nature arising out of or relating to the transactions contemplated by the
Transaction Documents by reason of
(i) any act or omission of the Company, the Servicer or the
Transferor in connection with the offering, issuance, sale or delivery of
the Certificates other than by reason of false or misleading information
provided by the Insurer in writing in connection with such offering;
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(ii) the misfeasance or malfeasance of, or negligence or theft
committed by, any director, officer, employee or agent of the Company, the
Servicer or the Transferor;
(iii) the violation by the Company, the Servicer or the Transferor
of any federal or state securities, banking or antitrust laws, rules or
regulations in connection with the issuance, offer and sale of the
Certificates or the transactions contemplated by the Transaction
Documents;
(iv) the violation by the Company, the Servicer or the Transferor of
any federal or state laws, rules or regulations relating to the maximum
amount of interest permitted to be received on account of the loan of
money or with respect to the Lease Contracts;
(v) the breach by the Company, the Servicer or the Transferor of any
of its obligations under this Agreement or any of the Transaction
Documents; and
(vi) the breach by the Company, the Servicer or the Transferor of
any representation or warranty on the part of the Company, the Servicer or
the Transferor contained in the Transaction Documents or in any
certificate furnished or delivered to the Insurer thereunder.
This indemnity provision shall survive the termination of this Agreement and
shall survive until the statute of limitations has run on any causes of action
which arise from one of these reasons and until all suits filed as a result
thereof have been finally concluded.
Notwithstanding any provision or obligation to the contrary set forth in
this Agreement or any instrument now or hereafter securing, affecting or
relating to any obligation of the Company, the Servicer or the Transferor under
this Agreement, including, without limitation, the Trust and Security Agreement,
no individual representative of the Company, the Servicer or the Transferor
(including, without limitation, employees, officers, directors and shareholders
thereof) shall have any personal liability under this Agreement, including,
without limitation, any liability for the performance or observance or
nonperformance or nonobservance of any covenant or obligation of the Company,
the Servicer or the Transferor or for breach of any representation or warranty
contained in this Agreement.
(b) Any party which proposes to assert the right to be indemnified under
this Section 3.04 will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim is to
be made against the Company, the Servicer or the Transferor under this Section
3.04, notify the Company, the Servicer or the Transferor of the commencement of
such action, suit or proceeding, enclosing a copy of all papers served. In case
any action, suit or proceeding shall be brought against any indemnified party
and it shall notify the Company, the Servicer or the Transferor of the
commencement thereof, the Company, the Servicer or the Transferor shall be
entitled to participate in, and, to the extent that it shall wish, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and after
notice from the Company, the Servicer or the Transferor to such indemnified
party of its election so to assume the defense thereof, the Company, the
Servicer or the Transferor shall not be liable to such indemnified party for any
legal or other expenses other than reasonable costs of investigation
subsequently incurred by such indemnified party in
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connection with the defense thereof The indemnified party shall have the right
to employ its counsel in any such action the defense of which is assumed by the
Company, the Servicer or the Transferor in accordance with the terms of this
subsection (b), but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless the employment of counsel by such
indemnified party has been authorized by the Company, the Servicer or the
Transferor. The Company, the Servicer or the Transferor shall not be liable for
any settlement of any action or claim effected without its consent.
Section 3.05. PAYMENT PROCEDURE. If the Insurer makes any payment under
the Certificate Insurance Policy, the Company, the Servicer and the Trustee
shall accept, except in the case of manifest error, a voucher or other evidence
of payment as prima facie evidence that such payment was properly made. In the
event of any payment by the Insurer, the Company, the Servicer and the Trustee
agree to accept a voucher or other evidence of payment complete on its face as
prima facie evidence of the propriety thereof and the liability therefor of the
Insurer except in the case of manifest error. All payments to be made to the
Insurer under this Agreement shall be made to the Insurer in lawful currency of
the United States of America in immediately available funds at the notice
address for the Insurer as specified in the Trust and Security Agreement on the
date when due. Payments to be made to the Insurer under this Agreement shall
bear interest payable to the extent provided in this Agreement at the Late
Payment Rate from the date when due to the date paid.
Section 3.06. SUBROGATION. Upon any payment by the Insurer pursuant to the
Certificate Insurance Policy, the Insurer shall be fully subrogated to the
rights of the Certificateholders to the extent of such payment, pursuant to the
priority set forth in Section 12.02(d) of the Trust and Security Agreement. The
Trustee acknowledges such subrogation and, further, agrees to execute such
instruments prepared by the Insurer and to take such reasonable actions as, in
the sole judgment of the Insurer, are necessary to evidence such subrogation and
to perfect the rights of the Insurer to receive any moneys paid or payable under
the Trust and Security Agreement, provided that the Trustee can legally take
such action consistent with its obligations under the Trust and Security
Agreement, and the Trustee shall be indemnified by the Insurer for any
reasonable expense that results from such action.
Section 3.07. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION. (a) To the
extent provided in Section 12.02(d) of the Trust and Security Agreement, after
the required payment of the Bond Insurer Premium therefrom, the Insurer shall be
entitled to reimbursement for any payment made by the Insurer under the
Certificate Insurance Policy, in an amount equal to the amount so paid and all
amounts previously paid that remain unreimbursed, together with interest on any
and all amounts remaining unreimbursed (to the extent permitted by law, if in
respect of any unreimbursed amounts representing interest) from the date such
amounts became due until paid in full (after as well as before judgment), at a
rate of interest equal to the Late Payment Rate, provided that the sole source
of reimbursement for payments made by the Insurer under the Certificate
Insurance Policy shall be pursuant to Section 12.02(d) of the Trust and Security
Agreement and no person or entity shall be personally liable for the payment of
such amounts.
(b) The Company and the Transferor agree to pay to the Insurer as follows:
anything in subsection 3.07(a) hereof to the contrary notwithstanding, the
Insurer shall be entitled to reimbursement from the Company for payments made
under the Certificate Insurance Policy arising as a result of the Company's or
the Transferor's, as the case may be, failure to repurchase any Lease
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Contract if it is not repurchased when required to be repurchased by it pursuant
to Section 4.04 of the Trust and Security Agreement, Section 3.03 of the
Contribution Agreement or Section 3.10 of the Servicing Agreement, together
with interest on any-and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect of any unreimbursed amounts representing
interest) from the date such amounts became due until paid in full (after as
well as before judgment), at a rate of interest equal to the Late Payment Rate.
(c) The Company, the Transferor and the Servicer agree to pay to the
Insurer as follows: any and all charges, fees, costs and expenses that the
Insurer may reasonably pay or incur, including, but not limited to, attorneys'
and accountants' fees and expenses, in connection with (i) any accounts
established to facilitate payments under the Certificate Insurance Policy to the
extent the Insurer has not been immediately reimbursed on the date that any
amount is paid by the Insurer under the Certificate Insurance Policy, (ii) the
enforcement, defense or preservation of any rights in respect of any of the
Transaction Documents, including defending, monitoring or participating in any
litigation or proceeding (including any insolvency or bankruptcy proceeding in
respect of the Company, the Transferor or the Servicer or any affiliate of any
of them) relating to any of the Transaction Documents or any party to any of the
Transaction Documents in its capacity as such a party, or (iii) any amendment,
waiver or other action with respect to, or related to, any Transaction Document,
whether or not executed or completed; costs and expenses shall include a
reasonable allocation of compensation and overhead attributable to the time of
employees of the Insurer spent in connection with the actions described in
clause (ii) above, and the Insurer reserves the right to charge a reasonable fee
as a condition to executing any waiver or consent proposed in respect of any of
the Transaction Documents.
(d) All amounts to be paid pursuant to subsection (a) above shall be due
and payable without demand, and all amounts to be paid pursuant to subsection
(b) above shall be due and payable upon demand. All such amounts shall be
payable in the priority and in the manner provided in the Transaction Documents
relating thereto, provided that upon the occurrence of any Servicer Event of
Default under the Servicing Agreement, the Insurer shall have the rights
provided for herein and therein.
Section 3.08. REIMBURSEMENT OF INSURER FOLLOWING REDEMPTION AT THE OPTION
OF THE TRANSFEROR. Following termination of the Trust and Security Agreement
pursuant to Section 10.01 of the Trust and Security Agreement, the Transferor
agrees to reimburse the Insurer for any Insured Payments required to be made
pursuant to the Certificate Insurance Policy subsequent to the date of such
termination.
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ARTICLE IV
FURTHER AGREEMENTS
Section 4. 0 1. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall
take effect on the Closing Date and shall remain in effect until such time as
the Insurer is no longer subject to a claim under the Certificate Insurance
Policy, the Certificate Insurance Policy has been surrendered to the Insurer for
cancellation, and all amounts payable by the Company, the Transferor or the
Servicer or from any other source under the Transaction Documents and under the
Certificates have been paid in full; provided, however, that the provisions of
Sections 3.03, 3.04 and 3.07 hereof shall survive any termination of this
Agreement.
Section 4.02. WAIVER OF RIGHTS; FURTHER ASSURANCES AND CORRECTIVE
INSTRUMENTS. (a) Excepting at such times as an Insurer Insolvency or default in
payment under the Certificate Insurance Policy shall exist or shall have
occurred and be continuing, none of the Company, the Transferor, the Servicer or
the Trustee shall grant any waiver of rights under any of the Transaction
Documents to which any of them is a party without the prior written consent of
the Insurer, and any amendment or supplement to the Transaction Documents
without the written consent of the Insurer shall be null and void and of no
force or effect.
(b) Each of the Company, the Transferor, the Servicer and the Trustee
agrees that it will, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, such supplements hereto and
such further instruments as the Insurer may reasonably request and as may
reasonably be required to effectuate the intention of or facilitate the
performance of this Agreement, provided that the Company, the Trustee
(consistent with its obligations under the Trust and Security Agreement), the
Transferor or the Servicer, as the case may be, can legally take such action and
the Company, the Transferor, the Trustee or the Servicer, as the case may be,
shall be indemnified by the Insurer for any reasonable expenses resulting from
such action if such action was directed by the Insurer.
Section 4.03. OBLIGATIONS ABSOLUTE. The obligations of the Company, the
Transferor and the Servicer hereunder shall be absolute and unconditional, and
shall not be subject to, and the Company, the Transferor and the Servicer hereby
waive any of their rights of, abatement, diminution, postponement or deduction,
or to any defense other than payment, or to any night of setoff or recoupment
arising out of any breach under any of the Transaction Documents, by any party
thereto or any beneficiary thereof, or out of any obligation at any time owing
to the Company, the Transferor or the Servicer. Nothing herein shall be
construed as prohibiting the Company, the Transferor or the Servicer from
pursuing any rights or remedies they may have against any other person or entity
in a separate legal proceeding. The obligations of the Company, the Transferor
and the Servicer hereunder are absolute and unconditional and will be paid or
performed strictly in accordance with this Agreement.
Section 4.04. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS. (a) This
Agreement shall be a continuing obligation of the Company, the Transferor and
the Servicer and shall (i) be binding upon the Company, the Transferor and the
Servicer and their respective successors and assigns and (ii) inure to
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the benefit of and be enforceable by the Insurer and its successors, transferees
and assigns. None of the Company, the Transferor or the Servicer may assign this
Agreement, or delegate any of its duties hereunder, without the prior written
consent of the Insurer.
(b) The Insurer shall have the right to give participations in its rights
under this Agreement and to enter into contracts of reinsurance with respect to
the Certificate Insurance Policy and each such participant or reinsurer shall be
entitled to the benefit of any representation, warranty, covenant and obligation
of the Company, the Transferor and the Servicer hereunder as if such participant
or reinsurer was a party hereto, provided that no such grant of participation
shall operate to relieve the Insurer of liability on any Certificate Insurance
Policy, and provided further that no such participation or contract of
reinsurance shall require the Servicer, the Trustee, the Company or the
Transferor to deal with any person other than the Insurer.
(c) In addition, the Insurer shall be entitled to assign or pledge to any
bank or other lender providing liquidity or credit with respect to the
Transaction or the obligations of the Insurer in connection therewith any rights
of the Insurer under the Transaction Documents or with respect to any real or
personal property or other interests pledged to the Insurer, or in which the
Insurer has a security interest, in connection with the Transaction.
(d) Except as provided herein with respect to participants and reinsurers,
nothing in this Agreement shall confer any night, remedy or claim, express or
implied, upon any person, including particularly, any Certificateholder, other
than the Insurer, against the Company, the Transferor or the Servicer, and all
the terms, covenants, conditions, promises and agreements contained herein shall
be for the sole and exclusive benefit of the parties hereto and their
successors. Neither the Trustee nor any Certificateholder shall have any right
to payment from the premium paid pursuant to Section 3.03 hereof or under the
Trust and Security Agreement or from any other amounts paid by the Servicer, the
Company or the Transferor pursuant to Section 3.03, 3.04 or 3.07 hereof.
Section 4.05 LIABILITY OF INSURER. The Insurer shall not be responsible
for any act or omission of the Trustee with respect to its use of the
Certificate Insurance Policy. Neither the Insurer nor any of its officers,
directors or employees shall be liable or responsible for (a) the use which may
be made of the Certificate Insurance Policy by or for any acts or omissions of
the Trustee in connection therewith; or (b) the validity, sufficiency, accuracy
or genuineness of documents, or of any endorsement(s) thereon, submitted by any
person in connection with a claim under the Certificate Insurance Policy, even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged. In furtherance and not in limitation of the
foregoing, the Insurer may accept documents that appear on their face to be in
order, without responsibility for further investigation.
Section 4.06. CONTROL BY INSURER. So long as an Insurer Insolvency or
default in payment under the Certificate Insurance Policy is not continuing,
upon the occurrence and during the continuation of any Servicer Event of Default
described in Section 6.01 of the Servicing Agreement, the Insurer shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, provided that such direction shall not be in
conflict with any rule of law or with any provision of this Agreement or the
Trust and Security Agreement.
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Section 4.07. REPRESENTATIONS, WARRANTIES AND COVENANTS of THE TRUSTEE AND
BACK-UP SERVICER.
(a) Compliance and Amendments. The Trustee and the Back-up Servicer
shall comply in all material respects with the terms and conditions of the
Transaction Documents to which each, respectively, is a party, and,
provided there does not exist an Insurer Insolvency or insurer Default,
neither the Trustee nor the Back-up Servicer shall agree to any amendment
to or modification of the terms of any of the Transaction Documents to
which each, respectively, is a party unless the Insurer shall otherwise
consent.
(b) Due Organization and Qualification. The Trustee is a
corporation, duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation. The Trustee is duly
qualified to do business, is in good standing and has obtained all
licenses, permits, charters, registrations and approvals (together,
"approvals") necessary for the conduct of its business as currently
conducted and the performance of its obligations under the Transaction
Documents, in each Jurisdiction in which the failure to be so qualified or
to obtain such approvals would render any Transaction Document
unenforceable in any respect or would have a material adverse effect upon
the Transaction, the Holders or the Insurer.
(c) Due Authorization. The execution, delivery and performance of
the Transaction Documents by the Trustee have been duly authorized by all
necessary corporate action and do not require any additional approvals or
consents, or other action by or any notice to or filing with any Person,
including, without limitation, any governmental entity or the Trustee's
stockholders, which have not previously been obtained or given by the
Trustee.
(d) Noncontravention. Neither the execution and delivery of the
Transaction Documents by the Trustee, the consummation of the transactions
contemplated thereby nor the satisfaction of the terms and conditions of
the Transaction Documents:
(i) conflicts with or results in any breach or violation of
any provision of the certificate or articles of incorporation or
bylaws of the Trustee or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently in
effect having applicability to the Trustee or any of their material
properties, including regulations issued by an administrative agency
or other governmental authority having supervisory powers over the
Trustee;
(ii) constitutes a default by the Trustee under or a breach of
any provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Trustee is a party or by which
any of its or their respective properties, which are individually or
in the aggregate material to the Trustee, is or may be bound or
affected; or
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(iii) results in or requires the creation of any lien upon or
in respect of any assets of the Trustee, except as contemplated by
the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting the Trustee, or any of its
subsidiaries, or any properties or rights of the Trustee, or any of its
subsidiaries, pending or, to the Trustee's knowledge after reasonable
inquiry, threatened, which, in any case, could reasonably be expected to
result in a Material Adverse Change with respect to the Trustee.
(f) Valid and Binding Obligations and Agreements. The Transaction
Documents, when executed and delivered by the Trustee, will constitute the
legal, valid and binding obligations of the Trustee, enforceable in
accordance with their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or the rights of
creditors of National Banks. The Trustee shall not at any time in the
future deny that the Transaction Documents constitute the legal, valid and
binding obligations of the Trustee
(g) Compliance With Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Trustee or the Back-up
Servicer in the conduct of its business violates any law, regulation,
judgment, agreement, order or decree applicable to any of them that, if
enforced, could reasonably be expected to result in a Material Adverse
Change with respect to the Trustee or the Back-up Servicer. Neither the
Trustee nor the Back-up Servicer is in breach of or in default under any
applicable law or administrative regulation of its respective jurisdiction
of incorporation, or any department, division, agency or instrumentality
thereof or of the United States or any applicable judgment or decree or
any loan agreement, note, resolution, certificate, agreement or other
instrument to which the Trustee or the Back-up Servicer is a party or is
otherwise subject which, if enforced, would have a material adverse effect
on the ability of the Trustee or the Back-up Servicer, as the case may be
to perform its respective obligations under the Transaction Documents.
(h) Transaction Documents. Each of the representations and
warranties of the Trustee and the Back-up Servicer contained in the
Transaction Documents is true and correct in all material respects, and
the Trustee and the Back-up Servicer hereby make each such representation
and warranty to and for the benefit of, the Insurer as if the same were
set forth in full herein; provided that the remedy for any breach of this
paragraph shall be limited to the remedies specified in the related
Transaction Document.
(i) Maintenance of Licenses. The Trustee and the Back-up Servicer,
respectively, or any successors thereof, shall maintain all licenses,
permits, charters and registrations which are material to the conduct of
its business.
Section 4.08 Covenants of K & P Finance Corp. I
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<PAGE> 24
(a) Meetings. K & P Finance Corp. I shall have annual meetings of
its shareholders and shall prepare income and franchise tax returns as
appropriate. The Transferor shall deliver to the Insurer copies of the
minutes of such meetings no later than April 30 of each year and such tax
returns promptly upon filing but in no event later than August 31 of each
year, beginning in 1997.
(b) Amendment to Certificate of Incorporation. K & P Finance Corp. I
shall not amend its certificate of incorporation without the Insurer's
prior written consent.
Section 4.09. TRUSTEE, BACK-UP SERVICER, TRANSFEROR, COMPANY AND SERVICER
TO JOIN IN ENFORCEMENT ACTION. To the extent necessary to enforce any right of
the Insurer in or remedy of the Insurer under any Lease Contract, the Trustee,
the Transferor, the Company, the Back-up Servicer and the Servicer agree to join
in any action initiated by the Insurer for the protection of such right or
exercise of such remedy; provided, however, that the Trustee and Back-up
Servicer may decline to join in any action, take any other action or refrain
from taking any action unless offered indemnity reasonably satisfactory to it by
the Insurer.
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. DEFAULTS. The occurrence of any of the following events
shall constitute an Event of Default:
(a) Any representation or warranty made by the Company, the
Transferor or the Servicer hereunder or under the Transaction Documents,
or in any certificate furnished hereunder or under the Transaction
Documents, shall prove to be untrue or incomplete in any material respect;
(b)(i) The Company or the Transferor shall fail to pay when due any
amount payable by the Company or the Transferor hereunder or (ii) a
legislative body has enacted any law that declares or a court of competent
jurisdiction shall find or rule that any of the Transaction Documents are
not valid and binding on the Company, the Servicer or the Transferor to
which it is a party;
(c) The occurrence and continuance of a "Servicer Event of Default"
under the Servicing Agreement (as defined therein) or of an "Event of
Default" under the Trust and Security Agreement (as defined therein);
(d) Any failure on the part of the Company, the Transferor or the
Servicer duly to observe or perform in any material respect any other of
the covenants or agreements on the part of the Company, the Transferor or
the Servicer contained in this Agreement or in any other Transaction
Document which continues unremedied for a period of 45 days after the date
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<PAGE> 25
on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Company, the Transferor or the
Servicer, as the case may be, by the Insurer (with a copy to Trustee) or
by the Trustee (with a copy to the Insurer);
(e) Any material party thereto shall breach any material
representation or warranty or fail to observe any material covenant or
agreement contained in any Transaction Document (except for the
obligations described under paragraph (a) or (c) above), and such failure
shall continue for a period of 45 days after written notice given to the
Company or such other party, provided that, if such failure shall be of a
nature that it cannot be cured within 45 days, such failure shall not
constitute an Event of Default hereunder if within such 45-day period the
Company or such other party shall have given notice to the Insurer of
corrective action it proposes to take, which corrective action is agreed
in writing by the Insurer to be satisfactory and the Company or such other
party shall thereafter pursue such corrective action diligently until such
default is cured;
(f) A decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any
present or future federal or state bankruptcy, insolvency or similar law
or the appointment of a conservator or receiver or liquidator or other
similar official in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Company,
the Transferor or the Servicer and such decree or order shall have
remained in force undischarged or unstayed for a period of 90 consecutive
days;
(g) The Company, the Transferor or the Servicer shall consent to the
appointment of a conservator or receiver or liquidator or other similar
official in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or relating to the Company, the
Transferor or the Servicer or of or relating to all or substantially all
of the property of either; or
(h) The Company, the Transferor or the Servicer shall admit in
writing its inability to pay its debts generally as they become due, file
a petition to take advantage of or otherwise voluntarily commence a case
or proceeding under any applicable bankruptcy, insolvency, reorganization
or other similar statute, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations.
Section 5.02. REMEDIES; NO REMEDY EXCLUSIVE (a) Upon the occurrence of an
Event of Default, the Insurer may exercise any one or more of the rights and
remedies set forth below against the party in default:
(i) declare all indebtedness of every type or description owed by
such party to the Insurer to be immediately due and payable, and the same
shall thereupon be immediately due and payable;
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<PAGE> 26
(ii) exercise any rights and remedies under any of the Transaction
Documents in accordance with the terms of such Transaction Document or
direct the Trustee to exercise such remedies in accordance with the terms
of the Transaction Documents; or
(iii) take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the amounts then due and
thereafter to become due under any of the Transaction Documents or to
enforce performance and observance of any obligation, agreement or
covenant of the Company, the Transferor or the Servicer under any of the
Transaction Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred upon
or reserved to the Insurer is intended to be exclusive of any other available
remedy, but each remedy shall be cumulative and shall be in addition to other
remedies given under any of the Transaction Documents or existing at law or in
equity. No delay or omission to exercise any right or power accruing under any
of the Transaction Documents upon the happening of any event set forth in
Section 5.01 hereof shall impair any such right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle the Insurer
to exercise any remedy reserved to the Insurer in this Article, it shall not be
necessary to give any notice, other than such notice as may be required in this
Article.
Section 5.03 WAIVERS. (a) No failure by the Insurer to exercise, and no
delay by the Insurer in exercising, any right hereunder shall operate as a
waiver thereof. The exercise by the Insurer of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein to
the Insurer are declared in every case to be cumulative and not exclusive of any
remedies provided by law or equity.
(b) The Insurer shall have the right, to be exercised in its complete
discretion, to waive any Event of Default hereunder, by a writing setting forth
the terms, conditions and extent of such waiver signed by the Insurer and
delivered to the Trustee, the Company and the Servicer. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend only to
the specific event or occurrence which gave rise to the Event of Default so
waived and not to any other similar event or occurrence which occurs subsequent
to the date of such waiver.
ARTICLE VI
MISCELLANEOUS
Section 6.01. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may be
amended, changed, modified, altered or terminated only by written instrument or
written instruments signed by the parties hereto. The Company hereby agrees to
promptly provide a copy of any amendment to this Agreement to the Trustee. The
Company and the Insurer also agree to provide prior written notification to both
Moody's and S&P of any amendment to this Agreement.
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<PAGE> 27
Section 6.02. NOTICES. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered or
telexed or telecopied to the recipient as follows:
To the Insurers: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio
Management - Structured Finance (IPM-SF)
Telecopy No.: (914)765-3810
Confirmation: (914) 273-4545
To the Company: T & W Financial Corporation
6416 Pacific Highway East
Tacoma, WA 98424
Attention: Mr. Michael Price
Telecopy No.: (206) 926-0739
Confirmation: (206) 922-5164
To the Transferor: T & W Funding Company I, L.L.C.
6416 Pacific Highway East
Tacoma, WA 98424
Attention: Mr. Michael Price
Telecopy No.: (206) 926-0739
Confirmation: (206) 922-5164
To the Servicer: T & W Financial Corporation
6416 Pacific Highway East
Tacoma, WA 98424
Attention: Mr. Michael Price
Telecopy No.: (206) 926-0739
Confirmation: (206) 922-5164
To K & P Finance Corp. I K & P Finance Corp. I
6416 Pacific Highway East
Tacoma, WA 98424
Attention: Mr. Michael Price
Telecopy No.: (206) 926-0739
Confirmation: (206) 922-5164
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<PAGE> 28
To the Back-up Servicer: Norwest Bank Minnesota,
National Association
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0070
Attention: Corporate Trust
Services/Asset-Backed
Administration
Telecopy No.: (612) 667-3539
Confirmation: (612) 667-1117
To the Trustee: Norwest Bank Minnesota,
National Association
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0070
Attention: Corporate Trust
Services/Asset-Backed
Administration
Telecopy No.: (612)667-3539
Confirmation: (612) 667-1117
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon delivery, except when telexed
or telecopied, in which case, effective upon telex or telecopy against receipt
of answerback or written confirmation.
An affidavit by any Person representing or acting on behalf of any party
hereto, as to such mailing having the registry receipt attached, shall be
conclusive evidence of the mailing of such demand, notice or communication.
Section 6.03. SEVERABILITY. In the event any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
the parties hereto agree that such holding shall not invalidate or render
unenforceable any other provision hereof. The parties hereto further agree that
the holding by any court of competent jurisdiction that any remedy pursued by
the Insurer hereunder is unavailable or unenforceable shall not affect in any
way the ability of the Insurer to pursue any other remedy available to it.
Section 6.04. GOVERNING LAW. This Agreement shall be construed, and the
obligations, rights and remedies of the parties hereunder shall be determined,
in accordance with the laws of the State of New York.
Section 6.05. CONSENT TO JURISDICTION AND VENUE, ETC. The Company, the
Transferor, the Servicer, the Trustee and the Back-up Servicer each irrevocably
(a) agrees that any suit, action or other legal proceeding arising out of or
relating to this Agreement, the Trust and Security Agreement or any of the other
Transaction Documents may be brought in a court of record in the State of New
York or in the Courts of the United States of America located in such state, (b)
consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which they may have to the laying of
venue of any such suit, action or proceeding in any of such courts and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. The Company, the Transferor, the Servicer, the Trustee and the Back-up
Servicer each hereby irrevocably appoint CT
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<PAGE> 29
Corporation System, Suite 1301, 116 John Street, New York, New York 10038, as
their agent to receive on behalf of the Company, the Transferor, the Servicer,
the Trustee and the Back-up Servicer, as the case may be, and their respective
properties service of copies of the summons and complaint and other process
which may be served in any such suit, action or proceeding (the "Process
Agent"). Such service may be made by mailing or delivering a copy of such
process to the Company, the Transferor, the Servicer, the Trustee or the Back-up
Servicer, as the case may be, in care of the Process Agent at the Process
Agent's above address, and the Company, the Transferor, the Servicer, the
Trustee and the Back-up Servicer each hereby irrevocably authorize and direct
the Process Agent to accept such service on their behalf. The Insurer agrees to
mail to the Company, the Transferor, the Servicer, the Trustee or the Back-up
Servicer, as the case may be, at its address provided in Section 6.02 hereof a
copy of any summons, complaint or other process mailed or delivered by it to the
Process Agent. As an alternative method of service, the Company, the Transferor,
the Servicer, the Trustee and the Back-up Servicer each also irrevocably consent
to the service of any and all process in any such action or proceeding by
mailing of copies of such process to the Company, the Transferor, the Servicer,
the Trustee or the Back-up Servicer, as the case may be, at its address provided
in Section 6.02 hereof. The Company, the Transferor, the Servicer, the Trustee
and the Back-up Servicer each agree that a final, nonappealable judgment in any
such suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by execution on the judgment or in any other manner provided by
law. All mailings under this Section 6.05 shall be by certified mail, return
receipt requested.
Nothing in this Section 6.05 shall affect the right of the Insurer to
serve legal process in any other manner permitted by law or affect the right of
the Insurer to bring any suit, action or proceeding against the Company, the
Transferor, the Servicer, the Trustee or the Back-up Servicer or their
respective property in the courts of any other jurisdiction
Section 6.06. CONSENT OF INSURER. In the event that the Insurer's consent
is required under the terms hereof or any term of any other Transaction
Document, it is understood and agreed that the determination whether to grant or
withhold such consent shall be made solely by the Insurer in its absolute
discretion. The Insurer hereby agrees that it shall respond to any request for
consent in a timely manner, taking into consideration the business of the
Company, the Transferor and the Servicer, provided that the Insurer has been
provided in full with any information requested by the Insurer and has fully
completed any due diligence that the Insurer has determined, in its sole
discretion, may be necessary in connection with such consent.
Section 6.07. COUNTERPARTS. This Agreement may be executed in counterparts
by the parties hereto, and each such counterpart shall be considered an original
and all such counterparts shall constitute one and the same instrument.
Section 6.08. RECITALS. All of the recitals hereinabove set forth are
incorporated in this Agreement by reference.
Section 6.09. HEADINGS. The headings of sections contained in this
Agreement are provided for convenience only. They form no part of this Agreement
and shall not affect its construction or interpretation. All references to
sections or subsections of this Agreement refer to the corresponding sections or
subsections of this Agreement.
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<PAGE> 30
Section 6. 1 0. PARTIES NOT TO INSTITUTE INSOLVENCY PROCEEDINGS. So long
as this Agreement is in effect, and for one year following its termination, none
of the parties hereto will file any involuntary petition or otherwise institute
any bankruptcy, reorganization, moratorium, insolvency or liquidation proceeding
or other proceeding under any federal or state bankruptcy or similar law against
the Transferor.
Section 6.1 1. TRIAL BY JURY WAIVED. Each party hereto hereby waives, to
the fullest extent permitted by law, any right to a trial by jury in respect of
any litigation arising directly or indirectly out of, under or in connection
with any of the Transaction Documents or any of the transactions contemplated
thereunder. Each party hereto (A) certifies that no representative, agent or
attorney of any party hereto has represented, expressly or otherwise, that it
would not, in the event of litigation, seek to enforce the foregoing waiver and
(B) acknowledges that it has been induced to enter into the Transaction
Documents to which it is a party by, among other things, this waiver.
Section 6.12. ENTIRE AGREEMENT. This Agreement and the Certificate
Insurance Policy set forth the entire agreement between the parties with respect
to the subject matter thereof, and this Agreement supersedes and replaces any
agreement or understanding that may have existed between the parties prior to
the date hereof in respect of such subject matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all
as of the day and year first above mentioned.
MBIA INSURANCE CORPORATION
By /s/ [SIG]
--------------------------------------
Assistant Secretary
T & W FINANCIAL CORPORATION, as Company
By /s/ THOMAS W. PRICE
--------------------------------------
Title President
-----------------------------------
T & W FINANCIAL CORPORATION, as Servicer
By /s/ THOMAS W. PRICE
--------------------------------------
Title President
-----------------------------------
T & W FUNDING COMPANY I, L.L.C.,
as Transferor
By /s/ MICHAEL A. PRICE
--------------------------------------
Title President
-----------------------------------
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By /s/ EILEEN R. STELZNER
--------------------------------------
Title Corporate Trust Officer
-----------------------------------
<PAGE> 1
[MBIA LOGO] EXHIBIT 10.8
CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: Not to Exceed $100,000,000 POLICY NO.:23074
T & W Lease-Backed Trust
8.275% Lease-Backed Certificates
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Certificate Guaranty
Insurance Policy (this "Policy"), hereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Insured
Payment will be received by Norwest Bank Minnesota, National Association, or
its successor, as trustee for the Owners (the "Trustee"), on behalf of the
Owners, for distribution by the Trustee to each Owner of each Owner's
proportionate share of the Insured Payment. The Insurer's obligations hereunder
with respect to a particular Insured Payment shall be discharged to the extent
funds equal to the applicable Insured Payment are received by the Trustee,
whether or not such funds are properly applied by the Trustee. Insured Payments
shall be made only at the time set forth in this Policy, and no accelerated
Insured Payments shall be made regardless of any acceleration of the
Obligations, unless such acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Transferor, the Trust
or the Trustee for withholding taxes, if any (including interest and penalties
in respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of a
preference payment, (ii) an opinion of counsel satisfactory to the Insurer that
such order is final and not subject to appeal, (iii) an assignment in such form
as is reasonably required by the Insurer, irrevocably assigning to the Insurer
all rights and claims of the Owner relating to or arising under the Obligations
against the debtor which made such preference payment or otherwise with respect
to such preference payment and (iv) appropriate instruments to effect the
appointment of the Insurer as agent for such Owner in any legal proceeding
related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon, New York City time, on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
The Insurer will pay any other amount payable hereunder no later than
12:00 noon, New York City time, on the later of the Payment Date on which the
related Deficiency Amount is
<PAGE> 2
[MBIA LOGO]
due or the second Business Day following receipt in New York, New York on a
Business Day by State Street Bank and Trust Company, N.A., as Fiscal Agent for
the Insurer or any successor fiscal agent appointed by the Insurer (the "Fiscal
Agent") of a Notice (as described below); provided that if such Notice is
received after 12:00 noon, New York City time, on such Business Day, it will be
deemed to be received on the following Business Day. If any such Notice
received by the Fiscal Agent is not in proper form or is otherwise insufficient
for the purpose of making claim hereunder, it shall be deemed not to have been
received by the Fiscal Agent for purposes of this paragraph, and the Insurer or
the Fiscal Agent, as the case may be, shall promptly so advise the Trustee and
the Trustee may submit an amended Notice.
Insured Payments due hereunder, unless otherwise stated herein, will be
disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Insured Payment
less, in respect of Insured Payments related to Preference Amounts, any amount
held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds
to make payments due under this Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated
to the rights of each Owner to receive payments under the Obligations to the
extent of any payment by the Insurer hereunder.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Trust and Security Agreement dated as of February
1, 1997 among T & W Funding Company I, L.L.C., T & W Financial Corporation, as
servicer, and the Trustee, as trustee and back-up servicer, without regard to
any amendment or supplement thereto unless such amendment or supplement has
been approved in writing by the Insurer in accordance with the terms of the
Agreement.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which the Insurer or banking institutions in New York City or in the city in
which the corporate trust office of the Trustee under the Agreement is located
are authorized or obligated by law or executive order to close.
"Deficiency Amount" means (i) for any Payment Date, any shortfall in
amounts available in the Collection Account to pay the interest due on the
Obligations under Section 12.02(d)(v) of the Agreement after payment of all
amounts payable pursuant to Section 12.02(d)(i) through (iv) of the Agreement,
plus (ii) on the Stated Maturity, any shortfall in amounts available in the
Collection Account to pay the Outstanding Principal Balance after the payment
of all amounts payable pursuant to Section 12.02(d)(i) through (v) of the
Agreement.
2
<PAGE> 3
[MBIA LOGO]
"Insured Payment" means (i) as of any Payment Date, any Deficiency
Amount and (ii) any unpaid Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached hereto,
the original of which is subsequently delivered by registered or certified
mail, from the Trustee specifying the Insured Payment which shall be due and
owing on the applicable Payment Date.
"Owner" means each Holder (as defined in the Agreement) who, on the
applicable Payment Date, is entitled under the terms of the applicable
Obligations to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner
on the Obligations that is recoverable and sought to be recovered as avoidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment to
or modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent of the
Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York, 10006 Attention: Municipal Registrar and Paying Agency.
This Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to
the conflict of laws principles thereof.
The Insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason, including payment, or provision being
made for payment, prior to maturity of the Obligations.
3
<PAGE> 4
MBIA LOGO
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 7th day of February, 1997.
MBIA INSURANCE CORPORATION
/s/ RICHARD WEILL
---------------------------
President
Attest: /s/ [SIG]
---------------------------
Assistant Secretary
<PAGE> 5
MBIA LOGO
EXHIBIT A
TO CERTIFICATE INSURANCE POLICY
NUMBER: 23074
NOTICE UNDER CERTIFICATE
INSURANCE POLICY NUMBER: 23074
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of , as trustee
(the "Trustee"), hereby certifies to State Street Bank and Trust Company, N.A.
(the "Fiscal Agent") and MBIA Insurance Corporation (the "Insurer"), with
reference to Certificate Insurance Policy Number: [ ] (the "Policy") issued
by the Insurer in respect of the T & W Lease-Backed Trust, 8.275% Lease-Backed
Certificates (the "Obligations"), that:
(i) the Trustee is the trustee under the Trust and Security
Agreement dated as of February 1, 1997 (the "Agreement"), among T & W
Funding Company I, L.L.C., T & W Financial Corporation, as servicer, and
the Trustee, as trustee for the Owners;
(ii) the shortfall in amounts available in the Collection
Account to pay the interest due on the Obligations under Section
12.02(d)(v) of the Agreement after payment of all amounts payable
pursuant to Section 12.02(d)(i) through (iv) of the Agreement for the
Payment Date occurring on (the "Applicable Payment Date") is
$ ;
(iii) on the Stated Maturity, the shortfall in amounts
available in the Collection Account to pay the Outstanding Principal
Balance after the payment of all amounts payable pursuant to Section
12.02(d)(i) through (v) of the Agreement is $ ;
(iv) the sum of clauses (ii) and (iii) above is $
(the "Deficiency Amount");
(v) the amount of previously distributed payments under the
Obligations that are recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy
<PAGE> 6
MBIA LOGO
pursuant to the Bankruptcy Code in accordance with a final nonappealable
order of a court having competent jurisdiction is $ (the
"Preference Amount");
(vi) the total Insured Payment due is $ , which amount
equals the sum of the Deficiency Amount and the Preference Amount;
(vii) the Trustee is making a claim under and pursuant to the
terms of the Policy for the dollar amount of the Insured Payment set
forth in (iv) above to be applied to the payment of the Deficiency
Amount for the Applicable Payment Date or Stated Maturity, as the case
may be, in accordance with the Agreement and for the dollar amount of
the Insured Payment set forth in (v) above to be applied to the payment
of any Preference Amount; and
(viii) the Trustee directs that payment of the Insured Payment
be made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the
Policy; [TRUSTEE'S ACCOUNT].
Any capitalized terms used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance
Company Or Other Person Files An Application For Insurance Or Statement Of
Claim Containing Any Materially False Information, Or Conceals For The Purpose
Of Misleading, Information Concerning Any Fact Material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A
Civil Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The
Claim For Each Such Violation.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of , .
, as Trustee
By
Title
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EXHIBIT 10.9
[MBIA LOGO]
COMMITMENT TO ISSUE A
CERTIFICATE GUARANTY INSURANCE POLICY
Application No.: 96-12-0937
Sale Date: February 7, 1997
Program Type: Negotiated D/P
RE: $100,000,000 T&W Funding Company 1, L.L.C., Lease Receivables
Purchase Facility, Centre Square Funding Corporation, Class A Fixed
Rate Certificates (the "Obligations")
This Commitment to Issue a Certificate Guaranty Insurance Policy (the
"Commitment") constitutes an agreement between T&W Funding Company 1, L.L.C.
(the "Applicant"), and T&W Financial Corporation ("T&W"), and MBIA Insurance
Corporation ("MBIA" or the "Certificate Insurer"), a stock insurance company
incorporated under the laws of the State of New York.
Based on an approved application dated January 22, 1997, the Certificate Insurer
agrees, upon satisfaction of the conditions herein, to issue on the earlier of
(i) 120 days of said approval date or (ii) on the date of delivery of and
payment for the Obligations, a Certificate Guaranty Insurance Policy (the
"Policy"), for the Obligations.
The issuance of the Policy shall be subject to the following terms and
conditions:
1. Payment by the Applicant, or the Trustee on behalf of the Applicant, of the
following payments:
(a) An amount equal to $10,808 shall be wired to MBIA's account on the
Closing Date (the "Initial Premium"). This amount is equal to the
product of 0.0875% and the Aggregate Implicit Principal Balance on
the Closing Date. Thereafter, on the 15th day of each month or the
next succeeding business day, beginning on the April 15th, 1997
Payment Date, an amount equal to the product of (a) 0.0292%, and (b)
the Aggregate Implicit Principal Balance as of the close of business
on the immediately preceding Payment Date, after giving effect to
all payments of principal on such immediately preceding Payment Date
(the "Bond Insurer Premium"). The premium payments shall be rounded
to the nearest dollar amount.
The premium is based on a rate of 0.3500% per annum payable monthly.
This rate is based on confirmation from Standard & Poor's that the
triple-A gap in the transaction is 16.5% or less. This premium rate
is also based on notification that the transaction is of investment
grade quality from Standard & Poor's Corporation and Moody's
Investors Service.
The premium set out in this paragraph shall be the total premium
required to be paid on the Policy issued pursuant to this
Commitment.
(b) Legal fees and expenses of Kutak Rock, Omaha, Nebraska as counsel to
the Certificate Insurer in an amount not to exceed $25,000 shall be
wired to MBIA's account at closing;
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(c) Costs associated with any due diligence procedures performed by
independent third parties including, but not limited to,
verification of data integrity and underwriting standards, shall be
wired to MBIA's account when billed by such third parties.
T&W hereby agrees to reimburse MBIA for all legal fees and expenses of
Kutak Rock and all third party due diligence costs in the event that either the
Applicant, T&W, or CoreStates Capital Markets decide not to proceed with the
transaction.
2. There shall have been no material adverse change in the collateral or the
Obligations or official document authorizing the issuance of the Obligations.
3. There shall have been no material adverse change in any information
submitted to the Certificate Insurer.
4. No event shall have occurred which would allow any purchaser not to be
required to purchase the Obligations at closing.
5. Prior to the delivery of and payment for the Obligations, none of the
information or documents submitted by or on behalf of the Applicant or T&W to
the Certificate Insurer shall be determined to contain any untrue or misleading
statement of a material fact or fail to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
not misleading.
6. All transaction documents, legal opinions, resolutions and certificates
shall be acceptable to the Certificate Insurer and its counsel, Kutak Rock,
Omaha, Nebraska. This shall include, but not be limited to, documents relating
to the collateral, the transaction structure, the flow of funds, all triggers,
events of default, receivable eligibility criteria, and credit support levels.
7. All steps for perfection of the security interests of the Issuer and the
Trustee in the Lease Contracts and the Lease Receivables must be completed to
the satisfaction of the Certificate Insurer and its counsel prior to closing.
8. All "Eligible Investments" must be acceptable to the Certificate Insurer,
Standard & Poor's Corporation, and Moody's Investors Service. All banks at which
the transaction accounts are to be maintained must be acceptable to the
Certificate Insurer. The providers of any investment agreements or other similar
investment arrangements shall be expressly approved by the Certificate Insurer
in writing.
9. Prior to the issuance of the Policy there shall have been received from
Standard & Poor's Corporation confirmation that the risk to the Certificate
Insurer in insuring the Obligations is of at least investment grade quality and
that the triple-A gap in the transaction is no more than 16.5%. In addition,
confirmation shall have been received from Moody's Investors Service that the
risk to the Certificate Insurer in insuring the Obligations is of investment
grade quality.
10. There shall be no pending action or proceeding before any court,
governmental agency or authority, regulator or administrative body or arbitrator
against the Applicant or T&W or involving the Applicant or T&W and, to the best
of its knowledge, there shall be no threatened action or proceeding affecting
the Applicant or T&W, before any court, governmental agency or authority,
regulatory or administrative body or arbitrator which, in the case of any such
pending or threatened action or proceeding, would be reasonably likely to
materially and adversely affect the financial condition or other such day to day
operations of the Applicant or T&W or the
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validity or enforceability of the Lease Contracts or Lease Receivables or any of
the documents. The Applicant or T&W shall deliver to the Certificate insurer
certificates to such effect.
11. There shall be no material event of default on the part of the Applicant
or T&W under any agreement entailing financial obligations, which default would
materially adversely impact the financial condition or operations of the
Applicant or T&W or legal documents associated with the transaction. In
addition, there shall be no material event of default on any outstanding
obligation on the part of the Applicant or T&W which would materially adversely
affect the financial condition or operations of the Applicant and T&W.
Certificates and opinions of counsel confirming these matters, acceptable to the
Certificate Insurer, shall be delivered to the Certificate Insurer.
12. The Certificate Insurer shall have the right to review and approve the
Trustee, the Servicer, the Back-up Servicer, and the Document Custodian. The
Certificate Insurer shall have the right to remove the Trustee, the Servicer and
the Back-up Servicer for cause. Cause shall mean any material breach of any
obligation or covenant under the relevant documentation. T&W Financial
Corporation has been approved as Servicer, and Norwest Bank Minnesota, N.A. has
been approved as Trustee, Back-up Servicer and Document Custodian.
13. The Applicant, the Trustee, T&W, the Back-up Servicer, and the Document
Custodian will be required to enter into an Insurance and Indemnity Agreement
with the Certificate Insurer, wherein any payments made by the Certificate
Insurer under its policy, any unpaid installment premiums, and other amounts to
be set forth in the Insurance and Indemnity Agreement, will become a
Reimbursement Amount, payable from the flow of funds as set forth in the Trust
and Security Agreement. Reimbursement Amounts will bear interest at a rate equal
to the Prime lending rate as set forth in The Wall Street Journal plus 2.00%,
and are to be paid pursuant to the Trust and Security Agreement. The Certificate
Insurer is to be notified of any Policy claims at least three days prior to any
payment date.
14. The relevant transaction documents will provide that neither the
Certificateholders, the Trustee. T&W, the Servicer, the Back-up Servicer, nor
the Document Custodian may institute bankruptcy proceedings against the Issuer
until more than one-year plus one-day after the last day any Class A
Certificates are outstanding.
15. The transaction documents shall be governed by the laws of the State of
New York.
16. The Certificate Guaranty Insurance Policy issued by MBIA shall cover the
payment of(a) current interest due on each Payment Date to the extent that
amounts available for payment of such amounts are insufficient in accordance
with the flow of funds, and; (b) principal at Stated Final Maturity only.
"Stated Final Maturity" shall be defined in the Trust and Security
Agreement as the date occurring six months after the final Scheduled Payment is
due on the Lease Contract with the latest Final Due Date.
17. "Collateralization Percentage" shall be defined in the Trust and Security
Agreement as follows: As of any date of determination prior to the end of the
Funding Period, a percentage equal to the greater of: (A) eight percent (8.0%)
and (B) the product of (i) four and (ii) the concentration percentage based on
the aggregate Implicit Principal Balance of the Lease
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Contracts with respect to the Customer with the largest concentration of Lease
Contracts. On and after such date, the Collateralization Percentage shall be the
Collateralization Percentage determined on the final day of the Funding Period.
18. "Required Collateralization Amount" shall be defined in the Trust and
Security Agreement as follows: As of any date of determination, the greatest of
(A) the Collateralization Percentage multiplied by the Aggregate Implicit
Principal Balance as of the related Calculation Date, and (B) the aggregate
Implicit Principal Balance of all the Lease Contracts under which the three
Customers with the largest aggregate Implicit Principal Balances are obligated,
and (C) an amount equal to the product of (i) one-half of the Collateralization
Percentage, and (ii) the Initial Aggregate Implicit Principal Balance.
"Required Collateralization Percentage" shall be defined in the Trust and
Security Agreement as follows: As of any date of determination, a percentage
equal to the Required Collateralization Amount divided by the Aggregate Implicit
Principal Balance.
"Initial Aggregate Implicit Principal Balance" shall be defined in the
Trust and Security Agreement as follows: The greatest Aggregate Implicit
Principal Balance as calculated on any Calculation Date since the Closing Date.
"Principal Distribution Amount" shall be defined in the Trust and Security
Agreement as follows: With respect to each Payment Date (a) for any Payment Date
prior to Stated Maturity, an amount equal to (i) if, on such Payment Date, the
Available Cash is sufficient to pay the Required Principal Distribution Amount
on such date, the Required Principal Distribution Amount; or (ii) if, on such
Payment Date, the Available Cash is not sufficient to pay the Required Principal
Distribution Amount on such date, the Available Cash; and (b) on the Stated
Maturity, an amount equal to the Outstanding Principal Balance of the
Certificates on such date.
"Available Cash" shall be defined in the Trust and Security Agreement as
follows: With respect to each Payment Date, the amounts available in the
Collection Account after payment of all amounts necessary to pay the Servicer
Fee and other amounts due the Servicer to be set forth in the Trust and Security
Agreement with the approval of MBIA, the Trustee Fee, the Backup Servicer Fee,
the Bond Insurer Premium, and the Interest Distribution Amount.
"Required Principal Distribution Amount" shall be defined in the Trust and
Security Agreement as follows: With respect to each Payment Date, an amount
equal to the Outstanding Principal Balance of the Certificates as of the
Calculation Date preceding such Payment Date, minus the product of: (A) one
minus the Required Collateralization Percentage and (B) the Aggregate IPB as of
the Calculation Date preceding such Payment Date.
19. The occurrence of any of the following shall constitute a Trigger Event.
Upon the occurrence of a Trigger Event, excess cash flow is used to pay
additional principal on the MBIA-insured Class A Certificates in accordance with
(i) under "Flow of Funds", below:
a) for any three consecutive Due Periods, the average of the Annualized
Default Rates for such consecutive Due Periods shall be equal to or
greater than the Maximum Default Rate;
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b) in any Due Period, the Annualized Default Rate is equal to or
greater than three times the Maximum Default Rate;
c) in any two consecutive Due Periods, the sum of the Annualized
Default Rates for such Due Periods is equal to or greater than three
times the Maximum Default Rate;
d) for any three consecutive Due Periods, the average of the
Delinquency Rates shall be greater than the Maximum Delinquency
Rate;
e) the Tangible Net Worth Requirement is not met;
f) there is a Servicer Event of Default;
g) if both Michael Price and Thomas Price are no longer officers and
directors of the Servicer or are both incapacitated for a period of
six or more consecutive months;
h) an Event of Default under the Trust and Security Agreement occurs
and is continuing;
i) the voluntary or involuntary bankruptcy or insolvency of T&W;
j) MBIA makes a payment under the policy; or
k) the indebtedness of T&W under any of its other credit facilities has
been accelerated.
"Annualized Default Rate" shall be defined in the Trust and Security Agreement
as follows: For any Due Period, (i) the sum of the Implicit Principal Balance as
of the Calculation Date occurring in such Due Period of all Lease Contracts that
became Defaulted Lease Contracts during such Due Period (including any Lease
Contracts that have been purchased or substituted), (ii) minus the sum of
Recoveries and Residual Proceeds received during such Due Period, (iii) divided
by the Aggregate Implicit Principal Balance at the beginning of the Due Period,
(iv) multiplied by twelve.
"Defaulted Lease Contract" shall be defined in the Trust and Security Agreement
as follows: A Lease Contract shall become a Defaulted Lease Contract at the
earlier of the day (i) when any portion of such Lease Contract is 180 days
delinquent or (ii) the Servicer determines in accordance with its customary
practices that it shall not make a Servicer Advance or that a prior Servicer
Advance is unrecoverable.
"Recoveries" shall be defined in the Trust and Security Agreement as follows:
For any Due 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 Due Period in respect of such Defaulted Lease Contract or from liquidation
or re-leasing of the related equipment or leased vehicles, including but not
limited to Scheduled Payments, Overdue Payments, Guaranty Amounts and Insurance
Proceeds, as reduced by (i) any unreimbursed Servicer Advances with respect to
such Lease Contract and (ii) any reasonably incurred out-of-pocket expenses
incurred by the Servicer in enforcing such Defaulted Lease Contract.
"Residual Proceeds" shall be defined in the Trust and Security Agreement as
follows: 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.
"Delinquency Rate" shall be defined in the Trust and Security Agreement as
follows: For any Due Period, the sum of the Implicit Principal Balances of all
Lease Contracts as of the
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Calculation Date occurring in such Due Period with respect to which a Customer
has not made any portion of the Scheduled Payment due in the prior Due Period
(including any such Lease Contracts that have been purchased or substituted),
divided by the Aggregate Implicit Principal Balance on such Calculation Date
(including any such Lease Contracts that have been purchased or substituted).
"Delinquent Lease Contract" shall be defined in the Trust and Security Agreement
as follows: For any Due Period, any Lease Contract (a) with respect to which a
Customer has not made any portion of the Scheduled Payment due in such Due
Period and which remains unpaid as of the Calculation Date at the end of such
Due Period and (b) which is not a Defaulted Lease Contract.
"Maximum Default Rate" shall be defined in the Trust and Security Agreement as:
3.0%.
"Maximum Delinquency Rate" shall be defined in the Trust and Security
Agreement as: 7.0%.
"Tangible Net Worth Requirement" shall be defined in the Trust and Security
Agreement as: The requirement that with respect to the Reported Company:
(a) the total assets of the Reported Company and its affiliates that would
be shown as assets on a consolidated balance sheet of the Reported Company and
its affiliates as of such time prepared in accordance with generally accepted
accounting principles consistently applied after eliminating all amounts
properly attributable to minority interests, if any, in the stock and surplus of
the affiliates, minus
(b) the total liabilities of the Reported Company and its affiliates that
would be shown as liabilities on a consolidated balance sheet of the Reported
Company and its affiliates as of such time prepared in accordance with generally
accepted accounting principles consistently applied, minus
(c) the net book value of all assets, after deducting any reserves
applicable thereto, which would be treated as intangible assets under generally
accepted accounting principles consistently applied including, without
limitation, good will, trademarks, trade names, service marks, brand names,
copyrights, patents, and unamortized debt discount and expense, organizational
expenses and the excess of the equity in any affiliate over the cost of the
investment in such affiliate, minus
(d) the amount of any debt obligations to the Reported Company or any of
its affiliates by any shareholder, officer or director of the Servicer or any
such affiliate, is equal to at least $6,000,000 with respect to the occurrence
of a Trigger Event, and $7,500,000 with respect to the occurrence of a Funding
Period Trigger Event.
20. "Funding Period" shall be defined in the Trust and Security
Agreement as follows: The period commencing on the Closing Date through and
including the earliest to occur of: (i) a Funding Period Trigger Event; (ii)
January 31, 2000, unless extended by mutual agreement among the Transferor, the
Certificate Insurer and the Certificateholders; (iii) the date designated by the
Transferor upon a stated number of business days prior written notice to the
Certificateholders and the Bond Insurer; or (iv) the date on which the Liquidity
Facility is terminated.
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21. The occurrence of any of the following events during the Funding Period
shall constitute a Funding Period Trigger Event. Upon the occurrence of a
Funding Period Trigger Event, no additional Lease Contracts shall be purchased
by the Trust:
a) with respect to the Reported Company, the Tangible Net Worth
Requirement is not met; or
b) for any three consecutive Due Periods, the average of the Annualized
Default Rates for such consecutive Due Periods was greater than
2.5%; or
c) for any three consecutive Due Periods, the average of the
Delinquency Rates for such consecutive Due Periods was greater than
6.0%; or
d) a payment has been made to the Trustee by MBIA pursuant to the
Policy; or
e) the occurrence of a Trigger Event; or
f) T&W defaults on any payment obligations under any agreement
evidencing indebtedness or;
g) 18 months after the Closing Date, MBIA shall determine that its
participation in the transactions contemplated hereunder or under
any related document will have an adverse impact on MBIA; or
h) the Aggregate Implicit Principal Balance is less than the sum of the
Outstanding Certificate Balance plus the Required
Overcollateralization Amount for a period of 60 days.
22. The occurrence of any of the following shall constitute a Servicer Event
of Default under the Servicing Agreement when so declared by MBIA, or if MBIA is
in default of its obligations, by the Controlling Holder:
a) any failure by the Servicer to deliver to the Trustee any proceeds
or payments received from a customer which failure continues
unremedied for two business days;
b) any failure to deliver a Monthly Servicer's Report within one
business day following the day on which such report was due to be
received;
c) any failure by the Servicer to make a Servicer Advance in accordance
with the Transaction Documents or to deposit any Purchase Price
received by it that continues unremedied for one business day;
d) any failure by the Servicer to make remittances or deliver notices
and such failure continues unremedied for three business davs;
e) any failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the
Servicer, or any representation or warranty of the Servicer in the
Servicing Agreement proves to be incorrect, which failure or breach
(A) materially and adversely affects the interests or rights of
MBIA, the Trustee, the Backup Servicer 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, requiring the situation giving rise
to such breach or nonconformity to be remedied, shall have been
given to the Servicer;
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f) any assignment by the Servicer to a delegate of its duties or rights
under the Servicing Agreement, except as specifically permitted
under such agreement, or any attempt to make such an assignment;
g) any involuntary bankruptcy decree or order that is unstayed and in
effect for a period of 60 consecutive days;
h) the commencement by the Servicer of a voluntary bankruptcy case;
i) the occurrence of a Trigger Event if T&W is the Servicer;
23. On the Determination Date prior to each Distribution Date, the Servicer
shall make a Servicer Advance for each Lease Contract that is a Delinquent Lease
Contract on such date by remitting to the Trustee for deposit in the Collection
Account an amount equal to the Scheduled Payments, or portion thereof, which
were due in the prior Due Period but not received and deposited in the
Collection Account on or prior to such Determination Date; provided, however,
that the Servicer shall not be obligated to make any 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; further provided, that the Servicer may make
a Servicer Advance with respect to a Lease Contract once it has become a
Defaulted Lease Contract if it reasonably believes that such Servicer Advance
will increase the Recoveries available to the Issuer.
24. The occurrence of any of the following shall constitute an Event of
Default under the Trust and Security Agreement. Upon the occurrence of an Event
of Default the Trustee at MBIA's direction, or if MBIA is in default of its
obligations, the Trustee at the direction of holders of at least two-thirds of
the certificates, may declare the principal of all of the certificates to be
immediately due and payable.
a) default in the payment of any interest upon any Certificate when the
same becomes due and payable;
b) default in the payment of any principal of any Certificate when the
same becomes due and payable;
c) default in the performance of any covenant of the Applicant, or
breach of any material representation and warranty of the Applicant,
in the Trust and Security Agreement, the Contribution Agreement, the
Insurance Agreement, or the Servicing Agreement, and continuance of
such default or breach for a period of 30 days after the Applicant
has actual knowledge thereof,
d) the involuntary bankruptcy of the Applicant which remains unstayed
for a period of 60 days following commencement of such action,
e) the entry by the Applicant of a voluntary bankruptcy petition;
25. Provided no Event of Default has occurred, funds on deposit in the
Collection Account shall be distributed in the following order of priority:
a) to pay to the Servicer: (A) the Servicer Fee; (B) the Reinvestment
Income (except as previously remitted to the Servicer); (C) the
amounts necessary to reimburse the Servicer for reasonable costs and
expenses incurred in connection with its servicing of the Lease
Contracts; (D) any amounts received from Customers to pay certain
personal property,
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sales or use taxes, as the case may be, to the extent deposited in
the Collection Account; (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, and; (F)
the amount necessary to reimburse the Servicer for any
Nonrecoverable Advance;
b) to pay to the Trustee the Trustee Fee (and, following an Event of
Default, any expenses of the Trustee previously approved by the
Certificate Insurer) then due;
c) to pay to the Backup Servicer, the Backup Servicer Fee (and,
following an Event of Default, any expenses of the Backup Servicer
previously approved by the Certificate Insurer) then due;
d) to pay to the Certificate Insurer the insurance premium then due;
e) to pay the amount of interest due on the Class A Certificates, and
any overdue interest that may be due;
f) to pay the amount of principal due on the Class A Certificates;
g) to pay to the Certificate Insurer with interest thereon at the
"Prime Rate" of interest as set forth in the Wall Street Journal
plus 200 basis points: (A) any unpaid insurance premiums, and; (B)
reimbursement for amounts paid by the Certificate Insurer under the
insurance policy;
h) to pay to a successor Servicer after a successor Servicer has been
appointed, the amount of the Additional Servicer Fee, if any, and to
pay to such successor Servicer, the Certificate Insurer or the
Trustee, any Transition Costs, in an amount not to exceed $50,000,
incurred by the successor Servicer, the Certificate Insurer or the
Trustee not previously reimbursed;
i) on and after the Distribution Date following a Trigger Event, apply
any remaining funds to the payment of Class A Certificate principal;
j) to pay to the Servicer, any other amounts due the Servicer as
expressly provided in the Trust and Security Agreement or the
Servicing Agreement;
k) to pay to the Servicer, any remaining unreirnbursed Servicer
Advances;
l) to pay to the Trustee and the Backup Servicer any other amounts due
to the Trustee or the Backup Servicer as expressly provided in the
Trust and Security Agreement and the Servicing Agreement;
m) to pay to the Certificate Insurer any other amounts owed to the
Certificate Insurer under the Insurance and Indemnity Agreement,
and;
n) to remit any excess funds to or at the direction of the Applicant.
26. The following representations and warranties shall be made, among others,
with respect to each Lease Contract and the aggregate pool of Lease Contracts:
(A) As to including all Lease Contracts acquired through bulk purchases:
a) The information set forth in the related Lease Schedule is true and
correct as of the related Cut-off Date.
b) Such Lease Contract is pursuant to its terms an absolute and
unconditional obligation of the Customer, non-cancelable and
non-prepayable prior to the expiration of the initial term of such
Lease Contract; it does not provide for the substitution, exchange
or addition of any other items of Equipment or Leased Vehicles
pursuant to such
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Lease Contract; and the rights with respect to such Lease Contract
are assignable by the lessor thereunder without the consent of any
Person. Such 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 or Leased Vehicles.
c) Either the Company or one of the Contributors has provided to the
Trustee the sole original counterpart of such Lease Contract
previously in its possession, as amended, and the terms of such
Lease Contract have not been amended, waived or modified subsequent
to the above being provided to the Trustee, and, if another original
counterpart of such Lease Contract should subsequently come into the
possession of such party hereto, it will also be so provided to the
Trustee. On or prior to the Closing Date and each Funding Date, the
Company shall have provided to the Trustee the Application for
Certificate of Title with respect to each Leased Vehicle. Within 120
days of the Closing Date or the related Funding Date, the Company
shall have provided to the Trustee the original Certificate of Title
with respect to each Leased Vehicle.
d) There is only one original executed counterpart of such Lease
Contract that constitutes "chattel paper" for purposes of Section
9-105(l)(b) and 9-308 of the UCC, and the Electronic Ledgers have
been marked as provided in the Trust and Security Agreement.
e) Such 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.
f) Such Lease Contract is, and on the related Delivery Date will be, in
full force and effect in accordance with its respective terms, and
neither the Company, any of the Contributors nor any Customer 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 related Cut-Off Date, the Customer
has not been delinquent in making payments due under such Customer's
Lease Contract for a period in excess of 30 days (without regard to
advances, if any, made by the Servicer), and there are no
proceedings pending, or to the best of the knowledge of the parties
hereto, threatened asserting insolvency of such Customer; there has
been no other default, breach or violation and no event permitting
acceleration under such Lease Contract; there are no proceedings
pending, or to the best of the knowledge of the parties hereto,
threatened, wherein such Customer or any governmental agency has
alleged that such Lease Contract is illegal or unenforceable; and
none of the Scheduled Payments are subject to any set-off or credit
of any kind.
g) Such Lease Contract is the valid, binding and legally enforceable
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.
h) All filings (including Uniform Commercial Code filings) and
recordings as may be necessary to perfect the interest of the
Trustee in such Lease Contract and the related Lease Receivable have
been accomplished and are in full force and effect. All filings
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and recordings required to perfect the interest of the issuer and
the Trustee in the Equipment underlying such Lease Contract have
been or will be, within 30 days of the related Delivery Date,
accomplished in accordance with the Transaction Documents and are or
will be in full force and effect. All vehicles to be included in the
initial lease pool delivered on the Closing Date shall be re-titled
in the name of the Trust Estate within 120 days of the Closing Date.
Thereafter, all vehicles shall be re-titled prior to being funded
through the program.
i) Except for Lease Contracts acquired through bulk purchases, such
Lease Contract is identical to one of the form lease contracts to be
attached as an exhibit to the Trust and Security Agreement, except
for such immaterial modifications or deviations from such form Lease
Contracts which appear in certain Lease Contracts or which may
appear in the future form Lease Contracts of the Company or any of
the Contributors; any such modifications or deviations from the form
Lease Contracts 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 such Lease Contract.
d) Such Lease Contract was originated by the Company on behalf of one
of the Contributors in the ordinary course of business and meets the
Company's rating system. The origination and collection practices
used by the Company with respect to such Lease Contract have been in
all respects legal, proper, prudent and customary in the equipment
financing and servicing business; and comply in all material
respects to T&W's underwriting criteria; and no Customer has been
involved as a debtor in any bankruptcy or insolvency proceeding
during the term of the Lease Contract.
k) Any payment required to be made by a Customer subject to a PUT
("Purchase Upon Termination") clause does not exceed five times the
largest regular rental payment due under such Lease Contract. In
determining whether to lease Equipment or a Leased Vehicle to any
particular Customer, the Company considered each Customer's ability
to pay any PUT payments included in the terms of such Lease
Contract.
l) The related Lease Receivable is under a Lease Contract that has an
original stated term of at least 6 months and not more than 84
months. Such Lease Contract is within its original term and has not
had any extensions or modifications. Such Lease Contract has a
remaining term of not more than 83 months.
m) The Equipment or Leased Vehicle related to such Lease Contract was
properly delivered to the Customer in good repair, without defects
and in satisfactory order and is in proper working order as of the
related Cut-off Date. The Customer has accepted such Equipment or
Leased Vehicle leased to it and, after reasonable opportunity to
inspect and test such Equipment or Leased Vehicle, has not notified
the Company or any of the Contributors of any defects therein.
n) With the exception of the Loan Contracts, such Lease Contract
constitutes a "true lease" for federal income tax purposes. Such
Lease Contract or Loan Contract satisfies such other ratios and tax
related criteria as may be set forth herein.
o) The related Customer will have made at least one lease payment with
respect to such Lease Contract, including any security deposit or
advance payment made by the lessee upon the execution of such Lease
Contract or the delivery of the Equipment or Leased Vehicle. Such
Lease Contract obligates the related Customer to make all
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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 the related 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.
p) The related Customer is not a lessee that is a merchant with respect
to the Equipment or Leased Vehicle leased under such Lease Contract.
q) All requirements of applicable federal, State and local laws, and
regulations thereunder, including, without limitation, usury laws,
if any, in respect of such Lease Contract have been complied with in
all material respects, and such 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.
r) With the sole exception of the related Customer's right to quiet
enjoyment, such Lease Contract is not and will not be subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, whether arising out of transactions concerning
such Lease Contract or otherwise, and the operation of any of the
terms of such Lease Contract or the exercise by the Issuer or such
Customer of any right under such Lease Contract will not render such
Lease Contract unenforceable in whole or in part, and no such right
of rescission, set-off, counterclaim or defense, including a defense
arising out of a breach of such Customer's right of quiet enjoyment
of the related Equipment or Leased Vehicle, has been asserted with
respect thereto, except that certain rights or defenses may exist
under applicable law which, individually or in the aggregate, do not
make the remedies available to the Company, the Contributor or the
Issuer with respect to such Lease Contract inadequate for the
practical realization of the benefits provided thereby.
s) The Company or one of the Contributors has duly fulfilled all
obligations on the lessor's part to be fulfilled under or in
connection with such Lease Contract, including, without limitation,
giving any notices or consents necessary to effect the acquisition
of the Lease Assets by the Issuer and has done nothing to impair the
rights of the Trust and the Certificateholders in the Lease Contract
or payments with respect thereto.
t) The Lease Contract and the Equipment or Leased Vehicle have not been
sold, transferred, assigned or pledged by the Company or any of the
Contributors to any person other than the Issuer (except for
security interests in the Lease Assets which shall be terminated on
or prior to the Delivery Date), and the Issuer has all of the right,
title and interest in and to the Lease Contract, the Lease
Receivables and the related Equipment or Leased Vehicle, free and
clear of all liens and encumbrances, except for the interests of the
Customer pursuant to the Lease Contract.
u) Each Lease Contract requires that the Customer maintain the
Equipment or Leased Vehicle in good and workable order and that the
Customer obtain and maintain physical damage insurance, or provide
self-insurance or purchase insurance from the Issuer (which may be
self-insured) covering the Equipment or Leased Vehicle, Insurance
coverage required to be maintained by the Customer under each Lease
Contract is of a type customary for the equipment or vehicle covered
thereby and
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consistent with industry practice for monitoring compliance thereof;
such insurance coverage is in full force and effect.
v) The related Equipment is not subject to any titling requirements
unless such Equipment is a Leased Vehicle.
(B) As to the: pool of Lease Contracts, include all Lease Contracts acquired
through bulk purchases as of each cut-off date:
a) Customers located in any single State are obligated with respect to
Lease Contracts accounting for no more than 10% of the Aggregate
Implicit Principal Balance of the Lease Contracts except for three
States; Customers located in Washington shall not exceed 45% of the
Aggregate Implicit Principal Balance of the Lease Contracts,
California shall not exceed 20% of the Aggregate Implicit Principal
Balance of the Lease Contracts, and New York shall not exceed 20% of
the Aggregate Implicit Principal Balance of the Lease Contracts. Up
to 5% of the Aggregate Implicit Principal Balance of Lease Contracts
may be with Customers located in Canada, so long as such Customers
are obligated to pay any withholding taxes over and above net rental
payments.
b) Lease Contracts with Customers located in a particular zip code do
not account for more than 3% of the Aggregate Implicit Principal
Balance.
c) No single Customer accounts for more than 2.5% of the Aggregate
Implicit Principal Balance, and the top ten customers do not account
for more than 15% of the Aggregate Implicit Principal Balance.
d) Lease Contracts with rental payments that are not fixed for the
remaining term do not exceed 15% of the Aggregate Implicit Principal
Balance.
e) The Computer Tape, from which the selection of the Lease Contracts
was made, was made available to the Issuer's accountants who are
providing a comfort letter to MBIA and the initial holders of the
Certificates with respect to certain information 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 related
Cut-Off Date.
f) The Company used no selection procedures that identified the Lease
Contracts as being less desirable or valuable than other comparable
equipment leases owned by the Company.
g) No more than 1% of the Aggregate Implicit Principal Balance are
Lease Contracts made to a lessee who is an individual and who takes
under the lease primarily for a personal, family, or household
purpose.
h) Lease Contracts containing a PUT clause account for no more than 10%
of the Aggregate Implicit Principal Balance.
i) The aggregate Implicit Principal Balance of the Loan Contracts do
not exceed 20% of the aggregate Implicit Principal Balance of the
Lease Contracts.
j) Lease Contracts with a remaining term exceeding 60 months do not
account for more than 10% of the Aggregate Implicit Principal
Balance, provided, however, that the maximum term of any lease shall
be 84 months, and the weighted average remaining term of the lease
pool shall not exceed 48 months.
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k) At least 85% of the Aggregate Implicit Principal Balance is
attributable to Lease Contracts that provide that payment of the
Scheduled Payments due thereon are to be made monthly.
1) All Lease Contracts are denominated in U.S. dollars.
m) Lease Contracts with a remaining term exceeding 60 months account
for no more than 10% of the Aggregate IPB. The weighted average
remaining term of the Lease Contracts does not exceed 48 months.
n) Unless otherwise approved in writing by MBIA, no more than 10% of
the Lease Contracts shall be acquired by T&W in bulk purchases,
provided, however, that no more than 5% of the Implicit Principal
Balance shall relate to bulk purchases by T&W from any single
entity.
o) All bulk purchases are subject to the criteria set forth in No. 27,
below.
p) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in the restaurant business
(as defined by SIC code) shall not exceed 25%; provided, however,
that the Aggregate Implicit Balance of all Lease Contracts for which
the related Equipment relates to Customers in the restaurant
business (as defined by SIC code) shall not exceed 26.81%;
q) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in the grocery store business
(as defined by SIC code) shall not exceed 20%;
r) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in the refuse system business
(as defined by SIC code) shall not exceed 15%;
s) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in the funeral home and
crematory business (as defined by SIC code) shall not exceed 20%;
t) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in any other industry (as
defined by SIC code) shall not exceed 10%;
27. The following provisions shall be included in the Contribution Agreement
with respect to the acquisition of Lease Contracts through bulk purchases:
a) Prior to making any bulk purchase, T&W shall deliver to MBIA for
review and approval a description of T&W's policies and procedures
with respect to bulk purchases including, but not limited to, (i) a
description of all due diligence performed on the party from whom
the Lease Contracts are purchased; (ii) a description of any
re-underwriting procedures performed by T&W, and; (iii) any Lease
Contract File and legal document review procedures performed by T&W.
b) T&W shall provide all of the same representations, warranties and
covenants for the leases acquired through bulk purchases as for
leases originated by T&W itself. In
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addition, T&W shall represent and warrant that the underwriting
criteria of the originator of the leases to be acquired through bulk
acquisitions comply in all material respects with T&W's underwriting
criteria.
c) With respect to each bulk purchase, T&W shall fully re-underwrite
all Customers that comprise 1% or more of the Aggregate Implicit
Principal Balance, and a third party acceptable to MBIA will be
permitted to re-underwrite a sample of Lease Contracts acquired
through bulk purchases. This review shall be made at T&W's expense.
d) T&W shall provide to MBIA additional information with respect to the
performance of Lease Contracts acquired through bulk purchases. This
information shall be reported in the same format as that used for
the aggregate portfolio (including both leases originated and
acquired by T&W).
e) The inclusion of the Lease Contracts acquired through bulk purchases
shall not adversely affect the risk assigned by either Rating Agency
in connection with MBIA's insurance of the transaction.
f) On each Funding Date, T&W shall cause to be delivered to the Trustee
and MBIA an opinion of counsel with respect to the treatment of the
transfer from each originator of Lease Assets acquired through bulk
purchase to T&W or the Contributors, as the case may be, as a "true
sale" and the perfected first priority security interest of the
Trustee in such Lease Assets.
28. An operational review of the Servicer prepared by a third party acceptable
to the Certificate Insurer shall be delivered to the Certificate Insurer on an
annual basis. The first such review shall occur before the end of the 1997
calendar year, and such review may be in conjunction with a similar review
undertaken by other parties, provided the scope of such review is acceptable to
the Certificate Insurer. This review shall complement the reporting described in
Section IV of the Servicing Agreement dated as of July 1, 1995 related to the
MBIA-insured T&W Funding Company IV, L.L.C. transaction.
29. On a quarterly basis, MBIA may require a third party to re-underwrite a
sample of the leases sold into the Trust since the last re-underwriting review.
Such review may be in conjunction with a similar review undertaken by other
parties. provided the scope of such review is acceptable to the Certificate
Insurer,
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30. This Commitment may be signed in counterpart by the parties hereto.
Dated this 5th day of February, 1997.
MBIA Insurance Corporation
By: /s/ [SIG]
-------------------------------------
Title: Assistant Secretary
By: /s/ [SIG]
-------------------------------------
Title: PRESIDINT
T&W Funding Company 1, L.L.C.
By: /s/ [SIG]
-------------------------------------
Title: VICE PRESIDENT
16
<PAGE> 1
Exhibit 10.10
CUSTODIAN AGREEMENT
This Custodian Agreement ("Agreement") is entered into by and among T &
W Financial Corporation ("T & W"), T & W Funding Company VI, L.L.C. (the
"Company"), T & W Funding Company I, L.L.C. (the "Transferor"), Seafirst Bank
N.A., a national banking association and CoreStates Bank, N.A., a national
banking association (individually, a "Holder" and collectively, the "Holders"),
and Norwest Bank Minnesota, National Association as custodian of the various
lease contracts under this Agreement (the "Custodian"), on this 4th day of
February, 1997.
RECITALS
WHEREAS, the Holders are holding certain lease contracts listed on
Schedule A hereof (the "Lease Contracts"); and
WHEREAS, the Custodian is willing to hold the Lease Contracts on behalf
of the Holders; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, each Holder is delivering to the Custodian a certain Release and
Extinguishment of Rights to Certain Collateral by each Holder for the benefit of
the Transferor, the Company, and, with respect to Seafirst Bank N.A., T & W,
dated as of February 7, 1997 (each, a "Release Agreement"), to be held by the
Custodian in escrow in accordance with the terms hereof;
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
CUSTODY OF LEASE CONTRACTS
Section 1.1. Custodian to Act as Agent; Acceptance of Lease Contracts.
Upon the delivery by a Holder of its respective Lease Contracts and its Release
Agreement to the Custodian, the Custodian shall issue to such Holder in exchange
therefor, a receipt (the "Receipt") in the form attached hereto as Exhibit A. By
the issuance of the Receipt, the Custodian, as the duly appointed agent of the
Holder delivering the related Lease Contracts, shall be deemed to have
acknowledged receipt of such Lease Contracts, subject to the verification
provisions in the Receipt for each individual contract, and to have declared
that it holds and will hold such Lease Contracts and the related Release
Agreement as agent for such Holder from the
<PAGE> 2
date of such receipt to the earlier of (i) the confirmation by such Holder of
the receipt of the funds as described in Section 1.3 hereof or (ii) the request
by such Holder to return its Lease Contracts and Release Agreement (the "Release
Date"). During the period prior to the Release Date (the "Review Period"), the
Custodian shall not release any Lease Contracts or any portion thereof to any
person other than to the Holder which delivered such Lease Contracts, and the
Custodian shall allow such Holder and its agents access to its respective Lease
Contracts during such period for purposes of its or their review thereof. In
addition, the Custodian shall not release or deliver a Release Agreement prior
to the Release Date. The Custodian shall use due care in the custody of the
Lease Contracts and the Release Agreements as is customary in the banking
industry and in the Custodian's care of chattel paper pledged for its benefit.
Section 1.2. Custodian's Review of Lease Contracts. Not later than five
(5) business days following its receipt of the final delivery of Lease
Contracts, the Custodian shall (a) verify that each of said contracts delivered
are listed on Schedule A attached hereto, (b) notify T & W, the Transferor and
the Company of any contracts listed on Schedule A which are not in the
Custodian's possession, and (c) return any contract in the Custodian's
possession which is not listed on Schedule A to the respective Holder which
delivered the same. Each Holder shall be entitled to have one or more of its or
their representatives present during the time the Custodian is performing such
verification or otherwise handling the Lease Contracts.
Section 1.3. Release of Lease Contracts. A Holder may, at any time
during the Review Period, upon written request, require that the Custodian
release any or all of the Lease Contracts delivered by such holder to such
Holder or its designee. Upon the receipt by a Holder of its "Discharge Amount",
as defined in its Release Agreement, and telephonic notice by the Holder to the
Custodian the Custodian is authorized to release such Release Agreement and
deliver it to the Transferor and the Company on behalf of such Holder and the
respective Lease Contracts shall be effectively released from this Custodian
Agreement. Each Holder agrees to notify the Custodian immediately upon receipt
of the Discharge Amount. When the Release Date has occurred with respect to each
Holder, this Agreement shall terminate other than the Custodian's rights to
indemnification hereunder.
ARTICLE II
CONCERNING THE CUSTODIAN
Section 2.1. Merger or Consolidation of Custodian. Any Person into which
the Custodian 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 Custodian shall be a party, or any Person succeeding to the business of the
Custodian, shall be the successor of the Custodian hereunder without any further
act by the Custodian.
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Section 2.2. Representations of the Custodian. The Custodian hereby
represents that it is a depository institution subject to supervision or
examination by a federal or state authority, has a combined capital and surplus
of at least $100,000,000 and is qualified to do business in the jurisdiction in
which it will hold any Lease Contract.
Section 2.3. Custodian's Rights. (a) The Custodian may rely on and shall
be protected in acting upon any certificate, instrument, opinion, notice,
letter, telegram or other document delivered to it and which in good faith it
reasonably believes to be genuine and which has been signed by the proper party
or parties. The Custodian may rely conclusively on and shall be protected by in
acting upon (i) the written instructions of any designated officer of a Holder
or (ii) the verbal instructions of a Holder including without limitation, any
verbal instructions received pursuant to Section 1.3 hereof.
(b) The Custodian may consult counsel satisfactory to it and the opinion
of such 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 accordance with the opinion of such counsel.
(c) The Custodian shall not be liable for any error of judgment, or for
any act done or step taken or omitted by it, in good faith, or for any mistakes
of fact or law, or for anything which it may do or refrain from doing in
connection herewith, except in the case of its willful misconduct or negligent
performance or omission.
(d) The Custodian makes no warranty or representation and shall have no
responsibility (except as expressly set forth in this Agreement) as to the
completeness, validity, sufficiency, value, genuineness, ownership or
transferability of the Lease Contracts, and will not be required to and will not
make any representations as to the validity or value (except as expressly set
forth in this Agreement) of any of the Lease Contracts. The Custodian shall not
be obligated to take any legal action hereunder which might in its judgment
involve any expense or liability unless it has been furnished with reasonable
indemnity.
(e) T & W shall indemnify and hold the Custodian harmless from and
against all liabilities, damages, losses, fees (including reasonable attorney's
fees) and costs and expenses incurred by the Custodian as a result of any legal
proceedings or in defending against any action or claim relating to the
performance of its duties hereunder, unless such liabilities, damages, loss,
fees, costs and expenses shall arise from the Custodian's negligence or willful
misconduct. The Custodian's rights to indemnification shall survive the
termination of this Agreement.
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<PAGE> 4
ARTICLE III
MISCELLANEOUS PROVISIONS
Section 3.1. Notice. Unless otherwise specifically provided, all
notices, requests, consents and demands and other communications required under
this Agreement or pursuant to any other instrument or document delivered
hereunder shall be in writing and may be delivered personally, by telegram or
telex, or by facsimile transmission (with an original forwarded thereafter by
first class mail), or by registered or certified mail, postage prepaid, return
receipt requested, at the addresses specified below (unless changed by the
particular party whose address is stated herein by similar notice in writing to
all other parties hereto), in which case the notice will be deemed delivered
when received:
(a) to T & W Financial Corporation at 6416 Sixteenth Street
East, Tacoma, Washington 98424 Attention: Michael A. Price;
(b) to T & W Funding Company I, L.L.C. at 6416 Sixteenth Street
East, Tacoma, Washington 98424 Attention: Michael A. Price;
(c) to T & W Funding Company VI, L.L.C. at 6416 Sixteenth Street
East, Tacoma, Washington 98424 Attention: Michael A. Price;
(d) to CoreStates Bank, N.A. at 1500 Market Street,
Philadelphia, Pennsylvania 19101 Attention: Scott Gates;
(e) to Seafirst Bank N.A. at 1001 Fourth Avenue, Fourth Floor,
Seattle, Washington 98124 Attention: William Pitt; or
(f) to the Custodian at Sixth Street and Marquette Avenue,
Minneapolis, Minnesota 55479-0067 Attention: Daniel Rolczynski.
Section 3.2. Amendments. No modification or amendment of or supplement
to this Agreement shall be valid or effective unless the same is in writing and
signed by all parties hereto.
Section 3.3. Governing Law. This Agreement shall be deemed a contract
made under the laws of, and to be performed in, the State of Minnesota and shall
be construed and enforced in accordance with and governed by the laws of the
State of Minnesota.
Section 3.4. Counterparts. This Agreement may be executed in any number
of counterparts, and by the different parties hereto on the same or separate
counterparts, each of
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<PAGE> 5
which counterparts, when so executed and delivered shall be deemed to be an
original instrument and all of the counterparts, taken together, shall
constitute one and the same Agreement.
Section 3.5. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
T & W FINANCIAL CORPORATION
By: /s/ THOMAS W. PRICE
------------------------------
Name: Thomas W. Price
Title: President
T & W FUNDING COMPANY VI, L.L.C.
By: /s/ THOMAS W. PRICE
------------------------------
Name: Thomas W. Price
Title: President
T & W FUNDING COMPANY I, L.L.C.
By: /s/ THOMAS W. PRICE
------------------------------
Name: Thomas W. Price
Title: President
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
CORESTATES BANK, N.A.
By
Name:
Title:
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
SEAFIRST BANK N.A.
By
Name:
Title:
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Custodian
By
Name:
Title:
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<PAGE> 10
EXHIBIT A
RECEIPT FOR LEASE CONTRACTS
Norwest Bank Minnesota, National Association, as Custodian (the
"Custodian") under the Custodian Agreement among the Holders defined therein
(the "Holders") and the Custodian, dated February 5, 1997 (the "Custodian
Agreement"), acknowledges receipt from _______________________ of its Lease
Contracts delivered pursuant to the Custodian Agreement. In accordance with the
Custodian Agreement, the Custodian agrees to (a) verify that each of said
contracts delivered are listed on the respective Schedule attached hereto, (b)
notify T & W Financial Corporation of any contracts listed on Schedule A thereto
which are not in the Custodian's possession, and (c) return any contract in the
Custodian's possession which is not listed on the Schedule A thereto to the
Holder which delivered the same within the time period described therein.
IN WITNESS WHEREOF, I have hereunto executed this Receipt, the ______
day of February, 1997.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By
Name:
Title:
<PAGE> 11
SCHEDULE A
THE LEASE CONTRACTS
<PAGE> 1
EXHIBIT 10.11
INTEREST RATE HEDGE ASSIGNMENT
THIS ASSIGNMENT dated as of February 7, 1997, made by T&W Financial
Corporation (the "Assignor") to CoreStates Bank, N.A. ("CoreStates"), as
Collateral Agent (in such capacity, the "Collateral Agent") under the Security
Agreement referred to below.
PRELIMINARY STATEMENTS:
(1) T&W Funding Company I, L.C.C. ("Funding"), T&W Financial Corporation
("TWFC") and Norwest Bank Minnesota, National Association (the "Trustee") have
entered into a Trust and Security Agreement dated as of February 1, 1997 (the
"Trust and Security Agreement").
(2) TWFC, Funding and Centre Square Funding Corporation ("Centre
Square") have entered into a Certificate Purchase Agreement dated as of February
7, 1997 (the "Certificate Purchase Agreement" and, together with the Trust and
Security Agreement, the "Agreements"). Capitalized terms used and not defined
herein have the meanings given to them in the Certificate Purchase Agreement.
(3) Centre Square will pledge its rights under the Agreements to the
Collateral Agent for the benefit of the Liquidity Banks and the holders of
Commercial Paper pursuant to a Security Agreement, dated February 7, 1997
between Centre Square and the Collateral Agent (the "Security Agreement").
(4) It is a condition precedent to the purchase of the Certificates by
Centre Square under the Certificate Purchase Agreement that the Assignor shall
have made the assignment contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and in order
to induce Centre Square to purchase the Certificates, the Assignor hereby agrees
as follows:
SECTION 1. Assignment. The Assignor hereby assigns to the Collateral
Agent, for the benefit of Centre Square, all of the Assignor's right, title and
interest in and to the Swap Agreement entered into by the Assignor in connection
with the Agreements (the "Assigned Agreement"), including, without limitation,
(i) all rights of the Assignor to receive moneys due and to become due under or
pursuant to the Assigned Agreement, (ii) all rights of the Assignor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to the
Assigned Agreement, (iii) claims of the Assignor for damages arising out of or
for breach of or default under the Assigned Agreement (iv) the right of the
Assignor to terminate the Assigned Agreement, to perform thereunder and to
compel performance and otherwise exercise all remedies thereunder, and (v) all
proceeds of any and all of the foregoing (the
<PAGE> 2
assignment of the Assignor's right, title and interest to and in the Assigned
Agreement and the rights thereunder being referred to as the "Assigned Rights").
The Assignor hereby acknowledges the Assigned Rights constitute part of the
Collateral under and as defined in the Security Agreement and that the
assignment contained herein is subject to the terms and provisions of the
Security Agreement with respect to any Collateral to the extent such terms and
provisions are not inconsistent herewith.
SECTION 2. Assignor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Assignor shall remain liable under the Assigned
Agreement to perform all of its duties and obligations thereunder to the same
extent as if this Assignment had not been executed, (b) the exercise by the
Collateral Agent of any of the rights hereunder shall not release the Assignor
from any of its duties or obligations under the Assigned Agreement, and (c)
neither the Collateral Agent, the Liquidity Banks, the holders of the
Commercial Paper, MBIA nor Centre Square shall have any obligation or liability
under the Assigned Agreement by reason of this Agreement, nor shall any of them
be obligated to perform any of the obligations or duties of the Assignor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 3. Covenants. The Assignor covenants as follows:
(a) Promptly following the execution of the Assigned Agreement, the
Assignor shall obtain and deliver to the Collateral Agent an Acknowledgment and
Consent executed by the parties to the Assigned Agreement (other than the
Assignor), in substantially the form of Exhibit A hereto.
(b) The Assignor shall not, without the prior written consent of the
Collateral Agent (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the Assigned
Rights, or create or permit to exist any lien, security interest, option or
other charge or encumbrance upon or with respect to any of the Assigned Rights,
except for the assignment created by this Assignment; (ii) cancel or terminate
the Assigned Agreement or consent to or accept any cancellation or termination
thereof; (iii) amend or otherwise modify the Assigned Agreement or give any
consent, waiver or approval thereunder; (iv) waive any default under or breach
of the Assigned Agreement; or (v) take any other action in connection with the
Assigned Agreement which would impair the value of the interest or rights of
such Person thereunder or which would impair the interests or rights of the
Agent.
(c) The Assignor agrees that from time to time, at its own expense,
it will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that the
Collateral Agent may reasonably request, in order to perfect and protect the
assignment granted or purported to be granted hereby or to enable the Collateral
Agent to exercise and enforce its rights and remedies hereunder with respect to
any of the Assigned Rights.
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(d) The Assignor shall keep the office where it keeps its records
concerning the Assigned Rights at 6416 Pacific Heights E., Tacoma, Washington
98424. Until the Collateral Agent requests that the Assignor deliver the
original copies of the Assigned Agreement to the Collateral Agent, the Assignor
will hold and preserve the original copy of the Assigned Agreement and will
permit representatives of the Collateral Agent at any time during normal
business hours to inspect and make copies thereof.
(e) The Assignor shall at its expense (i) perform and observe all
the terms and provisions of the Assigned Agreement to be performed or observed
by it, maintain the Assigned Agreement in full force and effect (until such
Assigned Agreement expires or terminates by its terms), enforce the Assigned
Agreement in accordance with its terms, and take all such action to such end as
may be from time to time reasonably requested by the Collateral Agent; and (ii)
furnish to the Collateral Agent promptly upon receipt thereof copies of all
notices, requests and other documents received by the Assignor under or pursuant
to the Assigned Agreement, and from time to time (A) furnish to the Collateral
Agent such information and reports regarding the Assigned Rights as the
Collateral Agent may reasonably request and (B) upon request of the Collateral
Agent make to any other party to the Assigned Agreement such demands and
requests for information and reports or for action as the Assignor is entitled
to make thereunder.
SECTION 4. Payments Under the Assigned Agreements. Until the Final
Payment Date (as defined in the Trust and Security Agreement) the Collateral
Agent shall receive and hold all payments owing under the Assigned Agreement and
apply such payments as provided in the Security Agreement. After the Final
Payment Date, this Assignment shall terminate and any and all payments, if any,
received by the Collateral Agent under the Assigned Agreement shall be held in
trust by the Collateral Agent and forthwith delivered to the Assignor at its
address specified in Section 10.
SECTION 5. Collateral Agent Appointed Attorney-in-Fact. The Assignor
hereby appoints the Collateral Agent its attorney-in-fact, with full authority
in the place and stead of it and in its name, to take, from time to time in the
Collateral Agent's discretion, any action and to execute any instrument which
the Collateral Agent may deem necessary or advisable to accomplish the purposes
of this Assignment, including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
connection with the Assigned Agreement and the Assigned Rights;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection therewith; and
(c) to exercise any and all rights and remedies of the Assignor
under or in connection with the Assigned Agreement or otherwise in respect of
the Assigned Rights,
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including, without limitation, the filing of any claims or taking of any action
or institution of any proceedings which the Collateral Agent may deem necessary
or desirable for the collection of any of the Assigned Rights or otherwise to
enforce compliance with the terms and conditions of the Assigned Agreement or
any of the Assigned Rights.
SECTION 6. Collateral Agent May Perform. If the Assignor fails to
perform any agreement contained herein, the Collateral Agent, in its sole
discretion, may itself perform, or cause performance of, such agreement, but
shall be under no obligation to so act, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Assignor under Section
8.
SECTION 7. The Collateral Agent's Duties. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest in the Assigned
Agreement and the Assigned Rights and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any of the original
copy of the Assigned Agreement in its possession and the accounting for moneys
actually received by it hereunder, the Collateral Agent shall have no duty as to
the Assigned Agreement or the Assigned Rights or as to the taking of any
necessary steps to preserve rights against any parties or any other rights
pertaining to the Assigned Agreement or the Assigned Rights. The Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of any of the original copy of the Assigned Agreement in its
possession if the Assigned Agreement is accorded treatment substantially equal
to that which the Collateral Agent accords its own property.
SECTION 8. Indemnity and Expenses. The Assignor agrees to indemnify
Centre Square, the Collateral Agent and their respective successors, assigns and
Affiliates from and against any and all claims, losses and liabilities
(including reasonable attorneys' and paralegals' fees) growing out of or
resulting from this Assignment (including, without limitation, enforcement of
this Assignment), except claims, losses or liabilities resulting from such
indemnitee's gross negligence or willful misconduct.
SECTION 9. Amendments; Etc. No amendment or waiver of any provision of
this Assignment, and no consent to any departure by the Assignor herefrom shall
in any event be effective unless the same shall be in writing and signed by MBIA
and the Collateral Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 10. Addresses for Notices. All notices and other communications
provided for hereunder shall be given in the manner and to each party hereto at
the following addresses:
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if to the Assignor:
T&W Financial Corporation
6416 Pacific Heights E.
Tacoma, Washington 98424
Attention: President
Facsimilie: (206) 926-0739
if to CoreStates:
CoreStates Bank, N.A.
1345 Chestnut Street
Philadelphia, PA 19101
Attention: Commercial Paper Product Manager - Cindy Barton
Facsimilie: (215) 973-1887
SECTION 11. Continuing Assignment; Assignments under Agreements. This
Assignment shall (i) remain in full force and effect until the Final Payment
Date, (ii) be binding upon the Assignor and its successors and assigns, and
(iii) inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent, Centre Square and their
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (iii), Centre Square may assign or otherwise transfer
all or any portion of its rights and obligations hereunder to the extent
permitted under the Certificate Purchase Agreement.
SECTION 12. No Bankruptcy Petition. The Collateral Agent covenants and
agrees that, until the later to occur of (i) one year and a day after the Final
Payment Date paid in full and (ii) the cancellation of the Surety Bond, the
undersigned will not institute against Funding, or join any other person in
instituting against Funding, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or similar proceeding under the laws of
any jurisdiction.
SECTION 13. Governing Law; Terms. This Assignment shall be governed by
and construed in accordance with the laws of the State of New York without
regard to conflicts of law principles.
SECTION 14. Counterparts. This Assignment may be executed in
counterparts, each of which when executed by the parties hereto shall be deemed
an original and all of which together shall be deemed the same Agreement.
SECTION 15. Third Party Beneficiary. MBIA is intended to be, and hereby
is, a third party beneficiary of this Assignment with respect to Sections 9 and
12 hereof.
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IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
T&W FINANCIAL CORPORATION
By /s/ [SIG]
-------------------------------
TITLE: Chief Executive Officer
Agreed and Accepted as of this 7th
day of February, 1997.
CORESTATES BANK, N.A.
as Collateral Agent
By /s/ JOHN L. DALE
-------------------------------
Title: Vice President
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<PAGE> 7
EXHIBIT A
ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledges notice of, and consents to the terms
and provisions of, that certain Interest Rate Hedge Assignment (the
"Assignment") dated as of February 7, 1997 made by T&W Financial Corporation
(the "Assignor") to CoreStates Bank, N.A. ("CoreStates"), as collateral agent
(the "Collateral Agent"). Capitalized terms used herein without definition shall
have the meanings set forth in the Assignment. The undersigned hereby agrees as
follows:
(a) The undersigned will make all payments to be made by it under or
in connection with the Master ISDA Agreement dated February 7, 1997, between
Assignor and the undersigned and all schedules executed in connection herewith
(the "Assigned Agreement") and the confirmation dated February 7, 1997,
(together with any other confirmations to be entered into with the Assignor, the
"Confirmations") directly to the Collateral Agent by wire transfer of
immediately available funds to the following account: T&W Funding Operating
Sub-Account of the "Centre Square Funding Corporation Operating Account,"
Account Number 14116-03433 or to such other office or account as CoreStates may
direct.
(b) All payments referred to in paragraph (a) above shall be made by
the undersigned irrespective of, and without deduction for, any counterclaim,
defense, recoupment or set-off and shall be final, and the undersigned will not
seek to recover from the Collateral Agent for any reason any such payment once
made.
(c) The Collateral Agent shall be entitled to exercise any and all
rights and remedies of the Assignor under the Assigned Agreement and
Confirmations in accordance with the terms of the Assignment.
(d) The undersigned will not, without the prior written consent of
the Collateral Agent, (i) cancel or terminate the Assigned Agreement or consent
to or accept any cancellation or termination thereof (other than the expiration
or termination thereof by its terms) or (ii) amend or otherwise modify the
Assigned Agreement.
(e) The Assignor shall remain liable under the Assigned Agreement to
perform all of its duties and obligations thereunder to the same extent as if
the Assignment had not been executed.
(f) The undersigned agrees that payments made to the undersigned
pursuant to Section 4.3 of the Security Agreement shall be deemed to be payments
made on behalf of the Assignor in connection with its obligations under the
Assigned Agreement.
<PAGE> 8
This Consent and Agreement shall be binding upon the undersigned and its
successors and assigns, and shall inure, together with the rights and remedies
of the Collateral Agent hereunder, to the benefit of the Collateral Agent,
Centre Square, and their respective successors, transferees and assigns. This
Consent and Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regards to conflicts of law principles.
The undersigned agrees that it will not amend, modify or alter the
Assigned Agreement without the prior written consent of MBIA and the Collateral
Agent.
The undersigned agrees that it will not initiate against, or join any
person in instituting against, T&W Funding Company I, L.C.C., any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or other
similar proceeding under the laws of any jurisdiction until the later of (i) one
year and a day after the Final Payment Date and (ii) cancellation of the Surety
Bond (as such defined terms are defined in the Trust and Security Agreement and
the Certificate Purchase Agreement, respectively). The undersigned agrees that
each of the Collateral Agent and MBIA shall have the right to enforce the terms
hereof.
IN WITNESS WHEREOF, the undersigned has duly executed this Consent and
Agreement as of the date set opposite its name below.
Dated: February 7, 1997
CORESTATES BANK, N.A.,
as Counterparty
By
-------------------------------
Title:
2
<PAGE> 1
EXHIBIT 10.12
(Local Currency - Single Jurisdiction)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of February 4, 1997
CoreStates Bank, N.A. and T&W Financial Corporation
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) Definitions. The terms defined in Section 12 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the
provisions of the Schedule and the other provisions of this Master Agreement,
the Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the relevant
Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than
by payment), such delivery will be made for receipt on the due date in
the manner customary for the relevant obligation unless otherwise
specified in the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.
Copyright (C) 1992 by International Swap Dealers Association, Inc.
<PAGE> 2
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the
other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay to the other party the excess of
the larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii) above
will not, or will cease to, apply to such Transactions from such date). This
election may be made separately for different groups of Transactions and will
apply separately to each pairing of branches or offices through which the
parties make and receive payment or deliveries.
(d) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment obligation
will, to the extent permitted by law and subject to Section 6(c), be required
to pay interest (before as well as after judgment) on the overdue amount to the
other party on demand in the same currency as such overdue amount, for the
period from (and including) the original due date for payment to (but excluding)
the date of actual payment, at the Default Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. If, prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party defaults in the
performance of any obligation required to be settled by delivery, it will
compensate the other party on demand if and to the extent provided for in the
relevant Confirmation or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be
deemed to be repeated by each party on each date on which a Transaction is
entered into) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the
laws of the jurisdiction of its organisation or incorporation and, if
relevant under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any
other documentation relating to this Agreement to which it is a party,
to deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorise such execution, delivery and
performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment of
any court or other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting it or any
of its assets;
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(iv) Consents. All governmental and other consents that are required
to have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party any
forms, documents or certificates specified in the Schedule or any Confirmation
by the date specified in the Schedule or such Confirmation or, if none is
specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to
maintain in full force and effect all consents of any governmental or other
authority that are required to be obtained by it with respect to this Agreement
or any Credit Support Document to which it is a party and will use all
reasonable efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) Events of Default. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or
2(d) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)(i) or
2(d) or to give notice of Termination Event) to be complied with or
performed
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<PAGE> 4
by the party in accordance with this Agreement if such failure is not
remedied on or before the thirtieth day after notice of such failure
is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to
be complied with or performed by it in accordance with any
Credit Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of this
Agreement (in either case other than in accordance with its
terms) prior to the satisfaction of all obligations of such
party under each Transaction to which such Credit Support
Document relates without the written consent of the other party;
or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) Misrepresentation. A representation made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider
of such party in this Agreement or any Credit Support Document proves to
have been incorrect or misleading in any material respect when made or
repeated or deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to
any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified Transaction
(or such default continues for at least three Local Business Days if
there is no applicable notice requirement or grace period) or (3)
disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however described)
in respect of such party, any Credit Support Provider of such party or
any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in the Schedule)
which has resulted in such Specified Indebtedness becoming, or becoming
capable at such time of being declared, due and payable under such
agreements or instruments, before it would otherwise have been due and
payable or (2) a default by such party, such Credit Support Provider or
such Specified Entity (individually or collectively) in making one or
more payments on the due date thereof in an aggregate amount of not less
than the applicable Threshold Amount under such agreements or
instruments (after giving effect to any applicable notice requirement or
grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such
party or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights,
or a petition is presented for its
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winding-up or liquidation, and, in the case of any such
proceeding or petition instituted or presented against it, such
proceeding or petition (A) results in a judgment of insolvency
or bankruptcy or the entry of an order for relief or the making
of an order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each case within
30 days of the institution or presentation thereof; (5) has a
resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation,
amalgamation or merger); (6) seeks or becomes subject to the
appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar
official for it or for all or substantially all its assets; (7)
has a secured party take possession of all or substantially all
its assets or has a distress, execution, attachment,
sequestration or other legal process levied, enforced or sued on
or against all or substantially all its assets and such secured
party maintains possession, or any such process is not
dismissed, discharged, stayed or restrained, in each case within
30 days thereafter; (8) causes or is subject to any event with
respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events
specified in clauses (1) to (7) (inclusive); or (9) takes any
action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:--
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit Support
Provider under this Agreement or any Credit Support Document to
which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other
party to this Agreement; or
(2) the benefits of any Credit Support Document fail to
extend (without the consent of the other party) to the
performance by such resulting, surviving or transferee entity of
its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, and, if specified to be applicable, a
Credit Event Upon Merger if the event is specified pursuant to (ii) below or an
Additional Termination Event if the event is specified pursuant to (iii)
below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into, or
due to the promulgation of, or any change in, the interpretation by any
court, tribunal or regulatory authority with competent jurisdiction of
any applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make
a payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material
provision of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such
party to perform, any contingent or other obligation which the
party (or such Credit Support Provider) has under any Credit
Support Document relating to such Transaction;
(ii) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers
all or substantially all its assets to, another entity and such action
does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
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(iii) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying,
the occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and will not
constitute an Event of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) TWO AFFECTED PARTIES. If an Illegality under Section (5(b)(i)(l)
occurs and there are two Affected Parties, each party will use all
reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iii) RIGHT TO TERMINATE. If:--
(1) an agreement under Section 6(b)(ii) has not been
effected with respect to all Affected Transactions within 30
day after an Affected Party gives notice under Section 6(b)(i);
or
(2) an Illegality other than that referred to in Section
6(b)(ii), a Credit Event Upon Merger or an Additional
Termination Event occurs.
either party in the case of an Illegality, any Affected Party in the
case of an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the case
of a Credit Event Upon Merger or an Additional Termination Event if
there is only one Affected Party may, by not more than 20 days notice to
the other party and provided that the relevant Termination Event is then
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
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(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(d) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving details
of the relevant account to which any amount payable to it is to be paid.
In the absence of written confirmation from the source of a quotation
obtained in determining a Market Quotation, the records of the party
obtaining such quotations will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment), from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:--
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the
sum of the Settlement Amounts (determined by the Non-defaulting
Party) in respect of the Termination Transactions and the Unpaid
Amounts owing to the Non-defaulting Party over (B) the Unpaid
Amounts owing to the Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the Unpaid
Amounts owing to the Non-defaulting Party less (B) the Unpaid
Amounts owing to the Defaulting Party. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting
Party; if it is a negative number, the Non-defaulting Party will
pay the absolute value of that amount to the Defaulting Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's Loss
in respect of this Agreement. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting Party; if it
is a negative
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<PAGE> 8
number, the Non-defaulting Party will pay the absolute
value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date
results from a Termination Event:-
(1) ONE AFFECTED PARTY. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4),
if Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed
to be references to the Affected Party and the party which is
not the Affected Party, respectively, and, if Loss applies and
fewer than all the Transactions are being terminated, Loss shall
be calculated in respect of all Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected
Parties:-
(A) if Market Quotation applies, each party will
determine a Settlement Amount in respect of the
Terminated Transactions, and an amount will be payable
equal to (I) the sum of (a) one-half of the difference
between the Settlement Amount of the party with the
higher Settlement Amount ("X") and the Settlement
Amount of the party with the lower Settlement Amount
("Y") and (b) the Unpaid Amounts owing to X less (II)
the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss
in respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable
equal to one-half of the difference between the Loss of
the party with the higher Loss ("X") and the Loss of the
party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X;
if it is a negative number, X will pay the absolute value of
that amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will
be subject to such adjustments as are appropriate and permitted by law
to reflect any payments or deliveries made by one party to the other
under this Agreement (and retained by such other party) during the
period from the relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of
bargain and the loss of protection against future risks and except as
otherwise provided in this Agreement neither party will be entitied to
recover any additional damages as a consequence of such losses.
7. TRANSFER
Neither this Agreement nor any interest or obligation in or under this Agreement
may be transferred (whether by way of security or otherwise) by either party,
without the prior written consent of the other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to
any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
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8. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supersedes all oral communication and prior writings with respect
thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing
evidenced by a facsimile transmission) and executed by each of the
parties or confirm by an exchange of telexes or electronic messages on
an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will
survive the termination of any Transactions.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and
privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts
(including by facsimile transmission), each of which will be
deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms
(whether orally or otherwise). A Confirmation shall be entered
into as soon as practicable and may be executed and delivered in
counterparts (including by facsimile transmission) or be created
by an exchange of telexes or by an exchange of electronic
messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding
supplement to this Agreement. The parties will specify therein
or through another effective means that any such counterpart,
telex or electronic message constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to
operate as a waiver and a single or partial exercise of any right,
power or privilege will not be presumed to preclude any subsequent or
further exercise, of that right, power or privilege or the exercise of
any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken
into consideration in interpreting this Agreement.
9. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for an against all reasonable out-of-pocket expenses, including legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement or any Credit Support Document to which the
Defaulting Party is a party or by reason of the early termination of any
Transaction, including, but not limited to, costs of collection.
10. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed as indicated:-
(i) if in writing and delivered in person or by courier, on the date
it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
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(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form,
it being agreed that the burden of proving receipt will be on the sender
and will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
11. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any such action or proceedings relating
to this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in New York
City, if this Agreement is expressed to be governed by the laws of the
State of New York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings,
that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
12. DEFINITIONS
As used in this Agreement:-
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
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"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an illegality, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event all
Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:-
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified
as such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iii).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(a).
"Law" includes any treaty, law, rule or regulation and "lawful" and "unlawful"
will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated
under Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by Section 2(b), in
the place where the relevant new account is to be located and (d) in relation
to Section 5(a)(v)(2), in the relevant locations for performance with respect
to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such
party but without duplication, loss or cost incurred as a result of its
terminating, liquidating, obtaining or reestablishing any ledge or related
trading position (or any gain
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<PAGE> 12
resulting from any of them). Loss includes losses and costs (or gains) in
respect of any payment or delivery required to have been made (assuming
satisfaction of each applicable condition precedent) on or before the relevant
Early Termination Date and not made, except so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a
party's legal fees and out-of-pocket expenses referred to under Section 9. A
party will determine its Loss as of the relevant Early Termination Date, or, if
that is not reasonably practicable, as of the earliest date thereafter as is
reasonably practicable. A party may (but need not) determine its Loss by
reference to quotations of relevant rates or prices from one or more leading
dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 6(g)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under
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<PAGE> 13
this Agreement, another contract, applicable law or otherwise) that is exercised
by, or imposed on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Market Quotations (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions for which a Market Quotation is
determined; and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond
interest, rate option, foreign exchange transaction, cap transaction, option,
floor transaction, collar transaction, currency swap transaction, cross-currency
rate swap transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions, (b) any
combination of these transactions and (c) any other transaction identified as a
Specified Transaction in this Agreement or the relevant confirmation.
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION EVENT" means an Illegality or, if specified to be applicable, a
Credit Event Upon Merger or an Additional Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled at such Early Termination Date, as amount equal to
the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined
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by the party obliged to make the determination under Section 6(e) or if each
party is so obliged it shall be the average of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
T & W Financial Corporation CoreStates Bank, N.A.
- ---------------------------------- ----------------------------------
(Name of Party) (Name of Party)
By: /s/ PAUL B. LUKE /s/ EDWARD A. BORTZ
------------------------------- ----------------------------------
Name: Paul B. Luke Name: Edward A. Bortz
Title: SVP, Director of Finance Title: VP
Date: 2-04-97 Date: 2-4-97
14
<PAGE> 15
(Local Currency-Single Jurisdiction)
[ISDA LOGO]
International Swap Dealers Association, Inc.
SCHEDULE
to the
Master Agreement
dated as of February 4, 1997
between CoreStates Bank, N.A. and T&W Financial Corporation
("Party A") ("Party B")
Part 1. TERMINATION PROVISIONS.
(a) "SPECIFIED ENTITY" means in relation to Party A for the
purpose of:--
Section 5(a)(v), none
Section 5(a)(vi), none
Section 5(a)(vii), none
Section 5(b)(ii), none
and in relation to Party B for the purpose of:--
Section 5(a)(v), none
Section 5(a)(vi), none
Section 5(a)(vii), none
Section 5(b)(ii), none
(b) "SPECIFIED TRANSACTIONS" will have the meaning specified in Section 12
of this Agreement.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi)
will apply to Party A
will apply to Party B and
will be modified by deleting "or becoming capable at such time of being
declared"
<PAGE> 16
If such provisions apply:-
"SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 12
of this Agreement except that such term shall not include obligations in
respect of deposits received in the ordinary course of a party's banking
business.
"THRESHOLD AMOUNT" means $10 million.
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(ii)
will apply to Party A
will apply to Party B
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a)
will not apply to Party A
will not apply to Party B
(f) PAYMENTS ON EARLY TERMINATION. For purpose of Section 6(e) of this
Agreement:-
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) ADDITIONAL TERMINATION EVENT will not apply.
Part 2. AGREEMENT TO DELIVER DOCUMENTS.
For the purpose of Section 4(a) of this Agreement, each party agrees to deliver
the following documents, as applicable:-
<TABLE>
<CAPTION>
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH COVERED BY
DELIVER DOCUMENT CERTIFICATE TO BE DELIVERED SECTION 3(d)
REPRESENTATION
<S> <C> <C> <C>
Party B Certificate Upon Execution Yes
substantially in of this Agreement
the form of
Exhibit II
Party B Opinion of Counsel Upon Execution No
substantially in of this Agreement
the form of
Exhibit III
Party B Financial Statements As Requested Yes
</TABLE>
Part 3. MISCELLANEOUS
(a) ADDRESSES FOR NOTICES. For the purpose of Section 10(a) of this
Agreement:-
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<PAGE> 17
Address for notices or communications to Party A:-
Front Office issues:
CoreStates Bank, N.A.
Street Address: 1345 Chestnut Street, Philadelphia, PA 19107
Mailing Address: P.O. Box 7618, Philadelphia, PA 19101-7618
Attention: Interest Rate Desk, F.C. 1-1-9-49
FAX: (215) 973-6201
Phone: (215) 973-6028
Back Office issues:
Street Address: 530 Walnut Street, Philadelphia, PA 19105
Mailing Address: P.O. Box 8590, Philadelphia, PA 19101-8590
Attention: Investment Operations, F.C. 1-9-1-2
Master Documentation and Confirmations:
Attention: Ms. Nancy Doyle
FAX: (215) 973-8388
Phone: (215) 973-1148
Resets and Settlements:
Attention: Ms. Wendy Havens
FAX: (215) 973-6693
Phone: (215) 973-1022
Electronic Messaging System Details:....................................
Address for notices or communications to Party B:-
Address:................................................................
Attention:..............................................................
Telex No.:......................... Answerback:.........................
Facsimile No.:..................... Telephone No.:......................
Electronic Messaging System Details:....................................
(b) CALCULATION AGENT. The Calculation Agent is Party A unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(c) CREDIT SUPPORT DOCUMENT. N/A
(d) CREDIT SUPPORT PROVIDER. Credit Support Provider means in relation to
Party A. None.
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<PAGE> 18
CREDIT SUPPORT PROVIDER. Credit Support Provider means in relation to
Party B. None
(e) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference
to choice of law doctrine).
(f) SETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this
Agreement will not apply to any Transaction unless otherwise specified
in a Confirmation in relation to the relevant Transaction.
(g) "AFFILIATE" will have the meaning specified in Section 12 of this
Agreement.
(h) "SETTLEMENT AMOUNT" will have the meaning specified in section 12 of
this Agreement except that the phrase "or would not (in the reasonable
belief of the party making the determination) produce a commercially
reasonable result" will be deleted and replaced by "or where such
termination or terminations results from an event described in section
5(a)(vii) and for which a market quotation produces a commercially
unreasonable result."
Part 4. OTHER PROVISIONS.
(a) CONFIRMATIONS. Notwithstanding anything to the contrary in this
Agreement:
(i) The parties hereto agree that with respect to each Transaction
hereunder a legally binding agreement shall exist from the moment
that the parties hereto agree on the essential terms of such
Transactions, which the parties anticipate will occur by telephone.
(ii) For each Transaction Party A and Party B agree to enter into
hereunder, Party A shall promptly send to Party B a Confirmation,
substantially in the form of Exhibit I setting forth the terms of such
Transaction. Party B shall execute and return the Confirmation to Party
A or request correction of any error within three Business Days of
receipt. Failure of Party B to respond within such period shall not
affect the validity or enforceability of such Transaction and shall be
deemed to be an affirmation of such terms.
(b) ADDITIONAL AGREEMENTS.
(i) Each party agrees, upon learning of the occurrence of any event
or commencement of any condition that constitutes (or that with the
giving of notice or passage of time or both would constitute) an
Event of Default or Termination Event with respect to the party,
promptly to give the other party notice of such event or condition (or,
in lieu of giving notice of such event or condition in the case of an
event or condition that with the giving of notice or passage of time or
both would constitute an Event of Default or Termination Event with
respect to the party, to cause such event or condition to
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<PAGE> 19
cease to exist before becoming an Event of Default or Termination
Event).
(ii) Party B agrees to give all notices described in (b)(i) of this Part
4 with respect to any Credit Support Provider.
(c) Additional Representations. Section 3 of the Agreement is hereby amended
by adding at the end thereof the following subsections (e) and (f):
"(e) Eligible Swap Participant. It is an "eligible swap
participant" as that term is defined by the Commodity Futures
Trading Commission at 17 C.F.R. Section 35.1(b)(2)."
"(f) Line of Business. It has entered into this Agreement
(including each Transaction evidenced hereby) in conjunction
with its line of business (including financial intermediation
services) or the financing of its business."
(d) FDIC Requirements. The following Additional Representations and
Agreements will apply to Party A and will not apply to Party B:
(i) The necessary action to authorize referred to in the
representation in Section 3 (a)(ii) of this Agreement includes
all authorizations required under the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 and any
regulations and guidelines thereunder.
(ii) At all times during the term of this Agreement, it will
continuously include and maintain as part of its official
written books and records, this Agreement, this Schedule and all
other exhibits, supplements, and attachments hereto and
documents incorporated by reference herein, all Confirmations
and evidence of all necessary approvals. In addition to any
other remedies which the other party may have under this
Agreement or otherwise, if it breaches or defaults on any of its
obligations set forth in this subparagraph (ii), the other party
shall be entitled to apply to any court of competent
jurisdiction for an order requiring specific performance of such
obligations, and it shall not contest any such application and
shall comply with any such order.
(e) Set-Off. Section 6 of the Agreement is amended by adding the following
new subsection 6(f).
"(f) Set-off. Without affecting the provisions of this Agreement
requiring the calculation of certain net payment amounts, all
payments under this Agreement shall be made without set-off or
counterclaim and will not be subject to any conditions except as
provided in Section 2 of this Agreement and except as provided
in this Section 6(f). Any amount (the `Early Termination
Amount') payable to one party (the `Payee') by the other party
(the `Payer') under Section 6(e), in circumstances where there
is a Defaulting Party or one Affected Party in the case where a
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<PAGE> 20
Termination Event under Section 5(b)(iv) has occurred, will, at the
option of the party ('X') other than the Defaulting Party or the
Affected Party (and without prior notice to the Defaulting Party or the
Affected Party), be reduced by its set-off against any amount (a) (the
'Other Agreement Amount') payable (whether at such time or in the future
or upon the occurrence of a contingency) by the Payee to the Payer
(irrespective of the currency, place of payment or booking office of the
obligation) under any other agreement(s) between the Payee and the Payer
or instrument(s) or undertaking(s) issued or executed by one party to,
or in favor of, the other party (and the Other Agreement Amount will be
discharged promptly and in all respects to the extent it is so set-off),
X will give notice to the other party of any set-off effected under this
Section 6(f).
"For this purpose, either the Early Termination Amount or the Other
Agreement Amount (or the relevant portion of such amounts) may be
converted by X into the currency in which the other is denominated at
the rate of exchange at which such party would be able, acting in a
reasonable manner and in good faith, to purchase the relevant amount of
such currency.
"If an obligation is unascertained, X may in good faith estimate that
obligation and set-off in respect of the estimate, subject to the
relevant party accounting to the other when the obligation is
ascertained.
"Nothing in this Section 6(f) shall be effective to create a charge or
other security interest. This Section 6(f) shall be without prejudice
and in addition to any right of set-off, combination of accounts, lien
or other right to which any party is at any time otherwise entitled
(whether by operation of law, contract or otherwise)."
(f) CONSENT TO RECORDING. Each Party (i) consents to the recording of the
telephone conversations of trading and marketing personnel of the
Parties and their Affiliates in connection with this Agreement or any
potential Transaction and (ii) agrees to obtain any necessary consent
of, and give notice of such recording to, such personnel of it and its
Affiliates.
(g) NO RELIANCE. In connection with the negotiation of, the entering into,
and the confirming of the execution of this Agreement, any Credit
Support Document to which it is a party, each Transaction, and any other
documentation relating to this Agreement that it is required by this
Agreement to deliver, each party agrees and confirms that: (i) the other
party hereto or thereto is not acting as a fiduciary or financial,
investment, or commodity trading advisor for it; (ii) it is not relying
(for purposes of making any investment decision or otherwise) upon any
advice, counsel or representations (whether written or oral) of the
other party hereto or thereto other than the representations expressly
set forth in this Agreement, in such Credit Support Document, and in any
Conformation; (iii) the
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<PAGE> 21
other party hereto or thereto has not given to it (directly or
indirectly through any other person) any assurance or guaranty
whatsoever as to the merits (either legal, regulatory, tax, financial,
accounting or otherwise) of this Agreement, such Credit Support
Document, such transaction or such other documentation; (iv) it has
consulted with its own legal, regulatory, tax, business, investment,
financial and accounting advisors to the extent deemed necessary, and it
has made its own judgment and upon any advice as it has deemed necessary
and not upon any view expressed by the other party hereto or thereto;
(v) it has determined that all trading decisions have been the result of
arm's length negotiations between the parties; (vi) it is entering into
this Agreement, such Credit Support Document, such Transaction and such
other documentation with a full understanding of all or the terms,
condition and risks hereof and thereof (economic and otherwise), and it
is capable of assuming and willing to assume (financially and otherwise)
those risks; and (vii) it is a sophisticated investor.
(h) Interest Rate Caps, Collars, Floors and Options. The condition precedent
in Section 2(a)(iii)(1) of the Agreement does not apply to a payment and
delivery owing by a party if the other party shall have satisfied in
full all its payments and delivery obligations under Section 2(a)(i) of
this Agreement and shall at the relevant time have no future payment
delivery obligations, whether absolute or contingent, under Section
2(a)(i).
(i) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY AND ALL RIGHTS
TO TRIAL BY JURY WITH RESPECT TO ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT
OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE RELATIONSHIP ESTABLISHED HEREUNDER OR ANY TRANSACTION CONTEMPLATED
HEREBY.
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<PAGE> 22
Fixing Dates: The 15th of each month, subject to adjustment in
accordance with the noted Bank Day Convention.
Business Days: New York
- -Payment Details-
Premium Payment: $0.00
Premium Payment Date: N/A
Payment Instructions: N/A
Please confirm the foregoing correctly sets forth the terms of our agreement by
executing the copy of this confirmation and returning it to us by facsimile, to
the attention of Wendy Pasbinder, Derivative Documentation, Fax # (213)
972-8389.
CoreStates Bank, N.A.
/s/ William J. Reardon
- ----------------------------------
William J. Reardon
Vice President
T & W Financial Corporation
[SIG]
- ----------------------------------
Title: Sup, Director of Finance
<PAGE> 1
EXHIBIT 10.13
================================================================================
INDENTURE
among
T & W FUNDING COMPANY IV, L.L.C.
("Issuer")
and
T & W LEASING, INC.
("Servicer")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
("Indenture Trustee" and "Back-up Servicer")
Dated as of July 1, 1995
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
GRANTING CLAUSE 1
<S> <C> <C>
ARTICLE I DEFINITIONS ...................................................... 2
Section 1.01. Definitions .................................................. 2
ARTICLE II NOTE FORM ........................................................ 20
Section 2.01. Form Generally ............................................... 20
Section 2.02. Form of Fixed Rate Note ...................................... 20
Section 2.03. Form of Floating Rate Note ................................... 28
ARTICLE III THE NOTES ........................................................ 36
Section 3.01. Denomination ................................................. 36
Section 3.02. Execution, Authentication, Delivery and Dating ............... 36
Section 3.03. Temporary Notes .............................................. 36
Section 3.04. Registration, Registration of Transfer and Exchange .......... 37
Section 3.05. Limitation on Transfer and Exchange .......................... 38
Section 3.06. Mutilated, Destroyed, Lost or Stolen Note .................... 38
Section 3.07. Payment of Principal and Interest; Principal and Interest
Rights Preserved; Calculation of Floating Interest Rate ...... 39
Section 3.08. Fixed Rate Notes; Floating Rate Notes; Conversion to
Fixed Rate Notes; Minimum Funding Amounts .................... 41
Section 3.09. Persons Deemed Owner ......................................... 42
Section 3.10. Cancellation ................................................. 42
ARTICLE IV ORIGINAL ISSUANCE OF NOTES; SUBSTITUTIONS OF COLLATERAL .......... 42
Section 4.01. Conditions to Issuance of Notes .............................. 42
Section 4.02. Security for Notes ........................................... 46
Section 4.03. Substitution and Purchase of Lease Receivables ............... 47
Section 4.04. Releases ..................................................... 49
Section 4.05. Trust Estate ................................................. 49
Section 4.06. Notice of Release ............................................ 49
ARTICLE V SATISFACTION AND DISCHARGE ....................................... 50
Section 5.01. Satisfaction and Discharge of Indenture ...................... 50
Section 5.02. Application of Trust Money ................................... 50
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VI DEFAULTS AND REMEDIES ............................................ 51
Section 6.01. Events of Defaults ........................................... 51
Section 6.02. Acceleration of Maturity; Rescission and Annulment ........... 52
Section 6.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee ............................................ 53
Section 6.04. Remedies ..................................................... 53
Section 6.05. Optional Preservation of Trust Estate ........................ 54
Section 6.06. Indenture Trustee May File Proofs of Claim ................... 54
Section 6.07. Indenture Trustee May Enforce Claim Without
Possession of Notes .......................................... 55
Section 6.08. Application of Money Collected ............................... 56
Section 6.09. Limitation on Suits .......................................... 57
Section 6.10. Unconditional Right of Noteholders to Receive Principal
and Interest ................................................. 57
Section 6.11. Restoration of Rights and Remedies ........................... 58
Section 6.12. Rights and Remedies Cumulative ............................... 58
Section 6.13. Delay or Omission; Not Waiver ................................ 58
Section 6.14. Control by Noteholders ....................................... 58
Section 6.15. Waiver of Past Defaults ...................................... 59
Section 6.16. Undertaking for Costs ........................................ 59
Section 6.17. Waiver of Stay or Extension Laws ............................. 59
Section 6.18. Sale of Trust Estate ......................................... 60
Section 6.19. Action on Notes .............................................. 61
ARTICLE VII THE INDENTURE TRUSTEE ............................................ 61
Section 7.01. Certain Duties and Responsibilities .......................... 61
Section 7.02. Notice of Default ............................................ 63
Section 7.03. Certain Rights of Indenture Trustee .......................... 63
Section 7.04. Not Responsible for Recitals or Issuance of Notes ............ 64
Section 7.05. May Hold Notes ............................................... 65
Section 7.06. Money Held in Trust .......................................... 65
Section 7.07. Compensation and Reimbursement ............................... 65
Section 7.08. Corporate Trustee Required; Eligibility ...................... 66
Section 7.09. Resignation and Removal ...................................... 67
Section 7.10. Acceptance of Appointment by Successor ....................... 68
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business of Indenture Trustee ................................ 68
Section 7.12. Co-Indenture Trustees and Separate Indenture Trustees ........ 68
Section 7.13. Rights with Respect to the Servicer .......................... 70
</TABLE>
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<TABLE>
<S> <C> <C>
Section 7.14. Appointment of Authenticating Agent .......................... 70
Section 7.15. Indenture Trustee to Hold Leases ............................. 71
ARTICLE VIII THE POLICY ....................................................... 72
Section 8.01. Payments under the Policy .................................... 72
ARTICLE IX SUPPLEMENTAL INDENTURES .......................................... 72
Section 9.01. Supplemental Indentures Without Consent of Noteholders ....... 72
Section 9.02. Supplemental Indentures with Consent of Noteholders .......... 73
Section 9.03. Execution of Supplemental Indentures ......................... 75
Section 9.04. Effect of Supplemental Indentures ............................ 75
Section 9.05. Reference in Notes to Supplemental Indentures ................ 75
ARTICLE X REDEMPTION OF NOTES .............................................. 75
Section 10.01. Redemption at the Option of the Issuer; Election to
Redeem .................................................... 75
Section 10.02. Notice to Indenture Trustee ............................... 76
Section 10.03. Notice of Redemption by the Issuer ........................ 76
Section 10.04. Deposit of the Redemption Price ........................... 76
Section 10.05. Notes Payable on Redemption Date .......................... 76
ARTICLE XI REPRESENTATIONS, WARRANTIES AND COVENANTS ........................ 77
Section 11.01. Representations and Warranties ............................ 77
Section 11.02. Covenants ................................................. 79
Section 11.03. Other Matters as to the Issuer ............................ 86
ARTICLE XII ACCOUNTS AND ACCOUNTINGS ......................................... 86
Section 12.01. Collection of Money ....................................... 86
Section 12.02. Collection Account; Advance Payment Account ............... 86
Section 12.03. Cash Collateral Account ................................... 90
Section 12.04. Reports by Indenture Trustee to the Bond Insurer and
Noteholders ............................................... 91
ARTICLE XIII PROVISIONS OF GENERAL APPLICATION ................................ 92
Section 13.01. General Provisions ........................................ 92
Section 13.02. Acts of Noteholders ....................................... 92
Section 13.03. Notices, etc., to Indenture Trustee, the Bond Insurer,
Issuer and Servicer ....................................... 92
</TABLE>
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<TABLE>
<S> <C> <C>
Section 13.04. Notices to Noteholders; Waiver ............................ 93
Section 13.05. Effect of Headings and Table of Contents .................. 94
Section 13.06. Successors and Assigns .................................... 94
Section 13.07. Separability .............................................. 94
Section 13.08. Benefits of Indenture ..................................... 94
Section 13.09. Legal Holidays ............................................ 94
Section 13.10. Governing Law ............................................. 94
Section 13.11. Counterparts .............................................. 94
Section 13.12. Corporate Obligation ...................................... 94
Section 13.13. Compliance Certificates and Opinions ...................... 95
Section 13.14. Rating .................................................... 95
Section 13.15. Bond Insurer Default ...................................... 95
</TABLE>
Exhibit A -- Form of Investment Letter
Exhibit B -- Form of Supplement for Grant of Substitute Lease Contracts
Exhibit C -- Form of Funding Report
-6-
<PAGE> 6
This INDENTURE dated as of July 1, 1995 (herein, as amended and
supplemented from time to time as permitted hereby, called this "Indenture"), is
entered into by and among T & W FUNDING COMPANY IV, L.L.C., a Delaware limited
liability company (herein, together with its permitted successors and assigns,
called the "Issuer"), T & W LEASING, INC., a Washington corporation, as servicer
(herein, together with its permitted successors and assigns, called the
"Servicer") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association, as trustee (herein, together with its permitted successors and
assigns, called the "Indenture Trustee") and as back-up servicer (herein,
together with its permitted successors and assigns, called the "Back-up
Servicer").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of the Issuer's notes,
Series 1995-l (hereinafter called the "Notes"), issuable in one or more tranches
(each, a "Tranche") as provided in this Indenture. All covenants and agreements
made by the Issuer, the Servicer, the Indenture Trustee and the Back-up Servicer
herein are for the benefit and security of the Holders of the Notes and the Bond
Insurer (as hereinafter defined). The Issuer, the Servicer, the Indenture
Trustee and the Back-up Servicer are entering into this Indenture, and the
Indenture Trustee is accepting the trusts created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer, the Servicer, the Indenture Trustee and the Back-up Servicer in
accordance with its terms have been done.
GRANTING CLAUSE
To secure the payment of the principal of and interest on the Notes in
accordance with their terms, the payment of all of the sums payable under this
Indenture and the performance of the covenants contained in this Indenture, the
Issuer hereby Grants to the Indenture Trustee, solely in trust and as collateral
security as provided in this Indenture, for the ratable benefit of the Holders
of the Notes and the Bond Insurer, all of the Issuer's rights, title and
interest in and to the following and any and all benefits accruing to the Issuer
from: (a) the Lease Receivables and Lease Contracts and all payments on or with
respect to the Lease Contracts and the Lease Receivables due after the related
Cut-Off Date; (b) the Equipment and any security interest of the Issuer in any
of the Equipment that is not owned by the Issuer; (c) any rights of the Issuer
under each Insurance Policy related to the Lease Contracts and Insurance
Proceeds; (d) the Contribution Agreement; (e) the Servicing Agreement; (f) all
amounts from time to time on deposit in the Collection Account, the Advance
Payment Account, and the Cash Collateral
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<PAGE> 7
Account (including any Eligible Investments and other property in such
accounts); 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) (all of the foregoing being
hereinafter referred to as the "Collateral" or "Trust Estate").
The Indenture Trustee acknowledges such Grant, accepts the trusts
hereunder 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 Noteholders may be adequately and effectively protected.
ARTICLE I
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 Indenture, 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 Contribution Agreement.
"Act": With respect to any Noteholder, the meaning specified in Section
13.02.
"Additional Principal Amount": The amount, if any, payable to
Noteholders pursuant to Section 12.02(d)(xiii) hereof.
"Additional Servicer Fee": The amount, if any, of the fee payable in
accordance with Section 6.02(b) 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.
"Advance Payment": With respect to a Lease Contract and a Due Period,
any Scheduled Payment or portion thereof made by, or on behalf of, a Customer
and received by the Servicer during such Due Period, which Scheduled Payment or
portion thereof does not become due until a subsequent Due Period.
"Advance Payment Account": The account or accounts established and
maintained pursuant to Section 12.02(e) hereof.
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<PAGE> 8
"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 Implicit Principal Balance": The aggregate of the Implicit
Principal Balances of the Lease Receivables outstanding at any time.
"Assignment and Assumption Agreement": An agreement between a
Contributor and the Issuer pursuant to which such Contributor transfers Lease
Assets to the Issuer in exchange for an ownership interest in the Issuer and an
assumption by the Issuer of certain indebtedness of such Contributor.
"Annualized Default Rate": For any Due Period, (i) the sum of the
Implicit Principal Balances as of the Calculation Date occurring in such Due
Period of all Lease Contracts that became Defaulted Lease Contracts during such
Due Period (including any Lease Contracts that have been purchased or
substituted) (ii) minus the sum of Recoveries and Residual Proceeds received
during such Due Period, (iii) divided by the Aggregate Implicit Principal
Balance at the beginning of the Due Period, (iv) multiplied by twelve.
"Authenticating Agent": Any entity appointed by the Indenture Trustee
pursuant to Section 7.14 hereof.
"Back-up Servicer": Initially, Norwest Bank Minnesota, National
Association, a national banking association, and its permitted successors and
assigns under the Servicing Agreement.
"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 Indenture and the Servicing Agreement as Back-up
Servicer, in an amount equal to the product of (i) one-twelfth of the Back-up
Servicer Fee Rate and (ii) the aggregate principal amount of Outstanding Notes
on the preceding Payment Date after giving effect to distributions on such date
(or, in the case of Notes originally issued after such preceding Payment Date
and before such Payment Date, the initial aggregate principal amount of such
Notes).
"Back-up Servicer Fee Rate": Two one hundredths of one percent (0.02%)
per annum.
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"Board of Directors": Either the board of directors of the Issuer 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 Issuer 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 Indenture Trustee.
"Bond Insurer": Initially, MBIA Insurance Corporation, and its permitted
successors and assigns under the Insurance Agreement.
"Bond Insurer Default": The occurrence and continuance of any of the
following events:
(a) the failure by the Bond Insurer to make a payment under the
Insurance Agreement in accordance with its terms; or
(b) an Insurer Insolvency.
"Bond Insurer Premium": The premium payable to the Bond Insurer equal
to:
(i) upon the closing of the initial Tranche of Notes, a premium
in the amount equal to the Initial Premium as defined in the Commitment
of the Bond Insurer dated as of July 25, 1995;
(ii) upon the closing of any subsequent Tranche of Notes, if
such Tranche is issued on a date other than a Payment Date, an amount
equal to the principal amount of such additional Tranche multiplied by
0.00375 per annum, pro-rated from such Delivery Date until the date
prior to the next succeeding Payment Date (using a 365 day year);
(iii) on each Payment Date occurring in August 1995 through and
including December 1995, an amount equal to (a) 0.00375 divided by 12
multiplied by (b)(i) the outstanding principal balance of all Tranches
of Notes, after giving effect to any principal distribution on each such
Payment Date, minus (ii) the initial principal amount of the initial
Tranche of Notes issued under the Indenture;
(iv) on each Payment Date after the Payment Date occurring in
December 1995, an amount equal to 0.00375 divided by 12 multiplied by
the outstanding principal balance of all Tranches of Notes, after giving
effect to any principal distribution on each such Payment Date.
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"Bond Insurer Premium Rate": Thirty seven and one half one-hundredths of
one percent (0.375%).
"Breakage Costs": For the purposes hereof, cost, if any, to the
Noteholders of terminating any swap transaction or swap transactions, as the
case may be, entered into by them with the Coordinator in conjunction with a
change in the amortization of the Notes from that set forth in the Targeted
Balance Schedule attached to the Funding Report for a relevant Tranche of Notes
plus interest at the rate of LIBOR plus 1.0% per annum calculated on a basis of
360-day year and actual days elapsed from the day such costs are incurred until
the Payment Date such costs are paid; such costs shall be calculated promptly by
the Coordinator and delivered to the Issuer at least five Business Days prior to
the Payment Date on which such Breakage Costs are to be paid in a certificate
indicating in reasonable detail the calculation of such amounts. Such amounts
shall be calculated in accordance with general market convention. In the event
of any good faith dispute by the Issuer of any Breakage Costs, the Noteholders
will obtain from the Coordinator and forward to the Issuer a detailed
explanation of its calculations, if the Issuer continues to dispute such
calculations, the Coordinator shall recalculate the Breakage Costs using the
methodology set forth in Section 6 of the ISDA Master Agreement using Market
Quotation and the Second Method as if a Termination Event had occurred with
respect to the particular Transaction, that Transaction were the Affected
Transaction and the Issuer were the Affected Party (capitalized terms having the
meaning set forth in the standard form of ISDA Master Agreement).
"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
Corporate Trust Office is located are authorized or obligated by law or
executive order to close.
"Calculation Agent": Initially, Norwest Bank Minnesota, National
Association, a national banking association, and its permitted successors and
assigns under this Indenture.
"Calculation Date": The last day of a Due Period, except that with
respect to the Initial Payment Date for any Tranche of Notes, the Calculation
Date shall mean the related Cut-Off Date.
"Cash Collateral Account": The trust account or accounts created and
maintained pursuant to Section 12.03 hereof.
"Cash Collateral Account Factor": 1+ ((the sum of the Trustee Fee Rate,
the Bond Insurer Premium Rate and the Back-up Servicer Fee Rate + the highest
possible interest rate of any Tranche of Notes Outstanding (which shall be the
greater of the highest Fixed Rate on any Tranche of Fixed Rate Notes or the
Maximum Floating Rate))/12).
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"Cash Collateral Account Required Balance": As of any Payment Date, an
amount equal to the product of (a) the Required Collateralization Amount minus
the difference between (i) the Aggregate Implicit Principal Balance as of the
related Calculation Date and (ii) the Outstanding principal amount of the Notes,
after giving effect to the payments allocated pursuant to Section 12.02(d)(vii)
and Section 12.02(d)(viii) on such Payment Date and (b) the Cash Collateral
Account Factor; provided, however, if a Trigger Event has occurred, an amount
equal to zero.
"Closing Date": July 28, 1995, the date that this Indenture is executed
and delivered by the parties hereto.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral": The meaning specified in the Granting Clause of this
Indenture.
"Collateralization Percentage": Eight percent (8.0%).
"Collection Account": The trust account or accounts created and
maintained pursuant to Section 12.02 hereof.
"Company": T & W Leasing, Inc.
"Contributor": Each of T & W Finance Corp. III, a Delaware corporation,
T & W Finance Corp. IV, a Delaware corporation and T & W Finance Company V,
L.L.C., a Delaware limited liability company.
"Contribution Agreement": The Contribution Agreement dated as of July 1,
1995 by and among the Issuer, the Company and the Contributors.
"Coordinator": The Industrial Bank of Japan, Limited, New York Branch.
"Corporate Trust Office": The principal corporate office of the
Indenture Trustee at the location identified in Section 13.03 below or such
other address as the Indenture Trustee may designate from time to time by notice
to the Bond Insurer, the Noteholders, the Coordinator, the Back-up Servicer and
the Issuer, or the principal corporate trust office of any successor Indenture
Trustee.
"Customer": The lessee under each related Lease Contract, including any
guarantor of such lessee and their respective successors and assigns.
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"Cut-Off Date": For each Tranche of Notes, the last Business Day of the
month preceding the related Delivery Date, or such other Business Day agreed to
by the Issuer, the Servicer and the Bond Insurer and set forth on the related
Funding Report.
"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 the day (i) when such Lease Contract is 180
days delinquent or (ii) the Servicer determines in accordance with its customary
practices that it shall not make a Servicer Advance or that a prior Servicer
Advance is unrecoverable.
"Defaulted Lease Purchase and Substitution Limit": $2,275,000.
"Delinquency Rate": For any Due Period, the sum of the Implicit
Principal Balances of all Lease Contracts as of the Calculation Date occurring
in such Due Period with respect to which a Customer has not made the Scheduled
Payment due in the prior Due Period (including any such Lease Contracts that
have been purchased or substituted), divided by the Aggregate Implicit Principal
Balance on such Calculation Date (including any such Lease Contracts that have
been purchased or substituted).
"Delinquent Lease Contract": For any Due Period, any Lease Contract (a)
with respect to which a Customer has not made any Scheduled Payment due in such
Due Period and which remains unpaid as of the Calculation Date at the end of
such Due Period and (b) which is not a Defaulted Lease Contract.
"Delinquent Lease Purchase and Substitution Limit": $9,450,000.
"Delivery Date": With respect to each Tranche of Notes, the date on
which such Notes are first executed, authenticated and delivered.
"Determination Date": The fifth Business Day preceding each Payment
Date.
"Discount Rate": For each Lease Contract, the rate equal to the sum of
(i) if the Notes which funded such Lease Contract are Fixed Rate Notes, the
respective Note Interest Rate, otherwise the respective Maximum Floating Rate,
(ii) the Trustee Fee Rate, (iii) the Back-up Servicer Fee Rate and (iv) the Bond
Insurer Premium Rate.
"Due Date": With respect to each Scheduled Payment and each Lease
Receivable, the date of the month on which such Scheduled Payment is due
thereunder.
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"Due Period": As to any Determination Date, Payment Date or Servicer
Remittance 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,
Payment Date or Servicer Remittance Date occurs.
"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" shall mean book-entry securities entered on the
books of the registrar of such security and held in the name or on behalf of the
Indenture Trustee or negotiable instruments or securities represented by
instruments in bearer form (and held in the possession of the Indenture Trustee
or its agent) or registered form (registered in the name of the Indenture
Trustee or its nominee):
(i) 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;
(ii) (A) 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 Indenture 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 categories of each of the Rating Agencies and provided
that each such investment has an original maturity of no more than 365
days and (B) any other demand or time deposit or deposit which is fully
insured by the Federal Deposit Insurance Corporation;
(iii) repurchase obligations with a term not to exceed 30 days with
respect to any security described in clause (i) above and entered into
with a depository institution or trust company (acting as a principal)
rated "A" or higher by S&P and "A2" by Moody's; provided, however, that
collateral transferred pursuant to such repurchase obligation must (A)
be valued weekly at current market price plus accrued interest, (B)
pursuant to such valuation, equal, at all times, 105% of the cash
transferred by the Indenture Trustee in exchange for such collateral and
(C) be delivered to the Indenture Trustee or, if the
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Indenture Trustee is supplying the collateral, an agent for the
Indenture Trustee, in such a manner as to accomplish perfection of a
security interest in the collateral;
(iv) 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 and provided, that no such security shall
be rated "R" by S&P;
(v) 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;
(vi) a guaranteed investment contract approved by each of the
Rating Agencies and the Bond Insurer 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;
(vii) money market funds including money market funds managed by
the Indenture Trustee having ratings in the highest available long term
rating category of each of the Rating Agencies 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 Indenture; and
(viii) any investment approved in writing by each of the Rating
Agencies and the Bond Insurer.
"Enumerated States": Alaska, California, Colorado, Florida, Indiana,
Ohio, Oregon, New Jersey, Texas and Washington.
"Equipment": The equipment leased to the Customers pursuant to the Lease
Contracts and described by general equipment type under the column heading
"equip" on the Lease Schedule.
"Event of Default": The meaning specified in Section 6.01 hereof.
"Facility Fee": The product of (i) 0.20% divided by 12 and (ii) the
difference, if any, between 98% of the Maximum Outstanding Note Amount and the
outstanding principal balance
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of Notes Outstanding, calculated as of the first day of each Due Period, to be
paid in arrears by T & W Leasing, Inc. to the Noteholders in accordance with the
Note Purchase Agreement.
"Final Due Date": With respect to each Lease Receivable, the final Due
Date thereunder.
"Final Payment Date": With respect to the Notes of any Tranche, the date
on which the final principal payment on such Notes becomes due and payable as
therein or herein provided, whether at their Stated Maturity, or by acceleration
or redemption.
"Fixed Rate": With respect to any Fixed Rate Note, the interest rate per
annum set forth on the face of such Note.
"Fixed Rate Note" or "Fixed Rate Notes": The Note or Notes issued
pursuant to the terms of this Indenture bearing interest at a Fixed Rate.
"Floating Rate": With respect to any Floating Rate Note and any Floating
Rate Period, the rate determined by the Calculation Agent on the related LIBOR
Determination Date equal to the sum of (x) LIBOR as calculated by the
Calculation Agent on such LIBOR Determination Date and (y) 0.30%.
"Floating Rate Cap Agreement": The Floating Rate Cap Agreement between a
party that has an investment grade rating acceptable to the Insurer and the
Issuer.
"Floating Rate Note" or "Floating Rate Notes": The Note or Notes issued
pursuant to the terms of this Indenture bearing interest at a Floating Rate.
"Floating Rate Period": The period beginning on a Payment Date (or with
respect to Floating Rate Notes issued during a Floating Rate Period, the date on
which such Notes are issued).and ending on the day immediately prior to the next
Payment Date
"Funding Period": The period commencing on the date the first Tranche of
Notes are issued, authenticated and delivered through and including July 15,
1996, unless extended by mutual agreement among the Issuer, the Bond Insurer and
51% of the aggregate principal amount of the Notes Outstanding at the time of
such extension.
"Funding Period Trigger Event": Any of the following events during the
Funding Period:
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(1) With respect to the Reported Company, the sum of its total
net worth, investors' equity and shareholders' equity as reflected in
the most recent Reported Company's Financial Statements or unaudited
financial statements is less than $6,500,000; or
(2) For any three consecutive Due Periods, the average of the
Annualized Default Rates for such consecutive Due Periods was greater
than 2.5%; or
(3) The Facility Fee has not been paid when due and remains
unpaid; or
(4) A payment has been made to the Indenture Trustee by the
Insurer pursuant to any Policy; or
(5) A Trigger Event has occurred.
"Funding Report": The report in the form attached hereto as Exhibit C
delivered by the Issuer to the Trustee, the Bond Insurer and the Noteholders in
connection with the issuance of a new Tranche of Notes.
"Grant": To grant, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, mortgage, pledge, create and grant a security interest
in and right of set-off against, deposit, set over and confirm. A Grant of the
Lease Contracts. the Lease Receivables or of any other instrument shall include
all rights, powers and options (but none of the obligations) of the Granting
party thereunder, including, without limitation, the immediate and continuing
right to claim, collect, receive and receipt for payments in respect of the
Lease Contracts and the Lease Receivables, or any other payment due thereunder,
to give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring proceedings in the name
of the Granting party or otherwise, and generally to do and receive anything
which the Granting party is or may be entitled to do or receive thereunder or
with respect thereto.
"Guaranty Amounts": Any and all amounts paid or payable by any
individual guarantor indicated on the applicable Lease Contract.
"Holder" or "Noteholder": The person in whose name a Note is registered
in the Note Register.
"Implicit Principal Balance": As of any date of determination, with
respect to each Lease Receivable, the present value of the remaining stream of
Scheduled Payments due with respect to such Lease Receivable after the
applicable Calculation Date (as reduced by the
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Servicer Fee but not reduced by any Additional Servicer Fee) based upon
discounting such Scheduled Payments (assuming such Scheduled Payments are
received on the next succeeding Calculation Date on or after the applicable Due
Dates) to such Calculation Date at the Discount Rate related to such Tranche, at
the same frequency as the Payment Dates; except that on the Calculation Date (w)
on or immediately following the deposit into the Collection Account of Insurance
Proceeds equal to the outstanding Implicit Principal Balance of the related
Lease Contract, or the Purchase Price of a repurchased Lease Contract, or on or
immediately following the delivery of a Substitute Lease Contract, (x)
immediately on or after the date that a Lease Contract has become a Defaulted
Lease Contract, or (y) immediately preceding the Final Payment Date with respect
to the Note that funded such Lease Contract, the Implicit Principal Balance of
each such related Lease Receivable shall be zero. To the extent that the Final
Due Date of any Lease Receivable is later than the Stated Maturity of the Notes
of the Tranche that funded such Lease Contracts, any Scheduled Payments due on
such Lease Receivable after the Calculation Date immediately preceding the
Stated Maturity of such Notes shall not be taken into account in calculating the
Implicit Principal Balance of such Lease Receivable.
"Indenture": This instrument in the form as originally executed as from
time to time supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, as this
Indenture is so supplemented or amended. All references in this Indenture to
designated "Articles," "Sections," "Subsections" and other subdivisions are to
the designated Articles, Sections, Subsections and other subdivisions of this
Indenture 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 Indenture,
refer to this Indenture as a whole and not to any particular Article, Section,
Subsection or other subdivision of this Indenture.
"Indenture Trustee": Initially, Norwest Bank Minnesota, National
Association until a successor Person shall have become the Indenture Trustee
pursuant to this Indenture, and thereafter "Indenture Trustee" shall mean such
successor Person.
"Independent": When used with respect to any specified Person means such
a Person, who (1) is in fact independent of the Issuer, (2) does not have any
direct financial interest or any material indirect financial interest in the
Issuer or in any Affiliate of the Issuer and (3) is not connected with the
Issuer as an officer, employee, promoter, underwriter, Indenture 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 Indenture Trustee, such Person shall be appointed by a Issuer Order and
approved by the Indenture 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.
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"Independent Accountants": BDO Seidman or any other firm of independent
certified public accountants of recognized national standing.
"Initial Aggregate Implicit Principal Balance": For any Tranche of
Notes, the Aggregate Implicit Principal Balance as calculated on the related
Delivery Date as presented in the related Funding Report.
"Initial Payment Date": August 20, 1995.
"Insurance Agreement": The Insurance Agreement, dated as of July 1,
1995, by and among the Bond Insurer, the Issuer, the Company, the Back-up
Servicer and the Indenture Trustee.
"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 (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 Due 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.
"Insurer Insolvency": The meaning set forth in the Insurance Agreement.
"Interest Distribution Amount": With respect to each Payment Date and
any Tranche of Notes, the amount of interest owed on such Notes for such Payment
Date.
"ISDA": The International Swap Dealers Association, Inc., and any
successor organization.
"Issuer": T & W Funding Company IV, L.L.C.
"Issuer Order" and "Issuer Request": A written order or request signed
in the name of the Issuer by its Chairman of the Board, President, or a Vice
President, and delivered to the Indenture Trustee.
"Issuer State of Formation": The State of Delaware.
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"Lease Contracts": The lease contracts (and all rights with respect
thereto, including all security interests, 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 pledged by the
Issuer to the Indenture Trustee from time to time pursuant to the Indenture to
support payment of the Notes and identified on the Lease Schedule attached to a
Funding Report delivered to the Indenture Trustee and the Bond Insurer on the
Delivery Date or which are Substitute Lease Contracts, and any amendments,
riders and annexes thereto; provided, however, that, from and after the date on
which a Lease Contract is purchased or substituted by the Company or the Issuer
in accordance with Section 4.03 hereof, such repurchased 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 (i) the Scheduled Payments, (ii) any Guaranty Amounts,
(iii) any Insurance Proceeds, (iv) any Residual Proceeds and (v) any Recoveries.
"Lease Schedule": With respect to each Tranche of Notes, the listing of
Lease Contracts and Lease Receivables attached to a Funding Report as Schedule
A, which shall include with respect to each Lease Contract listed on such
Schedule: (a) a number identifying such Lease Contract, (b) the Implicit
Principal Balance, (c) the Customer, (d) the State of the Customer's billing
address, (e) the original and remaining term, (f) the Scheduled Payment, (g) the
frequency with which Scheduled Payments are due and (h) the zip code of the
Customer's billing address, as such schedule may be amended upon any purchase or
substitution of Lease Contracts made in accordance with the terms of the
Transaction Documents.
"Leased Vehicle": An automobile or a light truck which is the subject of
a Lease Contract.
"LIBOR": With respect to any Floating Rate Period, the London interbank
offered rate for one-month United States dollar deposits determined by the
Calculation Agent pursuant to Section 3.07(d).
"LIBOR Determination Date": The second Business Day prior to the
commencement of the second and each subsequent Floating Rate Period.
"Liquidated Lease Receivable": A Lease Receivable that has been
liquidated pursuant to Section 3.01(b) of the Servicing Agreement.
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"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.
"Maximum Default Rate": 3.0%.
"Maximum Delinquency Rate": 7.0%.
"Maximum Floating Rate": For each Tranche of Floating Rate Notes, the
rate at which the counterparty under the Floating Rate Cap Agreement begins to
make payments to the Issuer.
"Maximum Outstanding Note Amount": $70,000,000.
"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.
"Net Worth Requirement": The requirement that with respect to the
Reported Company, the sum of its total net worth, investors' equity and
shareholders' equity as reflected in the most recent Reported Company's
Financial Statements is equal to at least $5,000,000.
"Note" or "Notes": Any Note or Notes, as the case may be, authenticated
and delivered under this Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is registered
in the Note Register.
"Note Interest Rate": With respect to each Tranche of Notes, if the
Notes are Fixed Rate Notes, the respective Fixed Rate, and if such Notes are
Floating Rate Notes, the Floating Rate.
"Note Purchase Agreement": The Note Purchase Agreement, dated July 1,
1995, among the Issuer and the initial Noteholder, as such agreement may be
amended and supplemented from time to time.
"Note Register" and "Note Registrar": The respective meanings specified
in Section 3.04 hereof.
"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 Indenture Trustee,
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which certificate shall comply with the applicable requirements of Section 13.13
hereof. Unless otherwise specified, any reference in this Indenture to an
Officer's Certificate shall be to an Officer's Certificate of the Issuer.
"Opinion of Counsel": A written opinion of counsel who may, except as
otherwise expressly provided in this Indenture, be counsel for the Issuer and
who shall be reasonably satisfactory to the Indenture Trustee and the Bond
Insurer and which opinion shall comply with the applicable requirements of
Section 13.13 hereof.
"Outstanding": With respect to Notes as of any date of determination,
all Notes theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes for whose payment money in the necessary amount has
been theretofore irrevocably deposited with the Indenture Trustee or any
Paying Agent (other than the Issuer) in trust for the Holders of such
Notes (provided, however, that if such Notes are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture,
satisfactory to the Indenture Trustee, has been made); and
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture, unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser;
provided, however, that for purposes of disbursing payments from the applicable
Policy and in determining whether the Holders of the requisite principal amount
of the Outstanding Notes of such Tranche have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Issuer or any other obligor upon the Notes or any Affiliate of the Issuer or
such other obligor shall be disregarded and deemed not to be outstanding, except
that, in determining whether the Indenture Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent, or
waiver, only Notes which the Indenture Trustee knows to be so owned shall be so
disregarded.
"Overdue Payment": With respect to a Due Period and a Delinquent Lease
Contract, all payments due in a prior Due Period that the Servicer receives from
or on behalf of a Customer during the related Due Period on such Delinquent
Lease Contract, including any Servicing Charges.
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"Paying Agent": The Indenture Trustee or any other Person that meets the
eligibility standards for the Indenture Trustee specified in Section 7.08 hereof
and is authorized by the Issuer pursuant to Section 11.15(o) hereof to pay the
principal of, or interest on, any Notes on behalf of the Issuer.
"Payment Date": With respect to the Notes of each Tranche, 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 for such
Tranche.
"Person": Any individual, corporation, partnership, limited liability
company, association, joint-stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Policy": With respect to each Tranche of Notes, the Note Insurance
Policy issued by the Bond Insurer insuring such Tranche in accordance with the
terms thereof.
"Preference Claim": Shall have the meaning set forth in Section 8.01
hereof.
"Principal Distribution Amount": With respect to each Payment Date and
any Tranche of Notes, the lesser of (a) the product of (1) the Principal Pro
Rata Factor for such Tranche of Notes and (2) amounts available in the
Collection Account and the Cash Collateral Account (including any reinvestment
income in the latter account) after payment of all amounts required by clauses
(i) through (vii) of Section 12.02(d) hereof and (b) the Targeted Principal
Distribution Amount for such Tranche of Notes.
"Principal Pro Rata Factor": With respect to each Payment Date and any
Tranche of Notes, (i) the Targeted Principal Distribution Amount for such
Tranche of Notes, divided by (ii) the sum of the Targeted Principal Distribution
Amounts for all Tranches of Notes; provided, however, with respect to Additional
Principal (if any) paid on any Payment Date, (i) the decline in the related
Tranche Aggregate Implicit Principal Balance since the Calculation Date
preceding the Trigger Event divided by (ii) the decline in the Aggregate
Implicit Principal Balance since the Calculation Date preceding the Trigger
Event.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase Price": With respect to any Lease Contract repurchased by the
Company or one of the Contributors pursuant to Section 3.03 of the Contribution
Agreement or by the Issuer pursuant to Section 4.03(d) hereof or Section 3.10 of
the Servicing Agreement, the sum of (i) the Implicit Principal Balance of the
related Lease Receivable on the Calculation Date on or
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immediately succeeding the date when the Lease Contract is repurchased, (ii) any
Scheduled Payments with respect to the Lease Contract due on or prior to such
Calculation Date but not received through such Calculation Date, (iii) with
respect to the related Equipment, the amount recorded in the books and records
of the Company or the Issuer as the "unguaranteed residual" and (iv) Breakage
Costs, if any.
"Rating Agencies": Moody's and S&P.
"Rating Agency Condition": With respect to any action, that the Rating
Agencies shall have notified the Issuer, the Servicer, the Back-up Servicer and
the Trustee in writing that such action will not result in a reduction or
withdrawal of the rating assigned by it to any Outstanding Tranche of Notes.
"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 the initial Payment Date relating to the Notes of any Tranche,
the Record Date shall be the Delivery Date related to such Tranche.
"Recoveries": For any Due 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 Due Period in respect of such Defaulted Lease
Contract or from liquidation or releasing of the related Equipment, including
but not limited to Scheduled Payments, Overdue Payments, Guaranty Amounts, and
Insurance Proceeds, as reduced by (i) any unreimbursed Servicer Advances with
respect to such Lease Contract and (ii) any reasonably incurred out-of-pocket
expenses incurred by the Servicer in enforcing such Defaulted Lease Contract.
"Redemption Date": A date fixed pursuant to Section 10.01 hereof.
"Redemption Price": With respect to any Note, and as of any Redemption
Date, the Outstanding principal amount of such Note, together with interest
accrued thereon to the Redemption Date at the applicable related Note 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 Note on the applicable Record Date or as otherwise provided in
this Indenture).
"Redemption Record Date": With respect to any redemption of any Note, a
date fixed pursuant to Section 10.01 hereof.
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"Registered Holder": The Person whose name appears on the Note 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, other than interest or other earnings from investments
in the Cash Collateral Account.
"Reported Company": shall mean T & W Leasing, Inc. and its Affiliates on
a consolidated basis; provided, however, if T & W Leasing, Inc. is no longer
acting as Servicer, then "Reported Company" shall also mean any successor
Servicer appointed pursuant to this Indenture.
"Reported Company's Financial Statements": shall include the Reported
Company's audited consolidated balance sheet, income statement, statement of
cash flows, auditors opinion letter regarding audited financial statements and
all notes to the audited financial statements.
"Required Collateralization Amount": As of any date of determination,
the greatest of (A) the Collateralization Percentage multiplied by the Aggregate
Implicit Principal Balance as of the related Calculation Date, and (B) the
aggregate Implicit Principal Balance of all the Lease Contracts under which the
three largest Customers are obligated, and (C) 4.0% of the Initial Aggregate
Implicit Principal Balance for all Outstanding Tranches combined.
"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.
"Responsible Officer": When used with respect to the Indenture 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 Indenture Trustee customarily performing functions similar to
those performed by any of the above designated officers and having direct
responsibility for the administration of this Indenture, 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 Bond Insurer Premium and the Trustee Fee to be due on
the next succeeding Payment Date.
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"Scheduled Payment": With respect to a Payment Date and a Lease
Contract, the periodic payment (exclusive of any amounts in respect of taxes)
set forth in such Lease Contract due from the Customer in the related Due
Period, calculated without regard to any modification granted pursuant to
Section 3.01(b)(v) of the Servicing Agreement; a payment made in a Due Period is
not a Scheduled Payment with respect to such Due Period unless all prior
Scheduled Payments have been made as of the date of such payment.
"Servicer": Initially, the party specified in the Servicing Agreement
and 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.
"Servicer Fee": An amount equal to $5.00 per Lease Contract per Due
Period. The Servicer Fee shall not include the Additional Servicer Fee.
"Servicer Remittance Date": The Determination Date.
"Servicing Agreement": The Servicing Agreement, dated July 1, 1995,
among the Issuer, the Servicer, the Back-up Servicer and the Indenture Trustee,
as such agreement may be amended and supplemented from time to time.
"Servicing Charges": The sum of (i) all late payment charges paid by
Customers on Delinquent Lease Contracts after payment in full of any Scheduled
Payments due in a prior Due Period and Scheduled Payments for the related Due
Period and (ii) any other incidental charges or fees received from a Customer,
including but not limited to, late fees, collection fees and insufficient funds
check charges.
"S & P": Standard & Poor's Group, a division of McGraw-Hill, Inc.
"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 Notes of any Tranche, the date
specified in the related Funding Report as the "Stated Maturity," which shall
not be earlier than the Payment Date in the Due Period following the Due Period
in which the final Scheduled Payment for any Lease Receivable funded by such
Tranche occurs.
"Targeted Balance": For each Tranche of Notes for any Payment Date, the
amount indicated under the column "Targeted Balance" for such Payment Date, as
reflected on the Targeted Balance Schedule.
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"Targeted Balance Schedule": For each Tranche of Notes, the schedule of
Targeted Balances attached to the related Funding Report.
"Targeted Principal Distribution Amount": With respect to any
particular Tranche of Notes, the aggregate principal amount of such Tranche of
Notes Outstanding as of the current Payment Date (after giving effect to any
principal allocations pursuant to Section 12.02(d)(vii) on such date) minus the
lesser of (x) the amount of the Targeted Balance for such Tranche of Notes for
such Payment Date and (y) the Tranche Aggregate Implicit Principal Balance as of
the Calculation Date preceding such Payment Date.
"Tranche": Any Tranche of Notes issued in connection with a Funding
Report.
"Tranche Aggregate Implicit Principal Balance": The aggregate of the
Implicit Principal Balance of the Lease Receivables relating to a particular
Tranche of Notes (as reflected on the related Funding Report), including any
Lease Receivables substituted for such original Lease Receivable, outstanding at
any time.
"Transition Cost": Any documented expenses and allocated cost of
personnel reasonably incurred by a successor Servicer or the Indenture Trustee
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.
"Transaction Documents": This Indenture, the Servicing Agreement, the
Contribution Agreement, the Assignment and Assumption Agreements, the Notes, the
Insurance Agreement and the Policies.
"Trigger Event": Any of the following events: (1) for any three
consecutive Due Periods, the average of the Annualized Default Rates for such
consecutive Due Periods shall be equal to or greater than the Maximum Default
Rate; (2) in any Due Period, the Annualized Default Rate is equal to or greater
than three times the Maximum Default Rate; (3) in any two consecutive Due
Periods, the sum of the Annualized Default Rates for such Due Periods is equal
to or greater than three times the Maximum Default Rate; (4) for any three
consecutive Due Periods, the average of the Delinquency Rates shall be greater
than the Maximum Delinquency Rate; (5) the Net Worth Requirement is not met; (6)
there is a Servicer Event of Default, as defined in the Servicing Agreement; (7)
if either Michael Price or Thomas Price is no longer an officer and director of
the Servicer or is incapacitated for a period of six or more consecutive months;
(8) an Event of Default under this Indenture occurs and is continuing; (9) any
of the events set forth in clauses (4) or (5) of Section 6.01 occurs with
respect to the Company and (10) the Bond Insurer makes a payment to the
Indenture Trustee under any Policy.
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"Trustee": Initially, Norwest Bank Minnesota, National Association,
until a successor Person shall have become the Trustee pursuant to this
Indenture, and thereafter "Trustee" shall mean such successor Person.
"Trust Estate": The meaning specified in the Granting Clause of this
Indenture.
"Trustee Fee": The fee payable on each Payment Date to the Indenture
Trustee in consideration for the Indenture Trustee's performance of its duties
pursuant to this Indenture as Indenture Trustee, in an amount equal to the
product of one-twelfth of the Trustee Fee Rate and (i) on the Initial Payment
Date, the initial principal amount of the Notes and (ii) on any Payment Date
thereafter, the principal amount of Outstanding Notes on the preceding Payment
Date after giving effect to distributions on such date (or, in the case of Notes
originally issued after such preceding Payment Date and before such Payment
Date, the initial aggregate principal amount of such Notes).
"Trustee Fee Rate": 0.045%.
"Vice President": With respect to the Issuer or the Indenture 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 II
NOTE FORM
Section 2.01. Form Generally. The Notes and the certificates of
authentication shall be in substantially the form set forth in this Article,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, 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 Notes, as evidenced by their execution of such Notes.
The definitive Notes 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 Indenture Trustee and
the initial purchasers of the Notes, all as determined by the officers executing
such Notes, as evidenced by their execution of such Notes.
Section 2.02. Form of Fixed Rate Note. The following sets forth the form
of each Fixed Rate Note:
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THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THE
TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET
FORTH IN THE INDENTURE UNDER WHICH THIS NOTE IS ISSUED (A COPY OF WHICH IS
AVAILABLE FROM THE INDENTURE TRUSTEE UPON REQUEST).
DUE TO THE PROVISIONS FOR THE PAYMENT OF PRINCIPAL CONTAINED HEREIN, THE
OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE AMOUNT SHOWN ON
THE FACE HEREOF. ANYONE PURCHASING THIS NOTE MAY ASCERTAIN THE OUTSTANDING
PRINCIPAL AMOUNT HEREOF BY INQUIRY OF THE INDENTURE TRUSTEE.
No. ____________ $____________
T & W FUNDING COMPANY IV, L.L.C.
________% LEASE-BACKED FIXED RATE NOTE, SERIES 1995-1 TRANCHE _____
DELIVERY DATE: STATED MATURITY: ________
T & W FUNDING COMPANY IV, L.L.C., a limited liability company duly
organized and existing under the laws of the State of Delaware (the "Issuer",
which term includes any successor entity under the Indenture referred to below),
for value received, hereby promises to pay to _________, or registered assigns,
the principal sum of ____________ Dollars ($____________) in monthly
installments beginning on _________, and to pay interest monthly in arrears on
the unpaid portion of said principal sum (and, to the extent that the payment of
such interest shall be legally enforceable, on any overdue installment of
interest on this Note) on the twentieth day of each calendar month or, if such
twentieth day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), for the period from and including the Delivery Date
set forth above through ___________, and thereafter, monthly from and including
the most recent Payment Date through the day immediately preceding the
applicable Payment Date, until the last day preceding the Final Payment Date, at
the rate of _____% per annum (calculated on the basis of a 360-day year
consisting of 12 months of 30 days each). Each monthly installment of principal
payable on this Note shall be an amount equal to the pro rata share of the
Principal Distribution Amount plus any Additional Principal Amount, as such term
is defined in the Indenture described herein. Any remaining unpaid portion of
the principal amount of this Note shall be due and payable no later than the
Stated Maturity referred to above. The interest and principal so payable on any
Payment Date will as provided in the Indenture, be paid to the Person in whose
name this Note is registered on the Record Date for
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such Payment Date, which shall be the close of business on the last day of the
month prior to such Payment Date (whether or not a Business Day).
The principal and interest on this Note are payable by check mailed by
first-class mail to the Person whose name appears as the Registered Holder of
this Note on the Note Register at the address of such Person as it appears on
the Note Register, or by wire transfer in immediately available funds to the
account specified in writing to the Indenture Trustee by the Person whose name
appears as the Registered Holder of this Note on the Note Register received 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 payment of public and
private debts. Funds represented by checks returned undelivered will be held for
payment to the Person entitled thereto, subject to the terms of the Indenture,
at the office or agency in the United States of America designated as such by
the Issuer for such purpose pursuant to the Indenture.
This Note is one of a duly authorized issue of notes of the Issuer
designated as its ________% Lease-Backed Fixed Rate Notes, Series 1995-1,
Tranche ____, Due ________, (herein called the "Tranche ____ Notes") issued and
to be issued under the Indenture dated _________, 1995 (herein called the
"Indenture"), among the Issuer, T & W Leasing, Inc., as Servicer, and Norwest
Bank Minnesota, National Association, as Indenture Trustee (the "Indenture
Trustee," which term includes any successor Indenture Trustee under the
Indenture) and as Backup Servicer, to which the Indenture, and all amendments
and indentures supplemental thereto, reference is hereby made for a statement of
the respective rights thereunder of the Issuer, the Indenture Trustee and the
Holders of the Tranche _____ Notes, and the terms upon which the Tranche _____
Notes are, and are to be, authenticated and delivered. All terms used in this
Note which are defined in the Indenture shall have the meanings assigned to them
in the Indenture. Pursuant to the Indenture, the Issuer can issue, from time to
time, additional Tranches of its notes (such notes, together with the Tranche
____ Notes, shall be referred to herein as the "Notes").
The Notes are secured by certain Lease Receivables and by certain other
Collateral described in the Indenture and the Policy issued by the Bond Insurer.
The Trust Estate secures the Notes equally and ratably without prejudice,
priority or distinction between any Note and any other Note by reason of time of
issue or otherwise, and also secures the payment of certain other amounts and
certain other obligations as described in the Indenture.
Unless earlier declared due and payable by reason of an Event of
Default, the Notes are payable only at the time and in the manner provided in
the Indenture and are not redeemable or prepayable at the option of the Issuer
before such time, except that the Notes shall be (i) exchanged for the Notes, of
a new Tranche in accordance with the Indenture, unless the Issuer
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or the Holders of a majority of Notes do not consent to such exchange and (ii)
redeemable at the option of the Issuer, and in the absence of the exercise
thereof, by the Bond Insurer in whole but not in part, at any time after the
Outstanding principal amount of Notes then Outstanding declines to 10% or less
of the original principal amount of such Notes at a redemption price equal to
the Outstanding principal amount thereof plus accrued interest thereon to the
date of redemption; provided that on such date of redemption, the Issuer shall
have redeemed the notes, if any, in whole but not in part, of all other Tranches
then Outstanding under the Indenture. If an Event of Default as defined in the
Indenture shall occur and be continuing, the principal of all the Notes may
become or be declared due and payable in the manner and with the effect provided
in the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register of
the Issuer upon surrender of this Note for registration of transfer at the
office or agency of the Issuer in the United States of America maintained for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Issuer and the Indenture Trustee and duly
executed by the holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes of the same Stated Maturity of authorized
denominations and for the same initial aggregate principal amount will be issued
to the designated transferees.
Prior to due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee, nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer, the Indenture Trustee, the Back-up Servicer, the Servicer
and the Bond Insurer with the consent of the Holders of a majority in aggregate
principal amount of Notes at the time Outstanding. The Indenture also contains
provisions permitting the Bond Insurer or the Holders of specified percentages
in aggregate principal amount of the Notes at the time Outstanding with the
prior written consent of the Bond Insurer, on behalf of the Holders of all
Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange therefor or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Note.
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The Notes are issuable only in registered form without coupons in such
authorized denominations as provided in the Indenture and subject to certain
limitations therein set forth.
This Note and the Indenture shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
conflicts of laws principles.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on a Note, but
solely from the Collateral pledged to the Indenture Trustee under the Indenture
and the Policy at the times, place and rate, and in the coin or currency, herein
prescribed. Notwithstanding anything else to the contrary contained in this Note
or the Indenture, the obligation of the Issuer to pay the principal of and
interest on this Note is not a general obligation of the Issuer, nor its
officers or directors, but is limited solely to the Collateral pledged under the
Indenture.
STATEMENT OF INSURANCE
OBLIGATIONS: $[
T & W Funding Company IV, L.L.C.
Lease-Backed Notes, Series 1995-1, Tranche [ ]
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of the Note Insurance Policy
(the "Policy"), thereby unconditionally and irrevocably guarantees to any Owner
that an amount equal to each full and complete Insured Payment will be received
by Norwest Bank Minnesota, National Association, or its successor, as trustee
for the Owners (the "Trustee"), on behalf of the Owners from the Insurer, for
distribution by the Trustee to each Owner of each Owner's proportionate share of
the Insured Payment. The Insurer's obligations under the Policy with respect to
a particular Insured Payment shall be discharged to the extent funds equal to
the applicable Insured Payment are received by the Trustee, whether or not such
funds are properly applied by the Trustee. Insured Payments shall be made only
at the time set forth in the Policy, and no accelerated Insured Payments shall
be made regardless of any acceleration of the Obligations, unless such
acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the Policy does not cover
shortfalls, if any, attributable to the liability of the Issuer or the Trustee
for withholding taxes, if any (including interest and penalties in respect of
any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a
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certified copy of the order requiring the return of such Preference Amount, (ii)
an opinion of counsel satisfactory to the Insurer that such order is final and
not subject to appeal, (iii) an assignment in such form as is reasonably
required by the Insurer, irrevocably assigning to the Insurer all rights and
claims of the Owner relating to or arising under the Obligations against the
debtor which made such preference payment or otherwise with respect to such
preference payment and (iv) appropriate instruments to effect the appointment of
the Insurer as agent for such Owner in any legal proceeding related to such
preference payment, such instruments being in a form satisfactory to the
Insurer, provided that if such documents are received after 12:00 noon, New York
City time, on such Business Day, they will be deemed to be received on the
following Business Day. Such payments shall be disbursed to the receiver or
trustee in bankruptcy named in the final order of the court exercising
jurisdiction on behalf of the Owner and not to any Owner directly unless such
Owner has returned principal or interest paid on the Obligations to such
receiver or trustee in bankruptcy, in which case such payment shall be disbursed
to such Owner.
The Insurer will pay any other amount payable under the Policy no later
than 12:00 noon New York City time on the later of the Payment Date on which the
related Deficiency Amount is due or the Business Day following receipt in New
York, New York on a Business Day by State Street Bank and Trust Company, N.A.,
as Fiscal Agent for the Insurer or any successor fiscal agent appointed by the
Insurer (the "Fiscal Agent") of a Notice (as described below); provided that if
such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim under the Policy, it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Insured Payments due under the Policy, unless otherwise stated therein,
will be disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by
wire transfer of immediately available funds in the amount of the Insured
Payment less, in respect of Insured Payments related to Preference Amounts, any
amount held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under the Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated
to the rights of each Owner to receive payments under the Obligations to the
extent of any payment by the Insurer under the Policy.
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As used in the Policy, the following terms shall have the following
meanings:
"Agreement" means the Indenture dated as of July 1, 1995 among T & W
Funding Company IV, L.L.C., T & W Leasing, Inc., as servicer and the Trustee, as
trustee, without regard to any amendment or supplement thereto unless such
amendment or supplement has been approved in writing by the Insurer in
accordance with the terms of the Agreement.
"Business Day" means 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
corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"Deficiency Amount" means for any Payment Date, any shortfall in amounts
available in the Collection Account to pay the interest due on the Note under
Section 12.02(d)(vi) of the Agreement after payment of all amounts payable
pursuant to Section 12.02(d)(i) through (v) of the Agreement, plus any shortfall
in amounts available in the Collection Account to pay principal in accordance
with Section 12.02(d)(vii) of the Agreement after the payment of all amounts
payable pursuant to Section 12.02(d)(i) through (vi) of the Agreement.
"Insured Payment" means (i) as of any Payment Date, any Deficiency
Amount and (ii) any unpaid Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached to the
Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee or Servicer on behalf of the Trustee specifying
the Insured Payment which shall be due and owing on the applicable Payment Date.
"Owner" means Holder (as defined in the Agreement) who, on the
applicable Payment Date, is entitled under the terms of the Note to payment
thereunder.
"Preference Amount" means any amount previously distributed to an Owner
on the Notes that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Capitalized terms used in the Policy and not otherwise defined therein
shall have the respective meanings set forth in the Agreement as of the date of
execution of the Policy, without giving effect to any subsequent amendment to or
modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
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Any notice under the Policy or service of process on the Fiscal Agent of
the Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
The Policy is being issued under and pursuant to, and shall be construed
under, the laws of the State of New York, without giving effect to the conflict
of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the Policy
is not refundable for any reason including payment, or provision being made for
payment, prior to maturity of the Obligations.
MBIA INSURANCE CORPORATION
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee by manual signature, this Note shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, T & W Funding Company IV, L.L.C. has caused this
instrument to be signed, manually, by its President or a Vice President and its
corporate seal to be imprinted hereon.
By
[Vice] President
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[FORM OF INDENTURE TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Notes described in the within-mentioned Indenture.
Dated:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By_____________________________________________________
Authorized Signatory
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Section 2.03. Form of Floating Rate Note. The following sets forth the
form for each Floating Rate Note:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THE
TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET
FORTH IN THE INDENTURE UNDER WHICH THIS NOTE IS ISSUED (A COPY OF WHICH IS
AVAILABLE FROM THE INDENTURE TRUSTEE UPON REQUEST).
DUE TO THE PROVISIONS FOR THE PAYMENT OF PRINCIPAL CONTAINED HEREIN, THE
OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE AMOUNT SHOWN ON
THE FACE HEREOF. ANYONE PURCHASING THIS NOTE MAY ASCERTAIN THE OUTSTANDING
PRINCIPAL AMOUNT HEREOF BY INQUIRY OF THE INDENTURE TRUSTEE.
No. ____________ $____________
T & W FUNDING COMPANY IV, L.L.C.
LEASE-BACKED FLOATING RATE NOTE, SERIES 1995-1 TRANCHE _____
DELIVERY DATE: STATED MATURITY: ________
T & W FUNDING COMPANY IV, L.L.C., a limited liability company duly
organized and existing under the laws of the State of Delaware (the "Issuer",
which term includes any successor entity under the Indenture referred to below),
for value received, hereby promises to pay to _________, or registered assigns,
the principal sum of ____________ Dollars ($____________) in monthly
installments beginning on _________, and to pay interest monthly in arrears on
the unpaid portion of said principal sum (and, to the extent that the payment of
such interest shall be legally enforceable, on any overdue installment of
interest on this Note) on the twentieth day of each calendar month or, if such
twentieth day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), for the period from and including the Delivery Date
set forth above through ___________, and thereafter, monthly from and including
the most recent Payment Date through the day immediately preceding the
applicable Payment Date, until the last day preceding the Final Payment Date, at
the rate calculated as set forth herein (on the basis of a 360-day year and the
actual number of days elapsed). Each monthly installment of principal payable on
this Note shall be an amount equal to the pro rata share of the Principal
Distribution Amount plus any Additional Principal Amount, as such term is
defined in the Indenture described herein. Any remaining unpaid portion of the
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principal amount of this Note shall be due and payable no later than the Stated
Maturity referred to above. The interest and principal so payable on any Payment
Date will as provided in the Indenture, be paid to the Person in whose name this
Note is registered on the Record Date for such Payment Date, which shall be the
close of business on the last day of the month prior to such Payment Date
(whether or not a Business Day).
Interest paid on this Note shall be paid at a rate equal to the sum of
(i) the London interbank offered rate for one month United States dollar
deposits ("LIBOR") and (ii) thirty one hundredths of one percent (0.30%), as
such rate is calculated by the Indenture on each LIBOR Determination Date. On
each LIBOR Determination Date, the Calculation Agent will determine LIBOR on the
basis of the offered rates for deposits in United States dollars having a
maturity of one month commencing on such LIBOR Determination Date that appears
on the Telerate Page 3750 (or on such replacement system as is customarily used
to quote LIBOR) as of approximately 11:00 A.M., London time, on such LIBOR
Determination Date. If at least two such offered rates appear on Telerate Page
3750 or associated pages, LIBOR will be the arithmetic mean (rounded upwards, if
necessary, to the nearest one-sixteenth of a percent) of such offered rates.
With the consent of the Indenture Trustee, the Bond Insurer and all of the
Noteholders, the Calculation Agent may use another method to determine LIBOR. On
each LIBOR Determination Date prior to 12:00 noon, Minneapolis time, the
Calculation Agent shall send to the Servicer by facsimile transmission
notification of LIBOR. The Floating Rate applicable to the then current and the
immediately preceding Due Periods may be obtained by any Noteholder by
telephoning the Indenture Trustee at its Corporate Trust Office at (612)
667-4844.
The principal and interest on this Note are payable by check mailed by
first-class mail to the Person whose name appears as the Registered Holder of
this Note on the Note Register at the address of such Person as it appears on
the Note Register, or by wire transfer in immediately available funds to the
account specified in writing to the Indenture Trustee by the Person whose name
appears as the Registered Holder of this Note on the Note Register received 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 payment of public and
private debts. Funds represented by checks returned undelivered will be held for
payment to the Person entitled thereto, subject to the terms of the Indenture,
at the office or agency in the United States of America designated as such by
the Issuer for such purpose pursuant to the Indenture.
This Note is one of a duly authorized issue of Notes of the Issuer
designated as its Lease-Backed Floating Rate Notes, Series 1995-1 Tranche _____,
Due ________ (herein called the "Tranche ____ Notes") issued and to be issued
under the Indenture dated _________, 1995 (herein called the "Indenture"), among
the Issuer, T & W Leasing, Inc., as Servicer, and
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Norwest Bank Minnesota, National Association, as Indenture Trustee (the
"Indenture Trustee," which term includes any successor Indenture Trustee under
the Indenture) and the Backup Servicer, to which the Indenture, and all
amendments and indentures supplemental thereto, reference is hereby made for a
statement of the respective rights thereunder of the Issuer, the Indenture
Trustee and the Holders of the Tranche _____ Notes, and the terms upon which the
Tranche _____ Notes are, and are to be, authenticated and delivered. All terms
used in this Note which are defined in the Indenture shall have the meanings
assigned to them in the Indenture. Pursuant to the Indenture, the Issuer can
issue, from time to time, additional Tranches of its notes (such notes, together
with the Tranche ____ Notes, shall be referred to herein as the "Notes").
The Notes are secured by certain Lease Receivables and by certain other
Collateral described in the Indenture and the Policy issued by the Bond Insurer.
The Trust Estate secures the Notes equally and ratably without prejudice,
priority or distinction between any Note and any other Note by reason of time of
issue or otherwise, and also secures the payment of certain other amounts and
certain other obligations as described in the Indenture.
Unless earlier declared due and payable by reason of an Event of
Default, the Notes are payable only at the time and in the manner provided in
the Indenture and are not redeemable or prepayable at the option of the Issuer
before such time, except that the Notes shall be (i) convertible by the Issuer
into Fixed Rate Notes of a new Tranche of Notes in an amount equal to the
principal amount Outstanding in accordance with the Indenture and (ii)
redeemable at the option of the Issuer, and in the absence of the exercise
thereof, by the Bond Insurer in whole but not in part, at any time after the
Outstanding principal amount of Notes declines to 10% or less of the original
principal amount of the Notes at a redemption price equal to the Outstanding
principal amount thereof plus accrued interest thereon to the date of
redemption; provided that on such date of redemption, the Issuer shall have
redeemed the notes, if any, in whole but not in part, of all other Tranches then
Outstanding under the Indenture. If an Event of Default as defined in the
Indenture shall occur and be continuing, the principal of all the Notes may
become or be declared due and payable in the manner and with the effect provided
in the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register of
the Issuer upon surrender of this Note for registration of transfer at the
office or agency of the Issuer in the United States of America maintained for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Issuer and the Indenture Trustee and duly
executed by the holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes of the same Stated Maturity of authorized
denominations and for the same initial aggregate principal amount will be issued
to the designated transferees.
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Prior to due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee, nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer, the Indenture Trustee, the Back-up Servicer, the Servicer
and the Bond Insurer with the consent of the Holders of a majority in aggregate
principal amount of Notes at the time Outstanding. The Indenture also contains
provisions permitting the Bond Insurer or the Holders of specified percentages
in aggregate principal amount of the Notes at the time Outstanding with the
prior written consent of the Bond Insurer, on behalf of the Holders of all
Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange therefor or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Note.
The Notes are issuable only in registered form without coupons in such
authorized denominations as provided in the Indenture and subject to certain
limitations therein set forth.
This Note and the Indenture shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
conflicts of laws principles.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on a Note, but
solely from the Collateral pledged to the Indenture Trustee under the Indenture
and the Policy at the times, place and rate, and in the coin or currency, herein
prescribed. Notwithstanding anything else to the contrary contained in this Note
or the Indenture, the obligation of the Issuer to pay the principal of and
interest on this Note is not a general obligation of the Issuer, nor its
officers or directors, but is limited solely to the Collateral pledged under the
Indenture.
STATEMENT OF INSURANCE
OBLIGATIONS: $[
T & W Funding Company IV, L.L.C.
Lease-Backed Notes, Series 1995-1, Tranche [ ]
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MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of the Note Insurance Policy
(the "Policy"), thereby unconditionally and irrevocably guarantees to any Owner
that an amount equal to each full and complete Insured Payment will be received
by Norwest Bank Minnesota, National Association, or its successor, as trustee
for the Owners (the "Trustee"), on behalf of the Owners from the Insurer, for
distribution by the Trustee to each Owner of each Owner's proportionate share of
the Insured Payment. The Insurer's obligations under the Policy with respect to
a particular Insured Payment shall be discharged to the extent funds equal to
the applicable Insured Payment are received by the Trustee, whether or not such
funds are properly applied by the Trustee. Insured Payments shall be made only
at the time set forth in the Policy, and no accelerated Insured Payments shall
be made regardless of any acceleration of the Obligations, unless such
acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the Policy does not cover
shortfalls, if any, attributable to the liability of the Issuer or the Trustee
for withholding taxes, if any (including interest and penalties in respect of
any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of
such Preference Amount, (ii) an opinion of counsel satisfactory to the Insurer
that such order is final and not subject to appeal, (iii) an assignment in such
form as is reasonably required by the Insurer, irrevocably assigning to the
Insurer all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or otherwise
with respect to such preference payment and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Owner in any legal
proceeding related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon, New York City time, on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
The Insurer will pay any other amount payable under the Policy no later
than 12:00 noon New York City time on the later of the Payment Date on which the
related Deficiency Amount is due or the Business Day following receipt in New
York, New York on a Business Day by State Street Bank and Trust Company, N.A.,
as Fiscal Agent for the Insurer or any successor fiscal agent appointed by the
Insurer (the "Fiscal Agent") of a Notice (as described below); provided that if
such Notice is received after 12:00 noon New York City time on such Business
Day, it
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will be deemed to be received on the following Business Day. If any such Notice
received by the Fiscal Agent is not in proper form or is otherwise insufficient
for the purpose of making claim under the Policy, it shall be deemed not to have
been received by the Fiscal Agent for purposes of this paragraph, and the
Insurer or the Fiscal Agent, as the case may be, shall promptly so advise the
Trustee and the Trustee may submit an amended Notice.
Insured Payments due under the Policy, unless otherwise stated therein,
will be disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by
wire transfer of immediately available funds in the amount of the Insured
Payment less, in respect of Insured Payments related to Preference Amounts, any
amount held by the Trustee for the payment of such Insured Payment and legally
available therefor. The Fiscal Agent is the agent of the Insurer only, and the
Fiscal Agent shall in no event be liable to Owners for any acts of the Fiscal
Agent or any failure of the Insurer to deposit, or cause to be deposited,
sufficient funds to make payments due under the Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated
to the rights of each Owner to receive payments under the Obligations to the
extent of any payment by the Insurer under the Policy.
As used in the Policy, the following terms shall have the following
meanings:
"Agreement" means the Indenture dated as of July 1, 1995 among T & W
Funding Company IV, L.L.C., T & W Leasing, Inc., as servicer and the Trustee, as
trustee, without regard to any amendment or supplement thereto unless such
amendment or supplement has been approved in writing by the Insurer in
accordance with the terms of the Agreement.
"Business Day" means 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
corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"Deficiency Amount" means for any Payment Date, any shortfall in amounts
available in the Collection Account to pay the interest due on the Note under
Section 12.02(d)(vi) of the Agreement after payment of all amounts payable
pursuant to Section 12.02(d)(i) through (v) of the Agreement, plus any shortfall
in amounts available in the Collection Account to pay principal in accordance
with Section 12.02(d)(vii) of the Agreement after the payment of all amounts
payable pursuant to Section 12.02(d)(i) through (vi) of the Agreement.
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"Insured Payment" means (i) as of any Payment Date, any Deficiency
Amount and (ii) any unpaid Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached to the
Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee or Servicer on behalf of the Trustee specifying
the Insured Payment which shall be due and owing on the applicable Payment Date.
"Owner" means Holder (as defined in the Agreement) who, on the
applicable Payment Date, is entitled under the terms of the Note to payment
thereunder.
"Preference Amount" means any amount previously distributed to an Owner
on the Notes that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Capitalized terms used in the Policy and not otherwise defined therein
shall have the respective meanings set forth in the Agreement as of the date of
execution of the Policy, without giving effect to any subsequent amendment to or
modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice under the Policy or service of process on the Fiscal Agent of
the Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
The Policy is being issued under and pursuant to, and shall be construed
under, the laws of the State of New York, without giving effect to the conflict
of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the Policy
is not refundable for any reason including payment, or provision being made for
payment, prior to maturity of the Obligations.
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MBIA INSURANCE CORPORATION
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee by manual signature, this Note shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, T & W Funding Company IV, L.L.C. has caused this
instrument to be signed, manually, by its President or a Vice President and its
corporate seal to be imprinted hereon.
By
[Vice] President
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[FORM OF INDENTURE TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Notes described in the within-mentioned Indenture.
Dated:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By________________________________________________________
Authorized Signatory
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ARTICLE III
THE NOTES
Section 3.01. Denomination. The aggregate principal amount of Notes of
all Tranche which may be authenticated and delivered under this Indenture is
limited so that on any day during the term of this Indenture, the unpaid
principal amount of Notes Outstanding shall not be greater than the Maximum
Outstanding Note Amount. The Notes shall be issuable only as registered Notes
without coupons in the denominations of at least $250,000; provided, however,
that the foregoing shall not restrict or prevent the transfer in accordance with
Sections 3.04 and 3.05 hereof of any Note with a remaining outstanding principal
amount of less than $250,000.
The Notes may be issued in one or more Tranches. With respect to the
Notes of any Tranche, there shall be established in the related Funding Report
prior to the issuance of the Notes of such Tranche each of the terms set forth
in the form of Funding Report attached hereto as Exhibit C.
Section 3.02. Execution, Authentication, Delivery and Dating. The Notes
shall be executed on behalf of the Issuer by its President or one of its Vice
Presidents under its corporate seal imprinted (if it has one) or otherwise
reproduced thereon. The signature of these officers on the Notes must be manual.
Notes bearing the manual signatures of individuals who were at any time
the proper officers of the Issuer shall bind the Issuer, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
authentication or delivery of such Notes or did not hold offices at the date of
authentication or delivery of such Notes.
Each Note shall bear on its face the Delivery Date applicable thereto
and be dated as of the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee or by any Authenticating Agent by the manual
signature of one of its authorized officers, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
Section 3.03. Temporary Notes. Pending the preparation of definitive
Notes, the Issuer may execute, and upon Issuer Order, the Indenture Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise
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produced, in any denomination, substantially of the tenor of the definitive
Notes in lieu of which they are issued and with such variations as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
If temporary Notes are issued, the Issuer will cause definitive Notes to
be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 11.02(n) hereof, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Notes, the Issuer
shall execute and the Indenture Trustee shall authenticate and deliver in
exchange therefor one or more definitive Notes of any authorized denominations
and of a like initial aggregate principal amount and Stated Maturity. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.
Section 3.04. Registration, Registration of Transfer and Exchange. (a)
The Issuer shall cause to be kept at an office or agency to be maintained by the
Issuer in accordance with Section 11.02(n) hereof a register (the "Note
Register"), in which, subject to such reasonable regulations as it may
prescribe, the Issuer shall provide for the registration of Notes and the
registration of transfers of Notes. Norwest Bank Minnesota, National
Association, 6th Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069,
is hereby appointed "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. The Indenture Trustee shall have the
right to examine the Note Register at all reasonable times and to rely
conclusively upon a certificate of the Note Registrar as to the names and
addresses of the holders of the Notes and the principal amounts and numbers of
such Notes as held.
(b) Upon surrender for registration of transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 11.02(n)
hereof and subject to the conditions set forth in Section 3.05 hereof, the
Issuer shall execute, and the Indenture Trustee or its agent shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Notes of any authorized denominations, and of a like aggregate
principal amount and Stated Maturity.
(c) At the option of the Holder, Notes may be exchanged for other Notes
of the same Tranche of any authorized denominations and of a like aggregate
principal amount and Stated Maturity, upon surrender of the Notes to be
exchanged at such office or agency. Whenever any Notes are so surrendered for
exchange, the Issuer shall execute, and the Indenture Trustee or its agent shall
authenticate and deliver, the Notes which the Noteholder making the exchange is
entitled to receive.
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(d) All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of such transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall (if so required by the Issuer or the Note Registrar) be duly
endorsed or be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Note 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 Notes, but the Issuer 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 Notes, other than
exchanges pursuant to Section 3.03 or 9.05 hereof not involving any registration
of transfer.
Notwithstanding anything else to the contrary contained in this
Indenture, the obligation of the Issuer to pay the principal of and interest on
the Notes is not a general obligation of the Issuer, but is limited solely to
the Collateral pledged under this Indenture and the Policy.
Section 3.05. Limitation on Transfer and Exchange. The Notes will not be
registered or qualified under the Securities Act of 1933 (the "1933 Act") or the
securities laws of any State. No transfer of any Note shall be made unless that
offer is made in a transaction which does not require registration or
qualification under the 1933 Act or under applicable state securities laws. In
the event that a transfer is to be made without registration or qualification,
such Noteholder's prospective transferee shall either (i) deliver to the
Indenture Trustee an investment letter substantially in the form set forth on
Exhibit A hereto, or other applicable document (the "Investment Letter") or (ii)
deliver to the Indenture Trustee an opinion of counsel that the transfer is
exempt from the 1933 Act. Neither the Issuer nor the Indenture Trustee is
obligated to register or qualify the Notes 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 Indenture Trustee, the Bond Insurer and the
Issuer 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 Indenture Trustee shall have no liability to the Trust Estate or any
Noteholder arising from a transfer of any such Note in reliance upon a
certification described in this Section 3.05.
Section 3.06. Mutilated, Destroyed, Lost or Stolen Note. If (i) any
mutilated Note is surrendered to the Note Registrar, or the Indenture Trustee
receives evidence to its satisfaction of
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the destruction, loss or theft of any Note, and (ii) there is delivered to the
Indenture Trustee and the Bond Insurer such security or indemnity as may be
required by the Indenture Trustee to save the Issuer, the Indenture Trustee and
the Bond Insurer or any agent of any of them harmless, then, in the absence of
notice to the Issuer or the Note Registrar that such Note has been acquired by a
bona fide purchaser, the Issuer shall execute and, upon its request, the
Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Note, a new Note of the same
tenor, initial principal amount and Stated Maturity, bearing a number not
contemporaneously outstanding. If after the delivery of such new Note, a bona
fide purchaser of the original Note in lieu of which such new Note was issued
presents for payment such original Note, the Bond Insurer, the Issuer and the
Indenture Trustee shall be entitled to recover such new Note 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 the Bond Insurer, the Issuer or the Indenture Trustee or any agent of any of
them in connection therewith. If any such mutilated, destroyed, lost or stolen
Note 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 Note, the
Issuer may pay such Note without surrender thereof, except that any mutilated
Note shall be surrendered.
Upon the issuance of any new Note under this Section, the Issuer 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 Indenture Trustee) connected therewith.
Every new Note issued pursuant to this Section 3.06, in lieu of any
destroyed, lost or stolen Note, shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Note shall be at any tune enforceable by anyone, and shall be entitled to
all the benefits of the Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section 3.06 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 Notes.
Section 3.07. Payment of Principal and Interest; Principal and Interest
Rights Preserved; Calculation of Floating Interest Rate. (a) The Notes of each
Tranche shall bear interest on the unpaid principal amount thereof from and
including the Delivery Date of such Tranche at the applicable Note Interest Rate
for such Tranche (calculated on the basis of a 360-day year consisting of 12
months of 30 days each with respect to Fixed Rate Notes and a 360-day year and
actual days elapsed with respect to Floating Rate Notes) through the day
immediately
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preceding the initial Payment Date of such Tranche and thereafter, monthly from
and including the most recent Payment Date through the day immediately preceding
the applicable Payment Date, until the last day preceding the Final Payment Date
for such Tranche 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 payable (giving effect to any applicable grace periods
provided herein) until fully paid. Interest shall be due and payable in arrears
on each Payment Date, with each payment of interest calculated as described
above on the unpaid principal amount of the Notes of such Tranche Outstanding
immediately following the preceding Payment Date or of the Delivery Date of such
Tranche, if there has not been any preceding Payment Date; provided, however,
that in making any interest payment, if the interest calculation with respect to
any Note shall result in a portion of such payment being less than $.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 Note of each Tranche shall be payable in
installments ending no later than the Stated Maturity thereof unless such Note
becomes due and payable at an earlier date by declaration of acceleration, call
for redemption or otherwise. All reductions in the principal amount of any Note
effected by payments of installments of principal made on any Payment Date shall
be binding upon all future Holders of such Note and of any Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof,
whether or not such payment is noted on such Note. Each installment of principal
payable on the Notes of each Tranche shall be in an amount equal to the
Principal Distribution Amount applicable to such Tranche and the Additional
Principal Amount applicable to such Tranche. The principal payable on the Notes
of such Tranche shall be paid on each Payment Date beginning on the initial
Payment Date of such Tranche and ending on the Final Payment Date for such
Tranche on a pro rata basis based upon the face amount of each Note of each
Tranche; 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 decreased to
the nearest whole cent, and such portion shall be applied to the next succeeding
principal payment.
(c) The principal of and interest on the Notes are payable by check
mailed by first-class mail to the Person whose name appears as the Registered
Holder of such Note on the Note Register at the address of such Person as it
appears on the Note Register or by wire transfer in immediately available funds
to the account specified in writing to the Indenture 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 3.07(c), all payments on the Notes shall be paid without any requirement
of presentment. The Issuer shall notify the Person in whose name a Note is
registered at the close of business on the Record Date next preceding the
Payment Date on which
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the Issuer expects that the final installment of principal of such Note will be
paid that the Issuer 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 Note may be
surrendered. Funds representing any such checks returned undeliverable shall be
held in accordance with Section 11.02(o). Each Noteholder shall surrender its
Note to the Indenture Trustee prior to payment of the final installment of
principal of such Note.
(d) On each LIBOR Determination Date, the Calculation Agent will
determine LIBOR on the basis of the offered rates for deposits in United States
dollars having a maturity of one month commencing on such LIBOR Determination
Date that appears on the Telerate Page 3750 (or on such replacement system as is
customarily used to quote LIBOR) as of approximately 11:00 A.M., London time, on
such LIBOR Determination Date. If at least two such offered rates appear on
Telerate Page 3750 or associated pages, LIBOR will be the arithmetic mean
(rounded upwards, if necessary, to the nearest one-sixteenth of a percent) of
such offered rates. With the consent of the Indenture Trustee, the Bond Insurer
and all of the Noteholders, the Calculation Agent may use another method to
determine LIBOR. On each LIBOR Determination Date prior to 12:00 noon,
Minneapolis time, the Calculation Agent shall send to the Servicer by facsimile
transmission notification of LIBOR. The Floating Rate applicable to the then
current and the immediately preceding Floating Rate Periods may be obtained by
any Noteholder by telephoning the Indenture Trustee at its Corporate Trust
Office at (612) 667-4844.
Section 3.08. Fixed Rate Notes; Floating Rate Notes; Conversion to Fixed
Rate Notes; Minimum Funding Amounts. The Issuer may issue Notes under this
Indenture in the following manner and amounts on any Delivery Date:
(a) the Issuer may issue an initial Tranche of Notes, Fixed Rate
Notes in a principal amount greater than or equal to $5,000,000;
provided, however, that the principal amount of Notes issued pursuant to
this subsection (a) and subsection (b) below shall not be greater than
the Maximum Outstanding Note Amount;
(b) the Issuer may issue an initial Tranche of Notes, Floating
Rate Notes in a principal amount greater than or equal to $5,000,000;
provided, however, that the principal amount of Notes issued pursuant to
this subsection (b) and subsection (a) above shall not be greater than
the Maximum Outstanding Note Amount;
(c) the Issuer may (i) on any date during the Funding Period,
issue Fixed Rate Notes, (ii) on any Payment Date, convert all or part of
one or more Outstanding Tranches of Floating Rate Notes Outstanding or
Fixed Rate Notes Outstanding to Fixed Rate Notes or (iii) on any Payment
Date during the Funding Period, issue Fixed Rate Notes through a
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combination of original issuance and conversion as provided in clauses
(i) and (ii) above; provided, however that (A) the Issuer must provide
the Servicer, the Indenture Trustee, the Back-up Servicer, the
Coordinator and the Bond Insurer with ten Business Days written notice
of its intent to effect such an issuance or conversion prior to the date
of such issuance or conversion, (B) after such issuance or conversion,
each new Tranche of Fixed Rate Notes shall be greater than or equal to
$5,000,000 in principal amount and (C) after such issuance and/or
conversion, the outstanding principal balance of Notes Outstanding of
all Tranches shall not be greater than the Maximum Outstanding Note
Amount;
(d) During the Funding Period, the Issuer may issue additional
Tranches of Floating Rate Notes in an amount greater than or equal to
$1,000,000 in principal amount; provided, however, that after such
issuance the outstanding principal balance of Notes Outstanding of all
Tranches shall not be greater than the Maximum Outstanding Note Amount;
and
(e) Anything to the contrary herein notwithstanding, there shall
only be one Tranche of Fixed Rate Notes Outstanding at any one time
unless a majority of the Noteholders consent to more than one Tranche;
in order to issue a new Tranche of Fixed Rate Notes pursuant to Section
3.08(c)(iii), the Lease Contracts already pledged to the Indenture
Trustee to back the Fixed Rate Notes being exchanged and any Floating
Rate Notes being converted pursuant to the issuance of such new Tranche
will be combined with the Lease Contracts being funded by such new
Tranche of Fixed Rate Notes so that the new Tranche of Fixed Rate Notes
will be issued backed by the combined pool of Lease Contracts; provided,
however, that all Lease Contracts in any such combined pool shall have
the same Discount Rate; and further provided, however, that such pooling
shall not occur if the Noteholder or the Issuer determines that the
interest rate on the new Tranche is less favorable than the interest
rate on the Tranches of Fixed Rate Notes Outstanding to be exchanged or
Floating Rate Notes to be converted. The pooling of Lease Contracts
referred to in this Section 3.08 is solely for the purpose of performing
the calculations required by this Indenture and the Servicing Agreement
and, notwithstanding anything to the contrary contained in this
paragraph, such Lease Contracts shall equally and ratably secure all
Notes as provided in Section 4.01(a) hereof.
Section 3.09. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Bond Insurer, the
Indenture Trustee and any agent of the Issuer, the Bond Insurer or the Indenture
Trustee shall treat the Person in whose name any Note is registered as the owner
of such Note for the purpose of receiving payments of principal of and interest
on such Note and for all other purposes whatsoever, whether or not such Note be
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overdue, and neither the Issuer, the Bond Insurer, the Indenture Trustee nor any
agent of the Issuer, the Bond Insurer or the Indenture Trustee shall be affected
by notice to the contrary.
Section 3.10. Cancellation. All Notes surrendered to the Indenture
Trustee for payment, registration of transfer or exchange (including Notes
surrendered to any Person other than the Indenture Trustee which shall be
delivered to the Indenture Trustee) shall be promptly cancelled by the Indenture
Trustee; provided, however, that any exchange of Notes pursuant to Section 3.08
hereof shall be accomplished in the following manner: any relevant Delivery
Date, the Indenture Trustee shall instruct such Holder to cancel the outstanding
certificate and send it to the Indenture Trustee via facsimile and overnight
delivery, and, upon receipt of the cancelled certificate via facsimile, send a
copy of the new certificate to the relevant Holder via facsimile and overnight
delivery. No Notes shall be authenticated in lieu of or in exchange for any
Notes cancelled as provided in this Section 3.10, except as expressly permitted
by this Indenture. All cancelled Notes held by the Indenture Trustee shall be
disposed of by the Indenture Trustee as is customary with its standard practice.
ARTICLE IV
ORIGINAL ISSUANCE OF NOTES; SUBSTITUTIONS OF COLLATERAL
Section 4.01. Conditions to Issuance of Notes. (a) Subject to the
conditions in Article III hereof, the Issuer may from time to time direct the
Trustee to authenticate an initial and one or more subsequent Tranches of Notes.
The Outstanding Notes of all Tranches shall be equally and ratably entitled, as
provided herein, to the benefits of this Indenture without preference, priority
or distinction, all in accordance with the terms and provisions of this
Indenture and the applicable Funding Report.
(b) The obligation of the Trustee to authenticate, execute and deliver
the Notes of the initial Tranche on the initial Delivery Date is subject to the
satisfaction of the following conditions:
(i) the Issuer shall have delivered to the Indenture Trustee,
the Bond Insurer and the Coordinator the related Funding Report at least
one Business Day prior to the related Delivery Date, in a form
satisfactory to the Indenture Trustee, to be acknowledged by each of the
Indenture Trustee, the Bond Insurer and the Coordinator;
(ii) the Issuer shall have delivered to the Indenture Trustee
the original executed counterpart of each Lease Contract identified in
the related Lease Schedule and the Lease Contract File relating to such
Lease Contract;
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(iii) the Rating Agencies shall have notified the Issuer, the
Servicer, the Back-up Servicer, the Bond Insurer, the Coordinator and
the Indenture Trustee in writing that the Notes have received a rating
of Aaa from Moody's and AAA from S&P;
(iv) each of the Issuer and the Servicer shall have delivered to
the Indenture Trustee its Officer's Certificate stating, as applicable,
that (A) such Person is not in Default under this Indenture or the
Servicing Agreement and that such issuance will not result in any breach
of any of the terms, conditions or provisions of, or constitute a
default under, such Person's certificate of incorporation, by-laws or
other organizational documents, as applicable, or any material
indenture, mortgage, deed of trust or other agreement or instrument to
which such Person is a party or by which it is bound, or any order of
any court or administrative agency entered in any proceeding to which
such Person is a party or by which it may be bound or to which it may be
subject; (B) that all conditions precedent provided in this Indenture
relating to the authentication and delivery of the Notes of such Tranche
have been complied with; and (C) that such Person reasonably believes
that neither an Event of Default nor a Trigger Event has occurred and is
continuing or that such issuance will not, based on the facts known to
such officer at the time of such certification, then or thereafter cause
an Event of Default or a Trigger Event to occur with respect to any
Tranche of Outstanding Notes;
(v) each of the Issuer and the Servicer shall have delivered to
the Indenture Trustee its Board Resolution authorizing, as applicable,
the execution, delivery and performance of this Indenture, the related
Funding Report and the other Transaction Documents and the transactions
contemplated hereby and thereby, certified by an officer of the Issuer
or the Servicer, as applicable;
(vi) each of the Issuer and the Servicer shall have delivered to
the Indenture Trustee a copy of an officially certified document, dated
not more than 30 days prior to the related Delivery Date, evidencing its
due organization and good standing;
(vii) each of the Issuer and the Servicer shall have delivered
to the Indenture Trustee copies of its Certificate of Formation and
Certificate of Incorporation, respectively, and By-Laws, certified by
its Secretary or Assistant Secretary;
(viii) the Issuer shall have delivered to the Indenture Trustee,
within 10 days of the related Delivery Date, evidence of filing with the
Secretary of State of the State of the Issuer's chief executive office
of UCC-1 financing statements executed by the Issuer, as debtor, and
naming the Indenture Trustee for the benefit of the Noteholders and the
Bond Insurer as secured parties, and the Trust Estate (including any
additional Lease Contracts identified in the related Lease Schedule) as
collateral;
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(ix) the Servicer shall have delivered to the Indenture Trustee
a certificate listing the Servicing Officers of the Servicer as of the
related Delivery Date;
(x) the Issuer shall have delivered to the Indenture Trustee an
executed copy of the Servicing Agreement, the Contribution Agreement and
all amendments and supplements thereto;
(xi) Counsel to the Issuer shall have delivered its Opinions of
Counsel with respect to the treatment of the transfers from the
Contributors to the Issuer as a "true sale," certain bankruptcy issues
with respect to the Issuer and its Affiliates, the perfected first
priority security interest of the Indenture Trustee in the Collateral
and the treatment of the Notes as debt of the Issuer;
(xii) the sum of (a) the initial principal amount of Notes of
the initial Tranche and (b) the Required Collateralization Amount does
not exceed the Tranche Aggregate Implicit Principal Balance for such
Tranche of Notes;
(xiii) neither an Event of Default nor a Trigger Event has
occurred and is continuing;
(xiv) the Bond Insurer has delivered the applicable Policy to
the Indenture Trustee; and
(xv) if the Notes are Floating Rate Notes, the Issuer and the
Coordinator have executed and delivered to the Bond Insurer a Floating
Rate Cap Agreement;
(xvi) such other documents as the Indenture Trustee or the Bond
Insurer may reasonably require.
Upon satisfaction of the above conditions, the Indenture Trustee shall execute
the related Funding Report and authenticate and deliver the Notes of the initial
Tranche upon Issuer Order and execution thereof by the Issuer.
(c) The obligation of the Indenture Trustee to authenticate, execute and
deliver the Notes of any subsequent Tranche is subject to the satisfaction of
the following conditions:
(i) on or before the tenth Business Day immediately preceding
the related Delivery Date (unless the parties to be notified agree to a
shorter notice period), the Issuer shall have given the Indenture
Trustee, the Servicer, the Back-up Servicer, the Bond
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Insurer, the Noteholders, the Coordinator and the Rating Agencies notice
of such issuance and the related Delivery Date;
(ii) on or before the fifth Business Day immediately preceding
the related Delivery Date, the Issuer shall have delivered to the
Indenture Trustee, the Bond Insurer and the Coordinator a computer
diskette, in a format acceptable to each of the Indenture Trustee, the
Bond Insurer and the Coordinator listing the Lease Contracts to be
funded by such new Tranche and the Lease Contracts that have been
pledged to the Indenture Trustee pursuant to this Indenture prior to
such date.
(iii) the Issuer shall have delivered to the Indenture Trustee,
the Bond Insurer, the Rating Agencies, the Noteholders and the
Coordinator the related Funding Report at least one Business Day prior
to the related Delivery Date, in a form satisfactory to the Indenture
Trustee and the Bond Insurer, to be acknowledged by each of the
Indenture Trustee and the Bond Insurer;
(iv) the Issuer shall have delivered to the Indenture Trustee
the original executed counterpart of each Lease Contract identified in
the related Lease Schedule and the Lease Contract File relating to such
Lease Contract;
(v) the Rating Agencies shall not have notified the Issuer, the
Servicer, the Back-up Servicer, the Bond Insurer or the Indenture
Trustee in writing that such issuance will result in a reduction or
withdrawal of the rating assigned by it to the Outstanding Notes of any
Tranche (including the Tranche to be issued);
(vi) each of the Issuer and the Servicer shall have delivered to
the Indenture Trustee its Officer's Certificate stating, as applicable,
that (A) such Person is not in Default under this Indenture or the
Servicing Agreement and that such issuance will not result in any breach
of any of the terms, conditions or provisions of, or constitute a
default under, such Person's certificate of incorporation, by-laws or
other organizational documents, as applicable, or any material
indenture, mortgage, deed of trust or other agreement or instrument to
which such Person is a party or by which it is bound, or any order of
any court or administrative agency entered in any proceeding to which
such Person is a party or by which it may be bound or to which it may be
subject; (B) that all conditions precedent provided in this Indenture
relating to the authentication and delivery of the Notes of such Tranche
have been complied with; and (C) that such Person reasonably believes
that neither an Event of Default nor a Funding Period Trigger Event has
occurred and is continuing or that such issuance will not, based on the
facts known to such officer at the time of such certification, then or
thereafter cause an Event of Default
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or a Funding Period Trigger Event to occur with respect to any Tranche
of Outstanding Notes;
(vii) the Issuer shall have delivered to the Indenture Trustee,
within 10 days of the related Delivery Date, evidence of filing with the
Secretary of State of the State of the Issuer's chief executive office
of UCC-1 financing statements executed by the Issuer, as debtor, and
naming the Indenture Trustee for the benefit of the Noteholders and the
Bond Insurer as secured parties, and the Trust Estate (including any
additional Lease Contracts identified in the related Lease Schedule) as
collateral;
(viii) if the Notes are Floating Rate Notes, the Issuer shall
have executed and delivered to the Indenture Trustee a Floating Rate Cap
Agreement acceptable to the Bond Insurer (as evidenced in writing
delivered to the Indenture Trustee by the Bond Insurer);
(ix) the sum of (a) the principal balance of Notes outstanding
and the Notes of the Tranche to be issued and (b) the Required
Collateralization Amount (computed taking into account the Tranche
Aggregate Implicit Principal Balance for the Tranche to be issued) does
not exceed the sum of (x) the Tranche Aggregate Initial Principal
Balance for such Tranche to be issued, (y) the Aggregate Implicit
Principal Balance of Lease Contracts conveyed to the Issuer prior to
such issuance and (z) the balance in the Cash Collateral Account;
(x) a Funding Period Trigger Event has not occurred and is not
continuing;
(xi) an Event of Default has not occurred and is not continuing;
(xii) after such issuance, the remaining aggregate average life
on all Notes is not greater than two years; and
(xiii) the Bond Insurer has delivered the applicable Policy to
the Indenture Trustee;
(xiv) Counsel to the Issuer shall have delivered to the
Indenture Trustee, the Bond Insurer and the Rating Agencies updated
Opinions of Counsel for the present calendar quarter prior to such
Delivery Date with respect to the treatment of transfers from the
Contributors to the Issuer as a "true sale," certain bankruptcy issues
with respect to the Issuer and its Affiliates and the perfected first
priority security interest of the Indenture Trustee in the Collateral.
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(xv) such other documents as the Indenture Trustee or the Bond
Insurer may reasonably require.
Upon satisfaction of the above conditions, the Indenture Trustee shall execute
the related Funding Report and authenticate and deliver the Notes of such
Tranche upon Issuer Order and execution thereof by the Issuer.
Section 4.02. Security for Notes. (a) Filing. The Servicer shall file
UCC-1 financing statements described in Section 4.01 hereof in accordance with
such Section and no later than 30 days after the Closing Date, with respect to
Lease Contracts backing the initial Tranche of Notes, and no later than 30 days
after the end of each calendar quarter with respect to Lease Contracts backing
any subsequent issuances of Floating Rate Notes, the Issuer shall file with
respect to all such Lease Contracts, other than Loan Contracts, UCC-1 financing
statements with the Secretaries of State of the Enumerated States, executed by
the Issuer as debtor, and naming the Indenture Trustee for the benefit of the
Noteholders and the Bond Insurer as secured parties and the Equipment located in
such States as collateral; provided that no filings naming an individual
Customer as debtor shall be required. From time to time, and no less than
annually, the Servicer shall take or cause to be taken such actions and execute
such documents as are necessary to perfect and protect the Indenture Trustee's
and the Bond Insurer's respective interests in the Lease Contracts and the
Equipment owned by the Issuer and initially located in the Enumerated States
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) Name Change or Relocation. If any change in either the Company's or
the Issuer's name, identity, structure or the location of its principal place of
business or chief executive office occurs, then the Issuer shall, or the Issuer
shall cause the Company, to deliver 30 days' prior written notice of such change
or relocation to the Servicer, the Bond Insurer, the Coordinator and the
Indenture 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 Indenture Trustee's and the Bond Insurer's
respective interests in the Trust Estate.
(c) Chief Executive Office. During the term of this Indenture, the
Issuer will maintain its chief executive office and principal place of business
in one of the States of the United States.
(d) Costs and Expenses. 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 Indenture Trustee's and the
Bond Insurer's respective right, title and interest in and to the Trust Estate
(other than the Equipment not initially located in the Enumerated States).
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Section 4.03. Substitution and Purchase of Lease Receivables. (a) If at
any time the Issuer, the Bond Insurer or the Indenture 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 one of the Contributors in the
Contribution 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 the Bond Insurer and the
other parties to this Indenture.
(b) In the event any representation or warranty of one of the
Contributors in the Contribution Agreement is incorrect and materially and
adversely affects the interests of the Bond Insurer or the Holders of the Notes,
or in the event of any breach of any of the representations and warranties set
forth in Sections 3.01(a)(ii), 3.01(a)(v), 3.01(a)(vi) or 3.01(a)(xxi) of the
Contribution Agreement, then the Issuer shall require the Company and the
applicable Contributor pursuant to the Contribution 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 or the applicable Contributor fails or is unable to cure
such circumstance or condition in accordance with the Contribution Agreement
then the Issuer shall require the Company or the applicable Contributor to
substitute or purchase pursuant to the Contribution Agreement any Lease Contract
as to which such representation or warranty is incorrect within the time
specified in Section 3.03 of the Contribution Agreement; provided, however, that
after such substitution, the aggregate average remaining life on all Notes after
such substitution is not greater than two years. The proceeds of a purchase
shall be remitted by the Issuer to the Servicer for deposit by the Servicer in
the Collection Account pursuant to Section 3.03(a) of the Servicing Agreement.
The Trustee shall not be required to calculate the aggregate average remaining
life on the Notes.
(c) If the Issuer fails to enforce the purchase or substitution
obligation of the Company and the applicable Contributor under the Contribution
Agreement, the Indenture Trustee is hereby appointed attorney-in-fact to act on
behalf of and in the name of the Issuer to require such purchase or
substitution.
(d) With respect to (i) any Lease Contract to be prepaid or terminated
early pursuant to Section 3.10 of the Servicing Agreement and (ii) any Defaulted
Lease Contract or Delinquent Lease Contract, the Issuer shall be entitled to
purchase such Lease Contract or to deliver a Substitute Lease Contract meeting
the same requirements as those specified in Section 3.04 of the Contribution
Agreement for substitutions and purchases by the Company or the applicable
Contributor upon breaches of a representation or warranty by the Company or
another Contributor thereunder; provided, however, that (w) the cumulative
Implicit Principal Balance of prepaid or early terminated Lease Contracts which
are substituted by the Issuer (measured as of the date of substitution) shall
not exceed 10% of the Initial Aggregate Implicit Principal Balance
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for all Tranches combined, (x) the cumulative Implicit Principal Balance of
Defaulted Lease Contracts which are purchased or substituted by the Issuer
(measured as of the date of substitution) shall not exceed the Defaulted Lease
Purchase and Substitution Limit and (y) the cumulative Implicit Principal
Balance of Delinquent Lease Contracts which are purchased or substituted by the
Issuer (measured as of the date of substitution) shall not exceed the Delinquent
Lease Purchase and Substitution Limit.
(e) The Issuer shall provide to the Indenture Trustee on the date of
delivery of any Substitute Lease Contract the items listed in (i) and (ii) below
and to the Bond Insurer the item listed in (i) below, and the Issuer shall
provide to the Indenture Trustee and the Bond Insurer at the end of each
calendar quarter the items listed in (iii) below with respect to any Substitute
Lease Contracts substituted during such period:
(i) a supplement to the Contribution Agreement and this
Indenture substantially in the form of Annex A to the Contribution
Agreement and Exhibit B hereto, subjecting such Substitute Lease
Contract to the provisions hereof and thereof and providing with respect
to the Substitute Lease Contract the information set forth in the Lease
Schedule;
(ii) the original executed counterpart of the Lease Contract
relating to such Substitute Lease Contract; and
(iii) evidence that financing statements have been filed with
respect to such Substitute Lease Contract in accordance with Section
4.01 hereof.
Section 4.04. Releases. (a) The Issuer shall be entitled to obtain a
release from the lien of this Indenture for any Lease Contract and the related
Equipment at any time (i) after a payment by the Company or the Issuer of the
Purchase 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
Issuer delivers to the Indenture Trustee and the Bond Insurer 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 Indenture pursuant to (i) or (iii) above, and (D) certifying that
the amount deposited in the Collection Account (x) equals the Purchase Price of
the Lease Contract, in the event a Lease Contract and the related Equipment are
being released from the lien of this Indenture pursuant to (i) above or (y)
equals the entire amount of Recoveries or Residual Proceeds received with
respect to such Lease Contract and related Equipment in the event of a release
from the lien of
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this Indenture pursuant to (iii) above; provided, however, that upon the
termination of a Lease Contract, any residual proceeds from the Equipment shall
be placed in the Collection Account prior to the Trustee or the Issuer releasing
the Equipment from the security interest granted to the Trustee by the Issuer
pursuant to this Indenture or to the Issuer by a Contributor pursuant to the
Contribution Agreement.
(b) Upon satisfaction of the conditions specified in subsection (a), the
Indenture Trustee shall release from the lien of this Indenture and deliver to
or upon the order of the Issuer (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
Contribution Agreement with respect to a Lease Contract) the Lease Contract, the
Lease Receivable and the Equipment described in the Issuer's request for
release.
Section 4.05. Trust Estate. The Indenture Trustee may, and when required
by the provisions of Articles Four, Six and Twelve hereof shall, execute
instruments to release property from the lien of this Indenture, or convey the
Indenture Trustee's interest in the same, in a manner and under circumstances
which are not inconsistent with the provisions of this Indenture. No party
relying upon an instrument executed by the Indenture Trustee as provided in this
Article Four shall be bound to ascertain the Indenture 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 Indenture 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.
ARTICLE V
SATISFACTION AND DISCHARGE
Section 5.01. Satisfaction and Discharge of Indenture. (a) Following
payment in full of (i) the Notes, (ii) the fees and charges of the Indenture
Trustee and the Back-up Servicer, (iii) all other Obligations of the Issuer
under this Indenture and (iv) all amounts owing to the Bond Insurer under the
Insurance Agreement, and the release by the Indenture Trustee of the Trust
Estate in accordance with Section 5.01(b), the Indenture shall be discharged.
(b) Upon payment in full of the amounts referred to in clauses (i)
through (iv) of Section 5.01(a) hereof, the Issuer may submit to the Indenture
Trustee an Officer's Certificate requesting the release to the Issuer 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 the
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Bond Insurer 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 Indenture at least equal to the payments of interest due on the
Outstanding Notes and the Principal Distribution Amount 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 and Opinion of Counsel from the Issuer and
authorization to release from the Bond Insurer, the Indenture Trustee shall
release the Withdrawn Collateral from the lien of the Indenture and deliver the
Withdrawn Collateral to the Issuer or its designee. The Issuer 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 Issuer or its designee.
Notwithstanding the foregoing, the Bond Insurer may waive the requirement that
the Issuer deliver such Officer's Certificate and/or Opinion of Counsel and
authorize the Indenture 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 Indenture upon payment in full of the amounts referred to in clauses (i)
through (iv) of Section 5.01(a) hereof. Notwithstanding termination of this
Indenture, the Indenture Trustee shall remain obligated to make claims under the
Policy with respect to any Preference Claim until termination of any such
policy.
(c) In connection with the discharge of this Indenture and the release
of the Trust Estate, the Indenture Trustee shall release from the lien of this
Indenture and deliver to or upon the order of the Issuer all property remaining
in the Trust Estate and shall execute for filing by the Issuer, UCC termination
statements evidencing such discharge and release.
Section 5.02. Application of Trust Money. Subject to the last paragraph
of Section 11.02(o) hereof, all monies deposited with the Indenture Trustee
pursuant to Section 5.01 hereof shall be held in trust and applied by the
Indenture Trustee, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent as the
Indenture Trustee may determine, to the Persons entitled thereto, of the
principal and interest for whose payment such money has been deposited with the
Indenture Trustee; but such money need not be segregated from other funds except
to the extent required herein or to the extent required by law.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01. Events of Defaults. "Event of Default" wherever used
herein means any one of the following events:
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(1) default in the payment of any interest upon any Note when
the same becomes due and payable; or
(2) default in the payment of any principal of any Note when the
same becomes due and payable; or
(3) default in the performance of any covenant of the Issuer, or
breach of any material representation or warranty of the Issuer, in this
Indenture, the Contribution Agreement, the Insurance Agreement or the
Servicing Agreement (other than a covenant or warranty default in the
performance of which or breach of which is specifically dealt with
elsewhere in this Section), and continuance of such default or breach
for a period of 30 days after the Issuer has actual knowledge thereof;
or
(4) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer under the Federal
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 the appointment
of a receiver, liquidator, assignee, trustee, or sequestrator (or other
similar official) for the Issuer or for any substantial part of its
property, or the ordering of the winding up or liquidation of the
Issuer's affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(5) the institution by the Issuer of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by the Issuer to the
institution of bankruptcy or insolvency proceedings against the Issuer,
or the filing by the Issuer of a petition or answer or consent seeking
reorganization or relief under the Federal 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 Issuer 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
Issuer or of any substantial part of the Issuer's property, or the
making by the Issuer 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 Issuer in furtherance of any such action.
Section 6.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default with respect to any Tranche of Notes at the time Outstanding
occurs and is continuing, then, and in every such case, the Indenture Trustee
shall, at the direction of the Bond Insurer, or during the continuance of a Bond
Insurer Default, the Indenture Trustee may, at the direction of the Holders of
not less than 66-2/3% in principal amount of the Outstanding Notes, declare the
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principal of all the Notes to be immediately due and payable by notice given in
writing to the Issuer (and to the Indenture Trustee if given by the
Noteholders); provided that the Bond Insurer shall not declare the principal
amount of the Outstanding Notes immediately due and payable unless it shall have
endorsed the Policy to provide coverage for any shortfall in the payment of
accelerated principal and any interest due on the Outstanding Notes 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
Indenture), 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 Indenture Trustee as
hereinafter in this Article provided, the Bond Insurer, or if a Bond Insurer
Default has occurred and is continuing, the Holders of not less than a majority
of the aggregate principal amount of the Outstanding Notes, by written notice to
the Issuer and the Indenture Trustee, may rescind and annul such declaration and
its consequences (except that in the case of a payment default on the Notes, the
consent of all the Noteholders shall be required to rescind and annul such a
declaration and its consequences) if:
(1) the Issuer has paid or deposited with the Indenture Trustee
a sum sufficient to pay
(A) all overdue installments of interest on all Notes,
(B) the principal of any Note which has become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by such Note 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 Indenture Trustee, the Bond Insurer or any
Noteholder hereunder or by the Bond Insurer under the Insurance
Agreement or the Policy, and the reasonable compensation,
expenses, disbursements and advances of the Indenture Trustee,
the Bond Insurer and the Noteholders, their agents and counsel
incurred in connection with the enforcement of this Indenture to
the date of such payment or deposit; and
(2) all Events of Default, other than the nonpayment of the
principal of the Notes which have become due solely by such declaration
of acceleration, have been cured or waived as provided in Section 6.15
hereof.
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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
Indenture Trustee. The Issuer covenants that if an Event of Default shall occur
and be continuing and the Notes have been declared due and payable and such
declaration has not been rescinded and annulled, the Issuer will, upon demand of
the Indenture Trustee and at the direction of the Bond Insurer, pay to the
Indenture Trustee, for the benefit of the Holders of the Notes and the Bond
Insurer, the whole amount then due and payable on the Notes for principal and
interest, with interest upon the overdue principal at the rate borne by the
Notes 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 Indenture Trustee and
the Bond Insurer, their respective agents and counsel.
If the Issuer fails to pay such amount forthwith upon such demand, the
Indenture Trustee, in its own name and as Indenture Trustee of an express trust
shall, at the direction of the Bond Insurer, and if a Bond Insurer Default has
occurred and is continuing the Indenture Trustee may, 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 Issuer and collect
the monies adjudged or decreed to be payable in the manner provided by law out
of the property of the Issuer, wherever situated.
If an Event of Default occurs and is continuing, the Indenture Trustee
shall, at the direction of the Bond Insurer, and if a Bond Insurer Default has
occurred and is continuing the Indenture Trustee may in its discretion, proceed
to protect and enforce its rights and the rights of the Bond Insurer by such
appropriate Proceedings as the Indenture Trustee, at the direction of the Bond
Insurer or, if a Bond Insurer Default has occurred and is continuing, 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
Indenture 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 Indenture Trustee shall, at the direction of the Bond Insurer
and if a Bond Insurer Default has occurred and is continuing, the Indenture
Trustee may do one or more of the following:
(a) institute Proceedings for the collection of all amounts then
due and payable on the Notes or under this Indenture, whether by
declaration or otherwise, enforce any judgment obtained and collect from
the Issuer the monies adjudged due;
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(b) take possession of and sell the Trust Estate securing the
Notes 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 Indenture with
respect to the Trust Estate securing the Notes;
(d) during the continuance of a default under a Lease Contract,
exercise any of the rights of the lessor under such Lease Contract; and
(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 Indenture
Trustee, the Bond Insurer or the Holders of the Notes hereunder;
provided, however, that without the consent of the Bond Insurer, or if a Bond
Insurer Default has occurred and is continuing, all the Holders of Outstanding
Notes, the Indenture Trustee may not sell or otherwise liquidate any portion of
the Trust Estate unless the proceeds of such Sale or liquidation distributable
to the Noteholders are sufficient to discharge in full the amounts then due and
unpaid upon the Notes for principal and interest together with any amounts owed
to the Bond Insurer 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 Notes and (ii) no Notes have been declared due and payable, or such
declaration and its consequences have been annulled and rescinded, the
Indenture Trustee shall, at the direction of the Bond Insurer, or if a
Bond Insurer Default has occurred and is continuing, the Indenture
Trustee may in its sole discretion if it determines it to be in the best
interests of the Holders of the Notes and upon request from the Holders
of a majority in principal amount of the Outstanding Notes, elect, by
giving written notice of such election to the Issuer, to take possession
of and retain the Trust Estate securing the Notes 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 Notes
in accordance with the provisions of Article Twelve of this Indenture.
If the Indenture Trustee is unable to or is stayed from giving such
notice to the Issuer 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
Indenture 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 Notes remaining at the time of
such rescission by written notice to the Indenture Trustee and the
Issuer from the
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Bond Insurer or, if a Bond Insurer Default has occurred and is
continuing, from the Holders of a majority in principal amount of the
Outstanding Notes.
Section 6.06. Indenture Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
Proceeding relating to the Issuer or any other obligor upon any of the Notes or
the property of the Issuer or of such other obligor or their creditors, the
Indenture Trustee (irrespective of whether the principal of the Notes shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Indenture Trustee shall have made any demand on the
Issuer for the payment of overdue principal or interest) shall be entitled and
empowered, to intervene in such proceeding or otherwise
(i) to file and prove a claim for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the Notes
issued hereunder and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Indenture
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, its agents and
counsel and any other amounts due the Indenture Trustee under Section
7.07 hereof) and of the Bond Insurer and the Noteholders allowed in such
judicial Proceeding, and
(ii) 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 the
Bond Insurer and each Noteholder to make such payments to the Indenture Trustee,
and in the event that the Indenture Trustee shall consent to the making of such
payments directly to the Bond Insurer or the Noteholders, to pay to the
Indenture Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Indenture Trustee, its agents and
counsel, and any other amounts due the Indenture Trustee under Section 7.07
hereof.
Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or accept or adopt on behalf of the Bond
Insurer or any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Bond Insurer or the Notes or the rights of any Holder
thereof, or to authorize the Indenture Trustee to vote in respect of the claim
of the Bond Insurer or any Noteholder in any such Proceeding.
Section 6.07. Indenture Trustee May Enforce Claim Without Possession of
Notes. (a) In all Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party)
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the Indenture Trustee shall be held to represent all of the Noteholders, and it
shall not be necessary to make any Noteholder a party to any such Proceedings.
(b) All rights of actions and claims under this Indenture or the Notes
may be prosecuted and enforced by the Indenture Trustee without the possession
of any of the Notes or the production thereof in any Proceeding relating
thereto, and any such Proceedings instituted by the Indenture Trustee shall be
brought in its own name as Indenture Trustee of an express trust, and any
recovery whether by judgment brought in its own name as Indenture 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 Indenture Trustee its agents and counsel, be
for the Bond Insurer and the ratable benefit of the Holders of the Notes.
Section 6.08. Application of Money Collected. If the Notes 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 Indenture Trustee
with respect to the Notes pursuant to this Article Six or otherwise and any
other money that may be held thereafter by the Indenture Trustee as security for
the Notes shall be applied in the following order, at the date or dates fixed by
the Indenture Trustee and, in case of the distribution of such money on account
of principal or interest, upon presentation of the Notes and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Servicer pursuant
to Section 3.09 of the Servicing Agreement and Section 12.02(d)(i)
hereof and to pay the Servicer the amount necessary to reimburse the
Servicer for any unrecovered Servicer Advances;
SECOND: To the payment to the Indenture Trustee of the Trustee
Fee then due, to the payment to the Back-up Servicer of the Back-up
Servicer Fee then due and to the Indenture Trustee its costs incurred in
connection with enforcing the remedies provided for in this Article Six;
THIRD: To the payment to the Bond Insurer of the Bond Insurer
Premium then due;
FOURTH: To the payment of the amounts then due and unpaid upon
the Notes for interest, with interest (to the extent such interest has
been collected by the Indenture 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 Notes) on overdue
principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest;
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FIFTH: To the payments of the remaining outstanding principal
balance of the Notes ratably without preference or priority of any kind;
SIXTH: To the payment to the Bond Insurer of any amounts
previously paid by the Bond Insurer under the Policy and not theretofore
repaid, together with interest thereon and any other amounts due under
the Insurance Agreement;
SEVENTH: To the payment to the Servicer of any other amounts due
the Servicer as expressly provided herein and in the Servicing
Agreement;
EIGHTH: To the payment to the Indenture Trustee and the Back-up
Servicer, any other amounts due to the Indenture Trustee or the Back-up
Servicer as expressly provided herein and in the Servicing Agreement;
NINTH: To pay to the Bond Insurer any other amounts owing under
the Insurance Agreement;
TENTH: To reimburse the Bond Insurer and the Noteholders for any
costs or expenses incurred in connection with any enforcement action
with respect to this Indenture or the Notes;
ELEVENTH: To the payment of any surplus to or at the written
direction of the Issuer or any other person legally entitled thereto.
Section 6.09. Limitation on Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder for so long as a Bond Insurer Default has not occurred, and if
a Bond Insurer Default has occurred, unless
(1) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(2) the Holders of not less than 66-2/3% in principal amount of
the Outstanding Notes shall have made written request to the Indenture
Trustee to institute Proceedings in respect of such Event of Default in
its own name as Indenture Trustee hereunder;
(3) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
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(4) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of security or indemnity has failed to
institute any such Proceedings; and
(5) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders
of 66-2/3% or more in principal amount of the Outstanding Notes; it
being understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of,
any provision of this Indenture to affect, disturb or prejudice the
rights of any other Holders of Notes, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right
under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Holders of Notes.
Section 6.10. Unconditional Right of Noteholders to Receive Principal
and Interest. Notwithstanding any other provision in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal, interest, and premium, if any, on such Note as
such principal, interest and premium, if any, 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 Indenture
Trustee, the Bond Insurer or any Noteholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason or has been determined adversely to the
Indenture Trustee, the Bond Insurer or to such Noteholder, then, and in every
case, the Issuer, the Indenture Trustee, the Bond Insurer and the Noteholders
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 Indenture Trustee, the Bond Insurer and the Noteholders
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 Notes in the last paragraph of Section 3.06 hereof, no right or
remedy herein conferred upon or reserved to the Indenture Trustee, the Bond
Insurer or to the Noteholders 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.
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Section 6.13. Delay or Omission; Not Waiver. No delay or omission of the
Indenture Trustee, the Bond Insurer or of any Holder of any Note 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 Indenture Trustee, the Bond Insurer or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee, the Bond Insurer or by the Noteholders as the case may be,
subject in each case, however, to the right of the Bond Insurer to control any
such right and remedy except as provided in Section 13.15 hereof.
Section 6.14. Control by Noteholders. The Bond Insurer or, if a Bond
Insurer Default has occurred and is continuing, the Holders of a majority in
principal amount of the Outstanding Notes, shall have the right to direct the
time, method and place of conducting any Proceeding for any remedy available to
the Indenture Trustee or exercising any trust or power conferred on the
Indenture Trustee; provided that:
(1) such direction shall not be in conflict with any rule of law
or with this Indenture including, without limitation any provision
hereof which expressly provides for a greater percentage of principal of
Outstanding Notes;
(2) any direction to the Indenture Trustee by the Noteholders to
undertake a private sale of the Trust Estate shall be by the Holders of
all Outstanding Notes, unless the condition set forth in Section
6.18(b)(ii) hereof is met;
(3) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee which is not inconsistent with such
direction; provided, however, that, subject to Section 7.01 hereof, the
Indenture Trustee need not take any action which a Responsible Officer
or Officers of the Indenture Trustee in good faith determines might
involve it in personal liability or be unjustly prejudicial to the
Noteholders not consenting; and
(4) the Indenture 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 Past Defaults. The Bond Insurer, or if a Bond
Insurer Default has occurred and is continuing, the Holders of 66-2/3% in
principal amount of the Outstanding Notes, may on behalf of the Holders of all
the Notes waive any past Default hereunder and its consequences, except a
Default:
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(1) in the payment of the principal of, or premium, if any, or
interest on any Note, or a Default described in Sections 6.01(4) and (5)
hereof, or
(2) 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 Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.16. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note 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 the Indenture, or in any suit against
the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture 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
Indenture Trustee or the Bond Insurer, or to any suit instituted by any
Noteholder or group of Noteholders holding in the aggregate more than 50% in
principal amount of the Outstanding Notes or to any suit instituted by any
Noteholder for the enforcement of the payment of the principal of or interest on
any Note on or after the Stated Maturity expressed in such Note.
Section 6.17. Waiver of Stay or Extension Laws. The Issuer 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
Indenture; and the Issuer (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 Indenture 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 Notes shall have been sold or all amounts payable on the Notes and
under this Indenture with respect thereto shall have been paid. The Indenture
Trustee
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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 Indenture Trustee
shall not in any private Sale sell the Trust Estate, or any portion thereof, to
a third party unless:
(i) the Bond Insurer, or if a Bond Insurer Default has occurred
and is continuing the Holders of all Outstanding Notes, consent to or
direct the Indenture Trustee to make such Sale; or
(ii) if a Bond Insurer Default has occurred and is continuing,
the proceeds of such Sale would not be less than the sum of all amounts
due to the Indenture Trustee hereunder and the entire unpaid principal
amount of the Notes and interest due or to become due thereon on the
Payment Date next succeeding such Sale together with any amounts owing
to the Bond Insurer under the Insurance Agreement.
(c) The Indenture Trustee, the Bond Insurer or the Noteholders 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 Noteholder may make
settlement for the purchase price by crediting against amounts owing on the
Notes of such Holder or other amounts owing to such Holder secured by this
Indenture, 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 Indenture Trustee, the Bond Insurer or the Noteholders in
connection with such Sale. The Notes 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 Notes. The Indenture Trustee, the Bond Insurer or the Noteholders
may hold, lease, operate manage or otherwise deal with any property so acquired
in any manner permitted by law.
(d) The Indenture 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 Indenture Trustee is
hereby irrevocably appointed the agent and attorney-in-fact of the Issuer 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
Indenture 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.
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Section 6.19. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer 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 Issuer.
ARTICLE VII
THE INDENTURE TRUSTEE
Section 7.01. Certain Duties and Responsibilities. (a) Except during the
continuance of an Event of Default known to the Indenture Trustee as provided in
subsection (e) below:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(ii) in the absence of bad faith or negligence on its part, the
Indenture 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 Indenture Trustee and
conforming to the requirements of this Indenture; but in the case of any
such certificates or opinions, which by any provision hereof are
specifically required to be furnished to the Indenture Trustee, the
Indenture Trustee shall be under a duty to examine the same and to
determine whether or not they conform on their face to the requirements
of this Indenture.
(b) In case an Event of Default known to the Indenture Trustee as
provided in subsection (e) below has occurred and is continuing, the Indenture
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, 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 Indenture shall be construed to relieve the
Indenture 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;
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(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Indenture
Trustee, unless it shall be proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Indenture 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 the Bond Insurer or the Holders of a
majority (or other such percentage as may be required by the terms
hereof) in principal amount of the Outstanding Notes in accordance with
Section 6.14 hereof relating to the time, method and place of conducting
any Proceeding for any remedy available to the Indenture Trustee, or
exercising any trust or power conferred upon the Indenture Trustee,
under this Indenture, the Contribution Agreement or the Servicing
Agreement; and
(iv) no provision of this Indenture shall require the Indenture
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 risk or adequate indemnity
against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Indenture Trustee shall be subject to the provisions
of this Section 7.01.
(e) For all purposes under this Indenture, the Indenture Trustee shall
not be deemed to have notice of any Event of Default described in Section
6.01(4) or 6.01(5) hereof or any Default described in Section 6.01(3) hereof
unless a Responsible Officer assigned to and working in the Indenture 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 or Default is received by
the Indenture Trustee at the Corporate Trust Office, and such notice references
the Notes generally, the Issuer, the Trust Estate or this Indenture.
(f) The Indenture Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under the Indenture, 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.
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(g) Notwithstanding any extinguishment of all right, title and interest
of the Issuer in and to the Trust Estate following an Event of Default and a
consequent declaration of acceleration of the maturity of the Notes, whether
such extinguishment occurs through a Sale of the Trust Estate to another person,
the acquisition of the Trust Estate by the Indenture Trustee with respect to the
Trust Estate (or the proceeds thereof) and the Noteholders and the rights of the
Noteholders shall continue to be governed by the terms of the Indenture.
(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 Indenture Trustee shall provide the reports and accountings as
required pursuant to Section 12.04 hereof.
Section 7.02. Notice of Default. Promptly after the occurrence of any
Default known to the Indenture Trustee (within the meaning of Section 7.01(e)
hereof) which is continuing, the Indenture Trustee shall transmit by telephonic
or telegraphic communication confirmed by mail to the Bond Insurer and the
Coordinator and by mail to all Holders of Notes, as their names and addresses
appear on the Note Register notice of such Default hereunder known to the
Indenture Trustee, unless in the case of notice to Noteholders, such Default
shall have been promptly cured or waived.
Section 7.03. Certain Rights of Indenture Trustee. Except as otherwise
provided in Section 7.01,
(a) the Indenture 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 Issuer mentioned herein
shall be sufficiently evidenced by an Issuer Request or Issuer Order and
any resolution of the Board of Directors may be sufficiently evidenced
by a Board Resolution;
(c) whenever in the administration of the Indenture the
Indenture Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder,
the Indenture Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, rely upon an
Officer's Certificate;
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(d) the Indenture Trustee may consult with counsel, and the
written advice of such counsel selected by the Indenture 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 Indenture Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by the Indenture at
the request or direction of any of the Noteholders or the Bond Insurer
pursuant to the Indenture, unless such Noteholders or the Bond Insurer
as the case may be shall have offered to the Indenture 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) the Indenture 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 Indenture Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if
the Indenture Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Issuer, upon reasonable notice and at reasonable times
personally or by agent or attorney; and
(g) the Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney, appointed with due care by it hereunder.
Section 7.04. Not Responsible for Recitals or Issuance of Notes. (a) The
recitals contained herein and in the Notes, except the certificates of
authentication on the Notes, shall be taken as the statements of the Issuer, and
the Indenture Trustee assumes no responsibility for their correctness. The
Indenture 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 Issuer 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
Indenture Trustee hereunder or as to the validity or sufficiency of the
Indenture or of the Notes. The Indenture Trustee shall not be accountable for
the use or application by the Issuer of Notes or the proceeds thereof or of any
money paid to the Issuer or upon Issuer Order under any provisions hereof.
(b) Except as otherwise expressly provided herein and without limiting
the generality of the foregoing, the Indenture Trustee shall have no
responsibility or liability for or with respect to the existence or validity of
any Equipment or Lease Contract, the perfection of any security
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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 Indenture Trustee or of any
intervening assignment, the review of any Lease Contract (it being understood
that the Indenture 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 Policy, the compliance
by the Issuer or the Servicer with any covenant or the breach by the Issuer 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 Issuer, the Servicer, the Bond Insurer or any Customer, any
action of the Servicer taken in the name of the Indenture Trustee, or the
validity of the Servicing Agreement, the Receivables Purchase Agreement or the
Contribution Agreement.
(c) The Indenture Trustee shall not have any obligation or liability
under any Lease Contract by reason of or arising out of the Indenture or the
granting of a security interest in such Lease Contract hereunder or the receipt
by the Indenture Trustee of any payment relating to any Lease Contract pursuant
hereto, nor shall the Indenture Trustee be required or obligated in any manner
to perform or fulfill any of the obligations of the Issuer under or pursuant to
any Lease Contract, or to make any payment, or to make any inquiry as to the
name 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 Notes. The Indenture Trustee, the Servicer, any
Paying Agent, the Note Registrar, any Authenticating Agent or any other agent of
the Issuer, in its individual or any other capacity, may become the owner or
pledgee of Notes, and if operative, may otherwise deal with the Issuer with the
same rights it would have if it were not Indenture Trustee, Servicer, Paying
Agent, Note Registrar, Authenticating Agent or such other agent.
Section 7.06. Money Held in Trust. Money and investments held in trust
by the Indenture Trustee or any Paying Agent hereunder shall be held in one or
more accounts hereunder but need not be segregated from other funds except to
the extent required herein or required by law. The Indenture 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 Issuer or otherwise
specifically provided herein.
Section 7.07. Compensation and Reimbursement. The Issuer agrees:
(i) to pay the Indenture Trustee monthly its fee for all
services rendered by it hereunder as Indenture 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
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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;
(ii) except as otherwise expressly provided herein, to reimburse
the Indenture Trustee or the Back-up Servicer upon its request for all
reasonable out-of-pocket expenses, disbursements and advances incurred
or made by the Indenture Trustee or the Back-up Servicer in accordance
with any provision of the Indenture or Servicing Agreement (including
the reasonable compensation and the expenses and disbursements of the
Indenture 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
(iii) to indemnify and hold harmless the Noteholders and the
Indenture Trustee from and against any loss, liability, expense, damage
or injury (other than those attributable to a Noteholder in its capacity
as an investor in the Notes) sustained or suffered pursuant to the
Indenture by reason of any acts, omissions or alleged acts or omissions
arising out of activities of the Indenture Trustee or its status as
Indenture Trustee (including without limitation any violation of any
applicable laws by the Issuer as a result of the transactions
contemplated by the Indenture), 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 Issuer shall
not indemnify the Indenture Trustee if such loss, liability, expense,
damage or injury is due to the Indenture 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 Issuer and shall not be payable from the
assets of the Trust. 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 the Indenture.
Upon the occurrence of an Event of Default resulting in an acceleration
of maturity of the Notes that has not been rescinded and annulled, the Indenture
Trustee shall have, as security for the performance of the Issuer under this
Section 7.07, a lien ranking senior to the lien of the Notes with respect to
which any claim of the Indenture Trustee under this Section 7.07 arose upon all
property and funds held or collected as part of the Trust Estate by the
Indenture Trustee in its capacity as such except the Indenture Trustee shall
have no liens on the amounts paid under the Policy. The Indenture Trustee shall
not institute any Proceeding seeking the enforcement of such lien against the
Trust Estate without the consent of the Bond Insurer and if a Bond Insurer
default has occurred and is continuing no such consent shall be required, and
(i) such Proceeding
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is in connection with a proceeding in accordance with Article Six hereof for
enforcement of the lien of the Indenture for the benefit of the Holders of the
Notes secured by such Trust Estate after the occurrence of an Event of Default
(other than an Event of Default due solely to a breach of this Section 7.07) and
a resulting declaration of acceleration of maturity of such Notes that has not
been rescinded and annulled, or (ii) such Proceeding does not result in or cause
a Sale or other disposition of such Trust Estate. All monies so collected by the
Indenture Trustee shall be applied in accordance with Section 6.08 hereof and
the Indenture Trustee shall receive amounts pursuant to Section 6.08 hereof only
to the extent that payment thereof will not result in a subsequent Event of
Default caused by such payment to the Indenture Trustee.
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 $100,000,000, 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 the
Rating Agencies, or otherwise acceptable to 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
Indenture 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 Indenture Trustee and no appointment of a
successor Indenture Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Indenture Trustee under
Section 7.10 hereof.
(b) The Indenture Trustee may resign at any time by giving 30 days'
written notice thereof to the Issuer, the Bond Insurer, the Coordinator and to
each Noteholder. If an instrument of acceptance by a successor Indenture Trustee
shall not have been delivered to the Indenture Trustee within 30 days after the
giving of such notice of resignation, the resigning Indenture Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Indenture Trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor Indenture Trustee.
(c) The Indenture Trustee may be removed by the Bond Insurer or if a
Bond Insurer Default has occurred and is continuing, by the act of 66-2/3% of
the Holders of Outstanding
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Notes by notice to the Indenture Trustee, at any time if one of the following
events have occurred:
(i) the Indenture Trustee shall cease to be eligible under
Section 7.08 hereof and shall fail to resign after written request
therefor by the Issuer, the Bond Insurer or by any Noteholder, or
(ii) the Indenture Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Indenture
Trustee or of its property shall be appointed or any public officer
shall take charge or control of the Indenture Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or
liquidation, or
(iii) the Indenture Trustee has failed to perform its duties
hereunder or has materially breached any representation or warranty made
hereunder.
(d) If the Indenture Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Indenture
Trustee for any cause with respect to the Notes, the Issuer, by a Board
Resolution, shall promptly appoint a successor Indenture Trustee reasonably
satisfactory to the Bond Insurer. If no successor Indenture Trustee shall have
been so appointed by the Issuer within 30 days of notice of removal or
resignation and shall have accepted appointment in the manner hereinafter
provided, then the Bond Insurer may appoint a successor Indenture Trustee. If
the Bond Insurer shall fail to appoint a successor Indenture Trustee within 90
days, then 66-2/3% of the Noteholders may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee with respect
to the Notes.
(e) The Issuer shall give notice in the manner provided in Section 13.04
hereof of each resignation and each removal of the Indenture Trustee and each
appointment of a successor Indenture Trustee with respect to the Notes. Each
notice shall include the name of the successor Indenture Trustee and the address
of its Corporate Trust Office.
Section 7.10. Acceptance of Appointment by Successor. Every successor
Indenture Trustee appointed hereunder shall execute acknowledge and deliver to
the Issuer and the retiring Indenture Trustee an instrument accepting such
appointment and thereupon the resignation or removal of the retiring Indenture
Trustee shall become effective and such successor Indenture Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Indenture Trustee but, on request of
the Issuer or the successor Indenture Trustee, such retiring Indenture Trustee
shall, upon payment of its reasonable out-of-pocket costs and expenses, execute
and deliver an instrument transferring to such successor Indenture Trustee all
the rights, powers and trusts of the retiring Indenture
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Trustee, and shall duly assign, transfer and deliver to such successor Indenture
Trustee all property and money held by such retiring Indenture Trustee
hereunder, subject nevertheless to its lien, if any, provided for in Section
7.07 hereof. Upon request of any such successor Indenture Trustee, the Issuer
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Indenture Trustee all such rights, powers and
trusts.
No successor Indenture Trustee shall accept its appointment unless at
the time of such acceptance such successor Indenture Trustee shall be eligible
under this Article.
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business of Indenture Trustee. Any Person into which the Indenture 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 Indenture
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Indenture Trustee, shall be the
successor of the Indenture 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.
In case any Notes have been authenticated, but not delivered, by the Indenture
Trustee then in office, any successor by merger, conversion or consolidation to
such authenticating Indenture Trustee may adopt such authentication and deliver
the Notes so authenticated with the same effect as if such successor Indenture
Trustee had itself authenticated such Notes.
Section 7.12. Co-Indenture Trustees and Separate Indenture 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
Issuer, the Bond Insurer and the Indenture Trustee shall have power to appoint,
and, upon the written request of the Indenture Trustee, the Bond Insurer or of
the Holders of Notes representing at least 25% of the aggregate principal amount
of the Outstanding Notes, the Issuer shall for such purpose join with the
Indenture Trustee in the execution, delivery and performance of all instruments
and agreements necessary or proper to appoint, one or more Persons approved by
the Indenture Trustee, either to act as co-Indenture Trustee, jointly with the
Indenture Trustee of all or any part of such Trust Estate or to act as separate
Indenture 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
Issuer 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 Indenture Trustee alone shall have power to make such
appointment.
Should any written instrument from the Issuer be reasonably required by
any co-Indenture Trustee or separate Indenture Trustee so appointed for more
fully confirming to such
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co-Indenture Trustee or separate Indenture Trustee such property, title, right
or power, any and all such instruments shall, on written request, be executed,
acknowledged and delivered by the Issuer.
Every co-indenture Trustee or separate Indenture Trustee shall, to the
extent permitted by law, but to such extent only, be appointed subject to the
following terms:
(i) the Notes shall be authenticated and delivered by, and all
rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Indenture Trustee
hereunder, shall be exercised solely by the Indenture Trustee;
(ii) the rights, powers, duties and obligations hereby conferred
or imposed upon the Indenture Trustee in respect of any property covered
by such appointment shall be conferred or imposed upon and exercised or
performed by the Indenture Trustee or by the Indenture Trustee and such
co-Indenture Trustee or separate Indenture Trustee jointly, as shall be
provided in the instrument appointing such co-Indenture Trustee or
separate Indenture Trustee, except to the extent that under any law of
any jurisdiction in which any particular act is to be performed, the
Indenture 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-Indenture Trustee or separate
Indenture Trustee;
(iii) the Indenture Trustee at any time, by an instrument in
writing executed by it, with the concurrence of the Issuer evidenced by
a Board Resolution, may accept the resignation of or remove any
co-Indenture Trustee or separate Indenture Trustee, appointed under this
Section, and, in case an Event of Default has occurred and is
continuing, the Indenture Trustee shall have power to accept the
resignation of, or remove, any such co-Indenture Trustee or separate
Indenture Trustee without the concurrence of the Issuer. Upon the
written request of the Indenture Trustee, the Issuer shall join with the
Indenture 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-Indenture Trustee or
separate Indenture Trustee that has so resigned or been removed may be
appointed in the manner provided in this Section;
(iv) no co-Indenture Trustee or separate Indenture Trustee
hereunder shall be personally liable by reason of any act or omission of
the Indenture Trustee or any other such Indenture Trustee hereunder nor
shall the Indenture Trustee be liable by reason of any act or omission
of any co-Indenture Trustee or separate Indenture Trustee selected by
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the Indenture Trustee with due care or appointed in accordance with
directions to the Indenture Trustee pursuant to Section 6.14; and
(v) any Act of Noteholders delivered to the Indenture Trustee
shall be deemed to have been delivered to each such co-Indenture Trustee
and separate Indenture Trustee.
Section 7.13. Rights with Respect to the Servicer. The Indenture
Trustee's rights and obligations with respect to the Servicer shall be governed
by the Servicing Agreement.
Section 7.14. Appointment of Authenticating Agent. The Indenture Trustee
may appoint an Authenticating Agent or Agents with respect to the Notes which
shall be authorized to act on behalf of the Indenture Trustee to authenticate
Notes issued upon original issue or upon exchange, registration of transfer or
pursuant to Section 3.06 hereof and Notes so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Indenture Trustee hereunder. Wherever
reference is made in the Indenture to the authentication and delivery of Notes
by the Indenture Trustee or the Indenture Trustee's certificate of
authentication or the delivery of Notes to the Indenture Trustee for
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Indenture Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Indenture Trustee by an
Authenticating Agent and delivery of the Notes to the Authenticating Agent on
behalf of the Indenture Trustee. Each Authenticating Agent shall be acceptable
to the Issuer, the Bond Insurer and the Noteholders 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
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the part of the Indenture 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 Indenture Trustee, the Bond Insurer, the Coordinator and to the
Issuer. The Indenture Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to such Authenticating
Agent, the Coordinator, the Bond Insurer and to the Issuer. 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 Indenture Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Issuer and the Bond
Insurer and shall mail written notice of such appointment by first-class mail,
postage prepaid, to all Holders of Notes, if any, with respect to which such
Authentication Agent will serve, as their names and addresses appear in the Note
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 Indenture Trustee agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this Section, and
the Indenture 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 Notes may have
endorsed thereon, in addition to the Indenture Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Notes described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By
As Authenticating Agent
By
Authorized Officer
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Section 7.15. Indenture Trustee to Hold Leases. The Indenture Trustee
hereby acknowledges receipt of (subject to any exceptions as may be noted by the
Indenture Trustee to the Servicer and the Bond Insurer within 10 days of the
Delivery Date), and shall hold each, Lease Contract, together with any documents
relating thereto that may from time to time be delivered to the Indenture
Trustee, until such time as such Lease Contract is released from the lien of the
Indenture or delivered to the Servicer pursuant to the terms hereof or of the
Servicing Agreement.
The Indenture 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.
ARTICLE VIII
THE POLICY
Section 8.01. Payments under the Policy. If on the close of business on
the second 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), and on deposit in the Cash Collateral Account are not
sufficient (after taking into account the Payments required to be made on such
Payment Date pursuant to Section 12.02(d)(i)-(v)) to make the payment of amounts
due on the Outstanding Notes on such Payment Date in accordance with Section
12.02(d)(vi) and Section 12.02(d)(vii), the Indenture Trustee shall, no later
than 10:00 a.m., New York time, on the Business Day immediately preceding such
Payment Date make a claim under the Policy in an amount equal to such
insufficiency. In addition, if on the close of business on the second Business
Day immediately prior to the Stated Maturity of any Tranche, the funds on
deposit in the Collection Account and available to be distributed on such
Payment Date pursuant to Section 12.02(d), and on deposit in the Cash Collateral
Account are not sufficient (after taking into account the Payments required to
be made on such Payment Date pursuant to Section 12.02(d)(i)-(vi)) to pay the
entire principal amount of Outstanding Notes of such Tranche, the Indenture
Trustee shall, no later than 10:00 a.m., New York time, on the Business Day
immediately preceding such Payment Date, make a claim under the Policy in an
amount equal to such insufficiency. Proceeds of claims on the Policy shall be
deposited in the Collection Account and used solely to pay amounts due in
respect of interest on the Notes on each Payment Date and principal of the Notes
at the Stated Maturity.
In addition, on any day that the Indenture Trustee has actual knowledge
or receives notice that any amount previously paid to a Noteholder has been
subsequently recovered from such Noteholder pursuant to a final order of a court
of competent jurisdiction that such payment
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constitutes an avoidable preference within the meaning of any applicable
bankruptcy law to such Noteholder (a "Preference Claim"), the Indenture Trustee
shall make a claim within three Business Days upon the Policy for the full
amount of such Preference Claim in accordance with the terms of the Policy. Any
proceeds of any such Preference Claim received by the Indenture Trustee shall be
paid to the related Noteholders.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
The Issuer, the Servicer, the Back-up Servicer and the Indenture Trustee, with
the consent of the Bond Insurer but without the consent of the Holders of any
Notes, at any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Indenture Trustee, for any of
the following purposes, provided that any such amendment, as evidenced by an
Opinion of Counsel if required by the Indenture Trustee, will not have a
material adverse affect on Noteholders:
(1) to correct or amplify the description of any property at any
time subject to the lien of the Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required
to be subjected to the lien of the Indenture, or to subject to the lien
of the Indenture additional property; or
(2) to evidence the succession of another Person to the Issuer,
and the assumption by such successor of the covenants of the Issuer
herein and in the Notes contained, in accordance with Section 11.02(q)
hereof; or
(3) to add to the covenants of the Issuer, for the benefit of
the Bond Insurer or the Holders of all Notes, or to surrender any rights
or power herein conferred upon the Issuer; or
(4) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee; or
(5) 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 the
Indenture, which shall not be inconsistent with the provisions of the
Indenture, provided that such action shall not adversely affect the
interests of the Holders of the Notes; or
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(6) to evidence the succession of the Indenture Trustee pursuant
to Article Seven hereof; or
(7) to add to any Events of Default.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained, but the Indenture Trustee shall
not be obligated to enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under the
Indenture or otherwise.
Promptly after the execution by the Issuer, the Servicer, the Back-up
Servicer and the Indenture Trustee of any supplemental indenture pursuant to
this Section, the Issuer shall mail to the Rating Agencies and each Noteholder a
copy of such supplemental indenture.
Section 9.02. Supplemental Indentures with Consent of Noteholders. With
the consent of the Bond Insurer and the Holders of not less than 66-2/3% in
principal amount of the Outstanding Notes, by Act of said Holders delivered to
the Issuer and the Indenture Trustee, the Issuer, the Servicer, the Back-up
Servicer and the Indenture Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Indenture or of modifying
in any manner the rights of the Holders of the Notes under the Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holders of each Outstanding Note affected thereby:
(1) change the Stated Maturity of any Note or the due date of
any installment of principal of, or any installment of interest on, any
Note, or reduce the principal amount thereof or the Note Interest Rate
or change any place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment; or
(2) reduce the percentage in principal amount of the Outstanding
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of the
Indenture or Events of Default or their consequences; or
(3) impair or adversely affect the Trust Estate except as
otherwise permitted herein; or
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(4) modify or alter the provisions of the proviso to the
definition of the term "Outstanding"; or
(5) modify or alter the provisions of the proviso to Section
6.04 hereof; or
(6) modify any of the provisions of this Section 9.02, except to
increase the percentage of Holders required for any modification or
wavier or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the Holder of each
Outstanding Note affected thereby; or
(7) permit the creation of any lien ranking prior to or on a
parity with the lien of the Indenture with respect to any part of the
Trust Estate or terminate the lien of the Indenture on any property at
any time subject hereto or deprive the Holder of any Note of the
security afforded by the lien of the Indenture; or
(8) modify any of Sections 6.01(l) or (2), 6.02, 6.03, 6.18, or
12.02(d) hereof.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer, the Servicer, the Back-up
Servicer and the Indenture Trustee of any supplemental indenture pursuant to
this Section, the Issuer shall mail to the Holder of the Notes and the Rating
Agencies a copy of such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In executing any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by the Indenture, the Indenture Trustee shall be entitled to
receive upon request, and (subject to Section 7.01 hereof) hereof shall be fully
protected in relying in good faith upon, an Opinion of Counsel reasonably
acceptable to the Indenture Trustee stating that the execution of such
supplemental indenture is authorized or permitted by the Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Indenture Trustee's own duties or
immunities under the Indenture or otherwise.
Section 9.04. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture under this Article, the Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
the Indenture for all purposes; and every Holder of Notes theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
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Section 9.05. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Notes so modified as to conform, in the opinion of the Indenture Trustee and
the Issuer, to any such supplemental indenture may be prepared and executed by
the Issuer and authenticated and delivered by the Indenture Trustee in exchange
for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption at the Option of the Issuer; Election to
Redeem. The Issuer shall have the option, and in the absence of the exercise
thereof the Bond Insurer shall have the option, to redeem the Notes, in whole
but not in part, as to the then Outstanding Notes, at any time after the
aggregate principal amount of the then Outstanding Notes is less than 10% of the
original aggregate principal amount of such Notes, at the Redemption Price plus
any fees due hereunder, including Breakage Costs, and all amounts due to the
Bond Insurer under the Insurance Agreement.
The Issuer shall set the Redemption Date and the Redemption Record Date
and give notice thereof to the Indenture Trustee and the Coordinator pursuant to
Section 10.02 hereof.
Installments of interest and principal due on or prior to a Redemption
Date shall continue to be payable to the Holders of Notes called for redemption
as of the relevant Record Dates according to their terms and the provisions of
Section 3.07 hereof. The election of the Issuer or the Bond Insurer to redeem
any Notes pursuant to this Section shall be evidenced by a Board Resolution or
written notice from the Bond Insurer, respectively, directing the Indenture
Trustee to make the payment of the Redemption Price on all of the Notes to be
redeemed from monies deposited with the Indenture Trustee pursuant to Section
10.04 hereof.
Section 10.02. Notice to Indenture Trustee. In the case of any
redemption pursuant to Section 10.01 hereof, the Issuer or the Bond Insurer
shall, at least 15 days prior to the Redemption Date, notify the Indenture
Trustee and the Coordinator of such Redemption Date and shall deposit into the
Collection Account on the related Calculation Date an amount equal to the
Redemption Price of all Notes to be redeemed.
Section 10.03. Notice of Redemption by the Issuer. Upon receipt of such
notice and such deposit set forth in Section 10.02 above, the Indenture Trustee
shall provide notice of redemption pursuant to Section 10.01 hereof by
first-class mail, postage prepaid, mailed no later
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than the Business Day following the Calculation Date on which such deposit was
made, to each Holder of Notes whose Notes are to be redeemed, at his address in
the Note Register.
Each notice of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price; and
(3) that on the Redemption Date, the Redemption Price will
become due and payable upon each such Note, and that interest thereon
shall cease to accrue on such date.
Notice of redemption of Notes shall be given by the Indenture Trustee in
the name and at the expense of the Issuer or the Bond Insurer, as applicable.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Note selected for redemption shall not impair or affect the validity of the
redemption of any other Note.
Section 10.04. Deposit of the Redemption Price. On or before the
Calculation Date next preceding any Redemption Date, the Issuer or the Bond
Insurer, as applicable, shall deposit with the Indenture Trustee or with the
Paying Agent an amount of monies sufficient to pay the Redemption Price of all
Notes which are to be redeemed on such Redemption Date plus any fees due
hereunder, including Breakage Costs, and all amounts due to the Bond Insurer
under the Insurance Agreement.
Section 10.05. Notes Payable on Redemption Date. Notice of redemption
having been given as provided in Section 10.03 hereof, the Notes to be redeemed
shall, on the applicable Redemption Date, become due and payable at the
Redemption Price and on such Redemption Date (unless the Issuer or the Bond
Insurer shall default in the payment of the Redemption Price) such Notes shall
cease to bear interest. The Holders of such Notes shall be paid the Redemption
Price by the Paying Agent on behalf of the Issuer; provided, however, that
installments of principal and interest which are due on or prior to the
Redemption Date shall be payable to the Holders of such Notes registered as such
on the relevant Record Dates according to their terms and the provisions of
Section 3.07 hereof.
If the Holders of any Note called for redemption shall not be so paid,
the principal and premium, if any, shall, until paid, bear interest from the
Redemption Date at the related Note Interest Rate.
ARTICLE XI
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REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 11.01. Representations and Warranties. The Issuer hereby makes
the following representations and warranties for the benefit of the Indenture
Trustee, the Bond Insurer and the Noteholders on which the Indenture Trustee
relies in accepting the Trust Estate in trust and in authenticating the Notes.
Such representations and warranties are made as of the Delivery Date, but shall
survive the transfer, grant and assignment of the Trust Estate to the Indenture
Trustee.
(a) Organization and Good Standing. The Issuer is a limited liability
company duly organized, validly existing and in good standing under the law of
the Issuer State of Formation 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 Issuer to perform its obligations under the Indenture or the Contribution
Agreement.
(b) Authorization. The Issuer has the power, authority and legal right
to execute, deliver and perform the Indenture, the Servicing Agreement, the
Insurance Agreement, the Contribution Agreement and the execution, delivery and
performance of the Indenture, the Insurance Agreement and the Contribution
Agreement have been duly authorized by the Issuer by all necessary action.
(c) Binding Obligation. The Indenture, assuming due authorization,
execution and delivery by the Indenture Trustee, the Back-up Servicer and the
Servicer, the Insurance Agreement, assuming due authorization, execution and
delivery by the Bond Insurer, the Indenture Trustee, the Back-up Servicer, the
Issuer, the Company and the Servicer, the Contribution Agreement, assuming the
due authorization, execution and delivery by the Company and each of the
Contributors, each constitutes a legal, valid and binding obligation of the
Issuer, enforceable again the Issuer 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 Indenture, the Insurance Agreement and the
Contribution Agreement 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 Limited Liability Company Agreement of the Issuer,
or any material indenture, agreement, mortgage, deed of trust or other
instrument to which the Issuer is a party or by which it is bound, or in the
creation or
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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 Indenture, the
Insurance Agreement, or the Contribution Agreement, or violate any law or, to
the best of the Issuer's knowledge, any material order, rule or regulation
applicable to the Issuer of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Issuer or any of its properties.
(e) No Proceedings. There are no Proceedings or investigations to which
the Issuer, or any of the Issuer Affiliates, is a party pending, or, to the
knowledge of Issuer, threatened, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality (A)
asserting the invalidity of the Indenture, the Insurance Agreement, the
Contribution Agreement or the Notes, (B) seeking to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by the
Contribution Agreement, the Indenture or the Notes or (C) seeking any
determination or ruling that would materially and adversely affect the
performance by the Issuer of its obligations under, or the validity or
enforceability of, the Indenture, the Insurance Agreement, the Contribution
Agreement or the Notes.
(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 Indenture, the
Insurance Agreement, or the Contribution Agreement and with the valid and proper
authorization, issuance and sale of each Tranche of Notes pursuant to the
Indenture (except approvals of State securities officials under the Blue Sky
Laws), have been or will be taken or obtained on or prior to the related
Delivery Date.
(g) Place of Business. The Issuer's principal place of business and
chief executive office is located at the address specified in Section 13.03
hereof.
(h) Transfer and Assignment. Upon the delivery to the Indenture Trustee
of the Lease Contracts and the filing of the Financing Statements described in
Sections 4.01(f) and 4.02(a) hereof, the Indenture Trustee for the benefit of
the Noteholders shall have a first priority perfected security interest in the
Lease Receivables, the Lease Contracts, the Equipment (to the extent owned by
the Issuer) initially located in the Enumerated States, 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 and provided, that, the security interest of the Indenture Trustee
for the benefit of the Noteholders with respect to the Equipment will not be a
perfected security interest with respect to any Equipment located initially in
any States other than the Enumerated States and with respect to Equipment
underlying Loan Contracts. All filings (including, without limitation, UCC
filings) as are necessary in any
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jurisdiction to perfect the ownership or other interest of the Indenture Trustee
in the Trust Estate (other than that Equipment in such other States or Equipment
underlying Loan Contracts), including the transfer of the Lease Contracts and
the payments to become due thereunder, have been made.
(i) Owners of the Issuer. The Contributors and K & P Finance Corp.
comprise all of the registered owners of all of the outstanding ownership
interests of the Issuer, all of which ownership interests are fully paid and
nonassessable and are owned of record, free and clear of all mortgages,
assignments, pledges, security interests, warrants, options and rights to
purchase.
(j) Contribution. As of the Delivery Date the Issuer has entered into
the Contribution Agreement with the Contributors relating to its acquisition of
the Lease Contracts, the Lease Receivables and the Equipment, and the
representations and warranties made by the Company and each of the Contributors
relating to the Lease Contracts, Lease Receivables and the Equipment have been
validly assigned to and are for the benefit of the Issuer, the Indenture
Trustee, the Bond Insurer and the Noteholders and such representations and
warranties are true and correct in all material respects.
(k) The Lease Contracts. The Issuer 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 Contributors in Section
3.01 of the Contribution Agreement.
(l) Taxable Income From Lease Contracts. Each of the Issuer, the
Company, the Contributors and their shareholders and members, as applicable,
shall treat the Lease Contracts as owned by the Issuer for federal, State, and
local income tax purposes, shall report and include in the computation of the
Issuer's gross income for such tax purposes the rental and other income from the
Lease Contracts, and shall deduct the interest paid or accrued with respect to
the Notes in accordance with its applicable method of accounting for such
purposes.
Section 11.02. Covenants. The Issuer hereby makes the following
covenants on which the Indenture Trustee relies in accepting the Trust Estate in
trust and in authenticating the Notes. Such covenants are made as of the
Delivery Date, but shall survive the transfer, grant and assignment of the Trust
Estate to the Indenture Trustee.
(a) No Liens. Except for the conveyances and grant of security interests
hereunder, the Issuer 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 the Indenture pursuant to Section 5.01 hereof; the Issuer will
notify the Indenture Trustee of the existence of any Lien on any Trust Estate
immediately upon discovery thereof; and the Issuer shall defend the right, title
and interest of the
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Indenture Trustee in, to and under the Trust Estate now existing or hereafter
created, against all claims of third parties claiming through or under the
Issuer; provided, however, that nothing in this Section 11.02(a) shall prevent
or be deemed to prohibit the Issuer from suffering to exist upon any of the
Trust Estate any Liens for municipal or other local taxes and other governmental
charges if such taxes or governmental charges shall not at the time be due and
payable or if the Issuer shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto.
(b) Delivery of Collections. The Issuer agrees to hold in trust and
promptly pay to the Servicer all amounts received by the Issuer in respect of
the Trust Estate (other than amounts distributed to or for the benefit of the
Issuer pursuant to Article Twelve hereof).
(c) Obligations with Respect to Lease Contracts. The Issuer 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 Indenture
Trustee (for the benefit of the Noteholders and the Bond Insurer) in the Lease
Receivables, the Lease Contracts and any other Trust Estate. As long as there is
no event of default under the applicable Lease Contract, the Issuer 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 Issuer 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; provided, however, that the Issuer may contest any act, regulation,
order, decree or direction in any reasonable manner which shall not materially
and adversely affect the rights of the Indenture Trustee (for the benefit of the
Noteholders and the Bond Insurer) in the Lease Receivables, the Lease Contracts
and the related Equipment. The Issuer will comply, in all material respects,
with all requirements of law applicable to the Issuer.
(e) Preservation of Security Interest. The Issuer 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 Indenture Trustee (for the
benefit of the Noteholders and the Bond Insurer) in the Trust Estate; provided,
that the Issuer shall not be required to file financing statements or any
related agreements or documentation with respect to any Equipment not initially
located in the Enumerated States or with respect to any Equipment underlying
Loan Contracts.
(f) Maintenance of Office, etc. The Issuer will not, without providing
30 days notice to the Indenture Trustee, the Coordinator and the Bond Insurer
and without filing such amendments to any previously filed financing statements
as the Indenture Trustee or the Bond Insurer may require or as may be required
in order to maintain the Indenture Trustee's perfected
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security interest in the Trust Estate (other than Equipment underlying Loan
Contracts), (a) change the location of its principal executive office, or (b)
change its name, identity or company structure in any manner which would make
any financing statement or continuation statement filed by the Issuer in
accordance with the Servicing Agreement or the Indenture seriously misleading
within the meaning of Article 9-402(7) of any applicable enactment of the UCC.
(g) Further Assurances. Except as set forth in Section 11.02(e), the
Issuer will make, execute or endorse, acknowledge, and file or deliver to the
Indenture 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 Indenture Trustee may request and reasonably require.
(h) Notice of Liens. The Issuer shall notify the Indenture Trustee and
the Bond Insurer promptly after becoming aware of any Lien on the Trust Estate,
except for any Liens for municipal or other local taxes if such taxes shall not
at the time be due or payable without penalty or if the Issuer shall currently
be contesting the validity thereof in good faith by appropriate proceedings and
shall have set aside on its books adequate reserves with respect thereto.
(i) Activities of the Issuer. The Issuer (a) shall engage in only (1)
the acquisition, ownership, leasing, selling and pledging of the property
acquired by the Issuer pursuant to the Contribution Agreement, and causing the
issuance of receiving and selling the Notes issued pursuant to the Indenture and
(2) the exercise of any powers permitted to limited liability companies under
the limited liability company law of the applicable Issuer State of Formation
which are incidental to the foregoing or necessary to accomplish the foregoing
and the Issuer shall incur no debt other than trade payables and expense
accruals in connection with its operations in the normal course of business; (b)
will (1) maintain its books and records separate from the books and records of
any other entity, (2) maintain separate bank accounts and no funds of the Issuer
shall be commingled with funds of any other entity, (3) keep in full effect its
existence, rights and franchises as a limited liability company under the laws
of the applicable Issuer State of Formation, and will obtain and preserve its
qualification to do business as a foreign limited liability company in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of the Indenture; 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,
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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 Issuer 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 company 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 trade payables and
expense accruals incurred in the ordinary course of business and which are
incidental to its business purpose; provided, however, that the Issuer may take
any action prohibited by this clause (8) if (y) the Issuer shall cause, prior to
the taking of such action, an Opinion of Counsel experienced in federal
bankruptcy matters, in substance satisfactory to the Indenture Trustee, the
Noteholders, the Bond Insurer and the Rating Agencies, to be delivered to the
Indenture Trustee, the Noteholders, the Bond Insurer and the Rating Agencies and
(z) the Rating Agencies shall indicate in writing that the taking of such action
will not affect the then current rating of the Notes. The Issuer shall not amend
any article in its Certificate of Formation that deals with any matter discussed
above without the prior written consent of the Bond Insurer.
(j) Directors. The Issuer agrees that at all times with respect to it
and K & P Finance Corp., at least one of the directors and one of the executive
officers (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 such entity; provided,
however, that such independent director and officer may serve in similar
capacities for other "special purpose entities" formed by the Company and its
Affiliates. The Issuer's Limited Liability Company Agreement shall at all times
provide that such independent director shall have a fiduciary duty to the
Holders of the Notes and the Holders of the Notes.
(k) Consolidated Return. The Issuer and the Company are members of an
affiliated group within the meaning of Section 1504 of the Code which has filed,
and will continue to file, a consolidated return for federal income tax purposes
at all times until the termination of the Indenture.
(1) Preservation of the Equipment. The Issuer warrants that it is the
lawful owner and possessor of the Equipment (except with respect to Equipment in
which it has a valid security interest) and that it will warrant and defend such
Equipment against all Persons, claims and demands whatsoever. The Issuer shall
not assign, sell, pledge, or exchange, or in any way encumber or otherwise
dispose of the Equipment, except as permitted under the Indenture.
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(m) Taxable Income from the Lease Contracts. The Issuer shall treat the
Lease Contracts as owned by it for federal, state and local income tax purposes,
and the affiliated group of which the Issuer is a member within the meaning of
Section 1504 of the Code shall treat the Lease Contracts as owned by the Issuer
for Federal, state and local income tax purposes, shall report and include in
the computation of the Issuer's gross income for such tax purposes in its
consolidated or combined return the rental and other income from the Lease
Contracts, and shall deduct the interest paid or accrued with respect to the
Notes in accordance with its applicable method of accounting for such purposes.
(n) Maintenance of Office or Agency. The Issuer will maintain an office
or agency within the United States of America where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demand to or upon the Issuer in
respect of the Notes and the Indenture may be served. The Issuer hereby
initially appoints the Indenture Trustee at the Corporate Trust Office for each
of said purposes. The Issuer will give 30 days prior written notice to the
Indenture Trustee, the Bond Insurer, the Coordinator and the Noteholders of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to maintain any
such office or agency or shall fail to furnish the Indenture Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Indenture Trustee, and the Issuer hereby appoints the Indenture
Trustee its agent to receive all such presentations, surrenders, notices and
demands.
(o) Money for Note Payments to Be Held in Trust. The Indenture Trustee
shall execute and deliver, and if there is any Paying Agent other than the
Indenture Trustee, the Issuer will cause each Paying Agent other than the
Indenture Trustee to execute and deliver to the Indenture Trustee and the Bond
Insurer an instrument in which such Paying Agent shall agree with the Indenture
Trustee that, subject to the provisions of this Section, such Paying Agent will:
(i) hold all sums held by it for the payment of principal of or
interest on Notes in trust for the benefit of the Noteholders entitled
thereto and the Bond Insurer until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(ii) give the Indenture Trustee, the Coordinator and the Bond
Insurer notice of any Default by the Issuer (or any other obligor upon
the Notes) in the making of any payment of principal or interest; and
(iii) at any time during the continuance of any such Default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent.
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The Issuer may at any time for the purpose of obtaining the satisfaction
and discharge of the Indenture or for any other purpose, pay, or by Issuer Order
direct any Paying Agent to pay, to the Indenture Trustee all sums held in trust
by such Paying Agent, such sums to be held by the Indenture 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 Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Indenture Trustee or any Paying Agent in
trust for the payment of the principal of or interest on any Note and remaining
unclaimed for four years after such principal or interest has become due and
payable shall be paid to the Issuer on Issuer Request or to the Bond Insurer
(upon its written request) if such payment had been made by the Bond Insurer;
and the Holder of such Note shall thereafter, as an unsecured general creditor,
and subject to any applicable statute of limitations, look only to the Issuer
for payment thereof, and all liability of the Indenture Trustee, such Paying
Agent or the Bond Insurer with respect to such trust money or the related Note,
shall thereupon cease; provided, however, that the Indenture Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Issuer 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 Issuer; and
provided, further, that any amounts held that are proceeds of a claim made under
any Policy shall be returned to the Bond Insurer, and the Noteholders shall look
only to the Bond Insurer for such payments. The Indenture Trustee may also adopt
and employ, at the expense of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Noteholders 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 Note Register for each such Noteholder).
(p) Enforcement of Servicing Agreement and Contribution Agreement. The
Issuer 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, the Contribution
Agreement and the Contributors under the Contribution Agreement and to secure
its rights thereunder.
(q) Issuer May Consolidate, etc., Only on Certain Terms. The Issuer
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:
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(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger or which acquires by conveyance or transfer
the properties and assets of the Issuer substantially as an entirety
shall be a Person organized and existing as a limited purpose entity
under the laws of the United States of America or any State thereof and
shall have expressly assumed, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee and the Bond Insurer in
form reasonably satisfactory to the Indenture Trustee and the Bond
Insurer, the obligation to make due and punctual payments of the
principal of and interest on all of the Notes and to perform every
covenant of the Indenture on the part of the Issuer to be performed or
observed; and
(ii) the Issuer shall have caused the Indenture Trustee to have
received a letter from the Rating Agencies to the effect that the rating
issued with respect to the Notes is confirmed, notwithstanding the
consummation of such merger, consolidation, transfer or conveyance
together with the consent of the Bond Insurer 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 Issuer shall have delivered to the Indenture Trustee
and the Bond Insurer an Officer's Certificate and an Opinion of Counsel
each stating that such consolidation, merger, conveyance or transfer and
such supplemental indenture 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 hereof, the
perfection and priority thereof and the rights and powers of the
Indenture Trustee, the Bond Insurer and the Holders of the Notes
hereunder; and
(vi) the surviving entity shall be a "special purpose entity;"
i.e., shall have an organizational charter substantially similar to the
Certificate of Formation of the Issuer including specific limitations on
the business purposes, and provisions for independent directors; and
(vii) the Bond Insurer shall have given its prior written
consent, which consent shall not be unreasonably withheld or delayed.
(r) Successor Substituted. Upon any consolidation or merger, or any
conveyance or transfer of the properties and assets of the Issuer substantially
as an entirety in accordance with
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Section 11.02(q) hereof, the Person formed by or surviving such consolidation or
merger (if other than the Issuer) 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 Issuer under the Indenture with the same effect as
if such Person had been named as the Issuer herein. In the event of any such
conveyance or transfer, the Issuer 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 Notes and from its obligations under
the Indenture and may be dissolved, wound-up and liquidated at any time
thereafter.
(s) Use of Proceeds. The proceeds from the sale of the Notes will be
used by the Issuer (i) to pay the Existing Indebtedness, (ii) to pay the
expenses associated with this transaction and (iii) for general corporate
purposes. None of the transactions contemplated in the Indenture, the
Contribution Agreement or the Servicing Agreement (including the use of the
proceeds from the sale of the Notes) 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 Issuer 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.
Section 11.03. Other Matters as to the Issuer.
(a) Limitation on Liability of Directors, Officers, or Employees of the
Issuer. The directors, officers, or employees of the Issuer shall not be under
any liability to the Trust, the Bond Insurer, the Indenture Trustee, the
Noteholders, the Company, the Servicer, the Back-up Servicer or any other Person
hereunder or pursuant to any document 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 the Indenture and the
issuance of the Notes.
(b) Parties Will Not Institute Insolvency Proceedings. So long as the
Indenture is in effect, and for one year following its termination, 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 Issuer.
ARTICLE XII
ACCOUNTS AND ACCOUNTINGS
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Section 12.01. Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to the Indenture. The Indenture
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 Indenture Trustee and the other accounts held in
the name of the Indenture Trustee to permit the Servicer to perform its duties
under the Servicing Agreement. The Indenture 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 the Indenture. If any Lease Contract becomes a Defaulted Lease
Contract, the Indenture Trustee, upon Issuer or Servicer request may, and upon
the request of the Bond Insurer or the Holders of a majority in principal amount
of the Outstanding Notes 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 the Indenture and to proceed
thereafter as provided in Article Six hereof.
Section 12.02. Collection Account; Advance Payment Account. (a) Prior to
the initial Delivery Date, the Indenture Trustee shall open and maintain a trust
account at its Corporate Trust Office (the "Collection Account") for the benefit
of the Noteholders, for the receipt of (i) payments remitted to the Indenture
Trustee by the Servicer (ii) amounts transferred from the Advance Payment
Account in accordance with Section 3.03(b) of the Servicing Agreement and from
the Cash Collateral Account in accordance with Section 12.03(d)(i) and (iii)
hereof, (iii) proceeds of claims made under any Policy, in accordance with
Article Eight hereof, upon receipt, (iv) any payment received by the Indenture
Trustee which consists of payments made under the Floating Rate Cap Agreement
and (v) 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 Issuer to the Noteholders out of funds in the Collection Account pursuant to
the Indenture shall be made by the Indenture Trustee or the Paying Agent of the
Issuer. All monies deposited from time to time in the Collection Account
pursuant to the Indenture shall be held by the Indenture Trustee as part of the
Trust Estate as herein provided.
(b) Upon Issuer Order, the Indenture Trustee shall invest the funds in
the Collection Account in Eligible Investments. The Issuer Order shall specify
the Eligible Investments in which the Indenture 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
(i) or (vii) of the definition of Eligible Investments may mature on such
Payment Date. In the absence of a Issuer Order, the Indenture Trustee shall
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invest funds in the Collection Account in Eligible Investments described in
clause (vii) of the definition thereof. Eligible Investments shall be made in
the name of the Indenture Trustee for the benefit of the Noteholders. The
Indenture Trustee shall provide to the Servicer and the Bond Insurer 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 Issuer 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 caused as a result of the Issuer's investment instructions
provided for herein. The Indenture 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 (except to the extent that the Indenture
Trustee is the obligor and has defaulted thereon).
(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 unpaid principal amount of the Notes
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 pursuant to Section 12.02(a) hereof, the Indenture 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) 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
that the proceeds of claims under the Policy shall be used solely to pay the
amounts due under paragraphs (vi) and (vii) of this Section 12.02(d); and
provided further that the Indenture Trustee shall withdraw from the Collection
Account and make interest payments based on the outstanding principal balance of
the Notes even if it shall not have received the Monthly Servicer's Report:
(i) to pay to the Servicer: (A) the Servicer Fee; (B) the
Reinvestment Income (except to the extent previously remitted to the
Servicer); (C) the amounts necessary to reimburse the Servicer and any
successor Servicer as provided in Section 3.09(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 Defaulted Lease Contracts, from amounts
received as Recoveries from any Defaulted Lease Contracts; (D) 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
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Account; (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; and (F) the amount necessary to
reimburse the Servicer for any Nonrecoverable Advance;
(ii) to the extent collected, to pay to Noteholders any Breakage
Cost for voluntarily terminated Lease Contracts;
(iii) to pay to the Indenture Trustee the Trustee Fee (and,
following an Event of Default, any expenses of the Indenture Trustee
previously approved by the Bond Insurer) then due;
(iv) to pay to the Back-up Servicer the Back-up Servicer Fee
(and, following an Event of Default, any expenses of the Indenture
Trustee previously approved by the Bond Insurer) then due;
(v) to pay to the Bond Insurer the Bond Insurer Premium then
due;
(vi) to pay the Interest Distribution Amount due on that Payment
Date and any overdue interest, to be applied as provided in Section 3.07
hereof;
(vii) to pay, with respect to each Tranche of Notes Outstanding,
an amount equal to the amount, if any, by which the principal balance of
the Notes Outstanding of such Tranche exceeds the Tranche Aggregate
Implicit Principal Balance;
(viii) to pay the Principal Distribution Amount then due, to be
applied to the payment of Note principal as provided in Section 3.07
hereof;
(ix) to pay to the Bond Insurer any amounts previously paid by
the Bond Insurer under the Policy and not repaid, together with interest
thereon in accordance with the Insurance Agreement;
(x) 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;
(xi) 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,
the Bond Insurer or the Indenture Trustee, any Transition Costs incurred
by any successor Servicer, the Bond Insurer (solely
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pursuant to Section 6.02(d) of the Servicing Agreement) or the Indenture
Trustee and not previously reimbursed;
(xii) on and after the Payment Date following a Trigger Event,
apply any remaining funds to the payment of Note principal to the
Holders of Notes Outstanding on the basis of the Principal Pro Rata
Factor calculated after the payment of principal pursuant to Section
12.02(d)(vii) and 12.02(d)(viii) hereof;
(xiii) to pay to the Servicer, any other amounts due the
Servicer as expressly provided herein and in the Servicing Agreement
other than unreimbursed Servicer Advances;
(xiv) to pay to the Servicer, any unreimbursed Servicer
Advances;
(xv) to pay to the Indenture Trustee and the Back-up Servicer,
any other amounts due to the Indenture Trustee or the Back-up Servicer
as expressly provided herein and in the Servicing Agreement;
(xvi) to pay to the Bond Insurer any other amounts owed to the
Bond Insurer pursuant to the Insurance Agreement;
(xvii) to pay to Noteholders any unpaid Breakage Costs; and
(xviii) to remit any excess funds to or at the direction of the
Issuer in accordance with the instructions on the Monthly Servicer's
Report.
The foregoing provisions of paragraph 12.02(d) notwithstanding, any
monies deposited in the Collection Account for purposes of redeeming Notes
pursuant to Article Ten hereof shall, subject to Section 11.02(o) hereof, remain
in the Collection Account until used to redeem such Notes.
(e) Prior to the Delivery Date, the Issuer shall cause the Indenture
Trustee to open and maintain a trust account at the Corporate Trust Office (the
"Advance Payment Account") for the benefit of Noteholders and the Bond Insurer,
for the receipt and withdrawal of Advance Payments in accordance with Section
3.03(c) of the Servicing Agreement. The Indenture Trustee shall transfer moneys
from the Advance Payment Account to the Collection Account on the applicable
Servicer Remittance Date in accordance with Section 3.03(c) of the Servicing
Agreement. Moneys in the Advance Payment Account shall be invested in Eligible
Investments that mature no later than the relevant Servicer Remittance Date.
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(f) Upon the Issuer's or the Indenture Trustee's obtaining actual
knowledge of the occurrence of any Trigger Event, the Issuer or the Indenture
Trustee, as the case may be, shall within two Business Days of obtaining such
actual knowledge notify the Bond Insurer and the Noteholders of such occurrence.
Section 12.03. Cash Collateral Account. (a) Prior to the Delivery Date,
the Issuer shall cause the Indenture Trustee to open and maintain a trust
account at the Corporate Trust Office (the "Cash Collateral Account") for the
benefit of the Noteholders, for the receipt of (i) any Initial Cash Deposit and
(ii) deposits pursuant to Section 12.02(d)(x). Monies received in the Cash
Collateral Account will be invested at the written direction of the Issuer in
Eligible Investments during the term of the Indenture, and any income or other
gain realized from such investment, shall be held by the Indenture Trustee in
the Cash Collateral Account as part of the Trust Estate as security for the
Notes subject to disbursement and withdrawal as herein provided. Monies shall be
subject to withdrawal in accordance with Section 12.03(d).
(b) Upon Issuer Order all or a portion of the Cash Collateral Account
shall be invested and reinvested at the Issuer's written direction in one or
more Eligible Investments. In the absence of a Issuer Order, the Indenture
Trustee shall invest Funds in the Cash Collateral Account in Eligible
Investments described in clause (vii) of the definition thereof. All income or
other gain from such investments shall be credited to such Cash Collateral
Account and any loss resulting from such investments shall be charged to such
Cash Collateral Account; provided, however, that the Issuer shall make or cause
to be made on any Servicer Remittance Date a deposit to the Cash Collateral
Account to the extent of any losses therein caused as a result of the Issuer's
investment instructions. No Eligible Investment shall mature later than the
Business Day preceding the next following Servicer Remittance Date and shall not
be sold or disposed of prior to its maturity. Eligible Investments shall be made
in the name of the Indenture Trustee for the benefit of the Noteholders. The
Indenture Trustee shall provide to the Servicer and the Bond Insurer 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) If any amounts invested as provided in Section 12.03(b) hereof shall
be needed for disbursement from the Cash Collateral Account as set forth in
Section 12.03(d) hereof, the Indenture 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 Indenture 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).
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(d) Disbursements from the Cash Collateral Account shall be made, to the
extent funds therefor 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 Servicer Remittance Date immediately
preceding any Payment Date (other than amounts representing payments of
Lease Receivables due after the Calculation Date immediately preceding
such Payment Date) is less than the sum of the amounts required to be
paid from the Collection Account on such Payment Date pursuant to
clauses (i) through (x) of Section 12.02(d) hereof, the Indenture
Trustee shall withdraw funds from the Cash Collateral Account on or
prior to 4:00 p.m. New York time on such Servicer Remittance 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
Section 12.02(d)(i) through (x) hereof on such Payment Date), the
Indenture 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 funds into the Collection Account; and
(iii) in the event that on any Payment Date a Trigger Event has
occurred, the indenture 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.
Section 12.04. Reports by Indenture Trustee to the Bond Insurer and
Noteholders.
(a) On each Payment Date the Indenture Trustee shall account to each
Holder of Notes 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 Issuer and the Bond Insurer of all such
payments. The Indenture Trustee may satisfy its obligations under this Section
12.04 by delivering the Monthly Servicer's Report to each such Holder of the
Notes, the Bond Insurer and the Issuer. On or before the 15th day prior to the
Final Payment Date the Indenture Trustee shall provide notice to the Holders of
the Notes of the Final Payment Date for the Notes. 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.
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(b) The Indenture Trustee shall, on a monthly basis, beginning on the
first Calculation Date, confirm 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 (vi) of the definition of Eligible
Investments and shall promptly notify the Noteholders and the Bond Insurer if
any such credit rating has been lowered.
(c) At least annually, the Indenture Trustee shall distribute to the
Noteholders any Form 1099 or similar information returns required by applicable
tax law to be distributed to the Noteholders and received in accordance with the
next sentence. The Servicer shall prepare or cause to be prepared all such
information for distribution by the Indenture Trustee to the Noteholders and
such other information with respect to the related Notes as the Trustee may need
in order to fulfill its obligations hereunder.
ARTICLE XIII
PROVISIONS OF GENERAL APPLICATION
Section 13.01. General Provisions. All of the provisions of this Article
shall apply to this Indenture.
Section 13.02. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders 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 Indenture Trustee, and,
where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders 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 Indenture
and (subject to Section 7.01 hereof) conclusive in favor of the Indenture
Trustee and the Issuer, 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 Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind the Holder of every
Note issued upon the registration
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of transfer thereof or in exchange therefor or in lieu thereof, in respect of
anything done, omitted or suffered to be done by the Indenture Trustee or the
Issuer in reliance thereon, whether or not notation of such action is made upon
such Note.
Section 13.03. Notices, etc., to Indenture Trustee, the Bond Insurer,
Issuer and Servicer. Any request, demand, authorization, direction, notice,
consent, waiver or Act of Noteholders or other document provided or permitted by
this Indenture 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 Indenture Trustee at Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust
Department; or
(b) to the Bond Insurer at 113 King Street, Armonk, New York
10504, Attention: Structured Surveillance to Insured Portfolio
Management - Structured Finance (IPM-SF), or at any other address
previously furnished in writing by the Bond Insurer to the Indenture
Trustee, the Noteholders, the Servicer, the Back-up Servicer and the
Issuer provided, however, that notices to the Bond Insurer pursuant to
Section 4.01(c) hereof shall be directed to Attention: Structured
Finance Department, Derrin Culp; or
(c) to the Issuer at 6416 16th Street East, Tacoma, Washington
98424, or at any other address previously furnished in writing to the
Indenture Trustee, the Bond Insurer, the Noteholders, the Back-up
Servicer and the Servicer address previously by the Issuer; or
(d) to the Servicer at 6416 16th Street East, Tacoma, Washington
98424, or at any other address previously furnished in writing to the
Indenture Trustee, the Bond Insurer, the Noteholders and the Issuer; or
(e) to each of (i) S&P, 26 Broadway, New York, NY 10004,
Attention: Asset Backed Surveillance Group, and (ii) Moody's, 99 Church
Street, New York, New York 10007, Attention: ABS Surveillance Group; or
(f) to the Coordinator, 245 Park Avenue, New York, New York
10167-0037, Attention: Securities Department.
Section 13.04. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders 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
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<PAGE> 109
Noteholder affected by such event, at his address as it appears on the Note
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
Noteholders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
which is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
Where this Indenture 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 Noteholders shall be filed with the Indenture
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 Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture 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 Indenture by the Issuer shall bind its successors and assigns, whether so
expressed or not.
Section 13.07. Separability. In case any provision in this Indenture or
in the Notes 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 Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto, the Noteholders, 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 Indenture or under the
Notes, except that the Bond Insurer is an express third party beneficiary to
this Indenture.
Section 13.09. Legal Holidays. In any case in which the date of any
Payment Date or the Stated Maturity of any Note shall not be a Business Day,
then (notwithstanding any other provision of the Notes or this Indenture)
payment of principal, interest, or premium, if any, need
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<PAGE> 110
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 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. This Indenture and each Note 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. This Indenture 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 Issuer or of any predecessor
or successor of the Issuer with respect to the Issuer's obligations on the Notes
or under this Indenture 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 Issuer or the Servicer to the Indenture
Trustee to take any action under any provision of this Indenture for which a
specific request is required under this Indenture, the Issuer or the Servicer,
as applicable, shall furnish to the Indenture Trustee an Officer's Certificate
of the Issuer or the Servicer, as applicable, stating that all conditions
precedent, if any, provided for in this Indenture 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 Indenture 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 Indenture 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;
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<PAGE> 111
(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. Rating. The Notes shall be assigned on or before the
initial Delivery Date a rating of "AAA" by S&P and "Aaa" by Moody's.
Section 13.15. Bond Insurer Default. If a Bond Insurer Default occurs
and is continuing, the Bond Insurer's right to consent hereunder and to direct
the Indenture Trustee shall be void and, in such event, in all provisions of
this Agreement wherein the Bond Insurer's consent or direction is required or
permitted, the consent or direction of the Holders of not less than a majority
in principal amount of Outstanding Notes shall be required or permitted.
-112-
<PAGE> 112
IN WITNESS WHEREOF, the Issuer, the Servicer, the Back-up Servicer and
the Indenture Trustee have caused the Indenture to be duly executed by their
respective officers thereunto duly authorized as of the date and year first
above written.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, Indenture Trustee
By: /s/ AMY BOLONGIE
------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, Back-up Servicer
By: /s/ AMY BOLONGIE
------------------------------
Name:
Title:
T & W FUNDING COMPANY IV, L.L.C.
Issuer
By: /s/ MICHAEL A. PRICE
------------------------------
Name:
Title:
T & W LEASING, INC.,
Servicer
By: /s/ MICHAEL A. PRICE
------------------------------
Name:
Title:
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<PAGE> 113
EXHIBIT A
FORM OF INVESTMENT LETTER
T & W FUNDING COMPANY IV, L.L.C.
LEASE-BACKED NOTES
T & W Funding Company IV, L.L.C.
6416 16th Street East
Tacoma, Washington 98424
Norwest Bank Minnesota, National Association,
as Trustee
6th Street & Marquette Avenue
Minneapolis, Minnesota 55479-0069
The undersigned hereby certifies on behalf of the purchaser named below
(the "Purchaser") as follows:
1. I ________________________________________, am the chief
financial officer, a person fulfilling an equivalent function or other
executive officer of the Purchaser.
2. I am familiar with the provisions of Rule 144A ("Rule 144A")
under the Securities Act of 1933 (the "Act").
3. The Purchaser is a "qualified institutional buyer," as
defined in Rule 144A.
4. The Purchaser is aware that the Issuer may rely on the
exemption from the registration requirements of the Act provided by Rule
144A.
5. The Purchaser acknowledges that the Purchaser has (i)
received such information regarding the Issuer of the Notes as the
Purchaser may require pursuant to Rule 144A or (ii) the Purchaser has
determined not to request such information.
[6. The Purchaser is not an ERISA Plan as of the date hereof,
and the Purchaser is not acquiring Notes for the account of, or with the
assets of, an ERISA Plan. For these purposes, an "ERISA Plan" means on
employee benefit plan the investments of
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<PAGE> 114
which are regulated under Section 406 of the Employee Retirement Income
Security Act of 1974, as amended, and/or Section 4975 of the Internal
Revenue Code of 1986, as amended.]
[6. The Purchaser is an ERISA Plan as of the date hereof
acquiring for the account of, or with the assets of, an ERISA Plan. The
Issuer and its affiliates are not however parties in interest with
respect to the ERISA Plan making the investment in the Notes. For these
purposes, an "ERISA Plan" means an employee benefit plan the investments
of which are regulated under Section 406 of the Employee Retirement
Income Security Act of 1974, as amended, and/or Section 4975 of the
Internal Revenue Code of 1986, as amended.]
7. The Purchaser acknowledges that transfer of a Note can only
be effected in accordance with the Indenture.
The representations and warranties contained herein shall be binding
upon the heirs, executors, administrators and other successors of the
undersigned. If there is more than one signatory hereto, the obligations,
representations, warranties and agreements of the undersigned are made jointly
and severally.
Executed at _____________________, _____________________ this ____ day
of _____________________,199___.
- --------------------------------- ---------------------------------
Purchaser's Name and Title (Print) Signature of Purchaser
- ---------------------------------
Address of Purchaser
- ---------------------------------
Purchaser's Taxpayer
Identification or Social
Security Number
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<PAGE> 115
EXHIBIT B
FORM OF SUPPLEMENT FOR GRANT OF SUBSTITUTE LEASE CONTRACTS
Pursuant to Section 4.03(e) of the Indenture dated as of ______________,
1995 (the "Indenture") among T & W Funding Company IV, L.L.C. (the "Issuer"), T
& W Leasing, Inc. (the "Servicer") and Norwest Bank Minnesota, National
Association, as Indenture Trustee and Back-up Servicer, attached hereto is a
supplement to Schedule A of the Indenture, which includes information regarding
certain Lease Contracts, Lease Receivables and Equipment that is hereby Granted
by the Issuer to the Indenture Trustee in accordance with the Indenture. For
purposes of this Supplement, all defined terms used herein and not otherwise
defined herein shall have the meanings assigned to them in this Indenture.
Dated: __________________
T & W FUNDING COMPANY IV, L.L.C.
By
Name:
Title:
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<PAGE> 116
SCHEDULE A
SUPPLEMENT FOR SUBSTITUTE LEASE CONTRACTS
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<PAGE> 117
EXHIBIT C
FORM OF FUNDING REPORT
-118-
<PAGE> 1
EXHIBIT 10.14
================================================================================
SECOND SUPPLEMENTAL INDENTURE
among
T & W FUNDING COMPANY IV, L.L.C.
("Issuer")
and
T & W FINANCIAL CORPORATION (formerly known as
T&W LEASING, INC.)
("Servicer")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
("Indenture Trustee" and "Back-up Servicer")
Dated as of April 30, 1996
================================================================================
<PAGE> 2
This SECOND SUPPLEMENTAL INDENTURE dated as of April 30, 1996 (herein,
as amended and supplemented from time to time as permitted hereby, called this
"Second Supplemental Indenture"), is entered into by and among T & W FUNDING
COMPANY IV, L.L.C., a Delaware limited liability company (herein, together with
its permitted successors and assigns, called the "Issuer"), T & W FINANCIAL
CORPORATION (formerly known as T&W LEASING, INC.), a Washington corporation, as
servicer (herein, together with its permitted successors and assigns, called the
"Servicer") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association, as trustee (herein, together with its permitted successors and
assigns, called the "Indenture Trustee") and as back-up servicer (herein,
together with its permitted successors and assigns, called the "Back-up
Servicer").
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture dated as of July 1, 1995, as
amended by the Supplemental Indenture dated as of August 11, 1995 (the
"Indenture"), with the Servicer, the Indenture Trustee and the Back-up Servicer
pursuant to which the Issuer intends to issue from time to time its Lease-Backed
Notes (the "Notes"). The Issuer has duly authorized the execution and delivery
of this Second Supplemental Indenture to amend the Indenture as set forth
herein. All covenants and agreements made by the Issuer, the Servicer, the
Indenture Trustee and the Back-up Servicer herein are for the benefit and
security of the Holders of the Notes and the Bond Insurer. Capitalized terms not
defined herein shall have the meaning set forth in the Indenture.
All things necessary to make this Second Supplemental Indenture a valid
agreement of the Issuer, the Servicer, the Indenture Trustee and the Back-up
Servicer in accordance with its terms have been done.
ARTICLE I
Section 1.01. Amendments to Article I of the Indenture. (a) The
definition of Additional Principal Amount is hereby amended by replacing
"12.02(d)(xiii)" with "12.02(d)(xii)."
(b) Clause (iv) of the definition of Bond Insurer Premium is hereby
removed in its entirety and replaced with the following:
(iv) on each Payment Date occurring in January 1996 through and
including April 1996, an amount equal to 0.00375 divided by 12
2
<PAGE> 3
multiplied by the outstanding principal balance of all Tranches
of Notes, after giving effect to any principal distribution on
such date.
(c) The following clause (v) is hereby added to the definition of Bond
Insurer Premium:
(v) on each Payment Date after the Payment Date occurring in
April 1996, an amount equal to the Bond Insurer Premium Rate
divided by 12 multiplied by the outstanding principal balance of
all Tranches of Notes, after giving effect to any principal
distribution on such date.
(d) The definition of Bond Insurer Premium Rate is hereby removed in its
entirety and replaced with the following:
"Bond Insurer Premium Rate": On and prior to the Payment Date
occurring in April, 1996, thirty-seven and one-half
one-hundredths of one percent (0.375%). Thereafter, thirty five
one-hundredths of one percent (0.35%).
(e) The following definition is hereby added after the definition of
Company:
"Consolidation Report": The report prepared in connection with
the consolidation of two or more Tranches of Floating Rate Notes
pursuant to Section 3.08(f) hereof and attached as an addendum
to the Monthly Servicer's Report.
(f) The definition of Funding Period is hereby removed in its entirety
and replaced with the following:
"Funding Period": The period commencing on the date the first
Tranche of Notes are issued, authenticated and delivered through
April 14, 1997, unless extended by mutual agreement among the
Issuer, the Bond Insurer and the Holders of 51% of the aggregate
principal amount of the Notes Outstanding at the time of such
extension.
(g) The period after item (5) of the definition of Funding Period
Trigger Event is hereby replaced with "; or" and the following item (6) is
hereby added to the definition of Funding Period Trigger Event:
3
<PAGE> 4
(vi) During the Funding Period, as of any Calculation Date, the
difference between (a) the sum of the Aggregate Implicit
Principal Balance and the balance in the Cash Collateral Account
and (b) the aggregate principal balance of Notes Outstanding is
less than the Required Collateralization Amount.
(h) The definition of Funding Report is hereby amended by inserting "or
the Consolidation Report prepared in connection with the consolidation of two or
more Floating Rate Tranches of Notes into one Floating Rate Tranche pursuant to
Section 3.08(f) hereof." immediately after "issuance of a new Tranche of Notes".
(i) The definition of Insurance Agreement is hereby amended by inserting
"including any amendments thereto as therein permitted." immediately after the
word "Trustee".
(j) The definition of Lease Contracts is hereby amended by adding the
following parenthetical between the phrase "on the Delivery Date" and the clause
"or which are Substitute Lease Contracts":
(or with respect to a consolidation pursuant to Section 3.08(f)
the Lease Schedules attached to the Funding Reports for the
Tranches to be consolidated)
(k) The definition of Maximum Outstanding Note Amount is hereby removed
in its entirety and replaced with the following:
"Maximum Outstanding Note Amount": $90,000,000.
(l) The definition of Policy is hereby removed in its entirety and
replaced with the following:
"Policy": With respect to the Notes, the Note Insurance Policy
issued by the Bond Insurer insuring the Notes in accordance with
the terms thereof.
Section 1.02. Amendments to Article II of the Indenture. (a) The
description of the "OBLIGATIONS" immediately under the heading "STATEMENT OF
INSURANCE" in Section 2.02 is hereby replaced in its entirety with the
following:
Not to Exceed $90,000,000
T & W Funding Company IV, L.L.C.
Lease-Backed Notes, Series 1995-1
4
<PAGE> 5
(b) The first sentence of the last paragraph of the "STATEMENT OF
INSURANCE" in Section 2.02 is hereby replaced in its entirety with the
following: "The Policy may be canceled only upon satisfaction of the conditions
set forth in Section 3 of the Amendment to the Insurance Agreement dated as of
April 30, 1996."
(c) The description of the "OBLIGATIONS" immediately under the heading
"STATEMENT OF INSURANCE" in Section 2.03 is hereby replaced in its entirety with
the following:
Not to Exceed $90,000,000
T & W Funding Company IV, L.L.C.
Lease-Backed Notes, Series 1995-1
(d) The first sentence of the last paragraph of the "STATEMENT OF
INSURANCE" in Section 2.03 is hereby replaced in its entirety with the
following: "The Policy may be canceled only upon satisfaction of the conditions
set forth in Section 3 of the Amendment to the Insurance Agreement dated as of
April 30, 1996."
Section 1.03. Amendment to Article III of the Indenture. The following
is hereby added to Section 3.08 of the Indenture as subparagraph (f) thereof:
(f) On each Payment Date, at the option of the Holder of Floating Rate
Notes, one or more Tranches of such Holder's Floating Rate Notes may be
exchanged for one consolidated Tranche of Floating Rate Notes, the initial
principal amount of which is equal to the sum of the outstanding principal
balance of the Tranches being consolidated, upon satisfaction of the following
conditions:
(i) delivery by the Issuer to the Trustee, the Bond Insurer and the
Holders of the Notes of a new Targeted Balance Schedule with respect to such
consolidated Tranche of Floating Rate Notes;
(ii) prior to the initial exchange under this Section 3.08(f), the Bond
Insurer shall have issued a new Policy with respect to the Floating Rate Notes
in an aggregate amount not to exceed $90,000,000; and
(iii) such consolidation occurs no later than the Payment Date
immediately following the earlier of (x) the Funding Period, (y) a Funding
Period Trigger Event or (z) an Event of Default.
5
<PAGE> 6
Section 1.04. Amendments to Article IV of the Indenture. (a) The
following is hereby added to Section 4.01(c) of the Indenture as clause (xvi)
thereof:
(xvi) the maximum weighted average remaining term of all Lease
Contracts at the time of such issuance shall be 44 months.
(b) Clause (xiii) of Section 4.01(c) is hereby replaced in its entirety
with the following:
(xiii) after such issuance, the principal amount of the Notes
Outstanding shall not exceed the Maximum Outstanding Note Amount;
Section 1.05. Effect of Amendment. Except as amended hereby, the
Indenture shall remain in full force and effect in accordance with the terms set
forth therein and is hereby ratified and confirmed in all respects by the
parties thereto.
Section 1.06. Counterparts. This Second Supplemental Indenture 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.
6
<PAGE> 7
IN WITNESS WHEREOF, the Issuer, the Servicer, the Back-up Servicer and
the Indenture Trustee have caused the Indenture to be duly executed by their
respective officers thereunto duly authorized as of the date and year first
above written.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, Indenture Trustee
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, Back-up Servicer
By:
Name:
Title:
T & W FUNDING COMPANY IV, L.L.C.
Issuer
By:
Name:
Title:
T & W FINANCIAL CORPORATION,
Servicer
By:
Name:
Title:
ACKNOWLEDGED and ACCEPTED:
7
<PAGE> 8
MBIA INSURANCE CORPORATION,
Bond Insurer
By: ________________________________
Name:
Title:
8
<PAGE> 9
CONSENT TO SECOND SUPPLEMENTAL INDENTURE
The undersigned, being the only Noteholder representing 100% of the
Notes (as defined in the Second Supplemental Indenture to which this Consent is
attached), hereby consents to the terms and conditions of the Second
Supplemental Indenture to which this Consent is attached and the execution
thereof by the Issuer, the Servicer, the Indenture Trustee, the Back-up Servicer
and the Bond Insurer.
Noteholder:
TLC INVESTMENT TRUST
By: The Industrial Bank of Japan, Limited,
New York Branch, as Attorney-in-fact
By:_____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.15
================================================================================
CONTRIBUTION AGREEMENT
between
T & W LEASING, INC.
("Company")
T & W FINANCE CORP. III
("Contributor")
T & W FINANCE CORP. IV
("Contributor")
T & W FINANCE COMPANY V, L.L.C.
("Contributor")
and
T & W FUNDING COMPANY IV, L.L.C.
("Issuer")
Dated as of July 1, 1995
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
- ------- ------- ----
<S> <C> <C>
ARTICLE 1 DEFINITIONS .......................................................... 2
Section 1.01. Defined Terms .................................................... 2
ARTICLE 2 DISPOSITION OF LEASE ASSETS .......................................... 3
Section 2.01. Lease Disposition ................................................ 3
Section 2.02. Delivery of Lease Contracts; Filing of Financing
Statements ....................................................... 3
Section 2.03. Servicing of Lease Contracts and Equipment ....................... 3
Section 2.04. Review of Lease Contracts ........................................ 3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES ....................................... 4
Section 3.01. Representations and Warranties of the Company and the
Contributors ..................................................... 4
Section 3.02. Representations and Warranties of the Issuer ..................... 12
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 ........................................................ 15
ARTICLE 4 COVENANTS OF THE COMPANY AND THE CONTRIBUTORS ........................ 16
Section 4.01. Company and Contributor Covenants ................................ 16
Section 4.02. Issuer Covenants ................................................. 20
Section 4.03. Assignment of Lease Assets ....................................... 21
ARTICLE 5 CONDITIONS PRECEDENT ................................................. 21
Section 5.01. Conditions to the Issuer's Obligations ........................... 21
Section 5.02. Conditions to the Company's and the Contributors'
Obligations ...................................................... 22
ARTICLE 6 TERM AND TERMINATION ................................................. 22
Section 6.01. Term ............................................................. 22
Section 6.02. Default by the Company or the Contributors ....................... 22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 7 MISCELLANEOUS ........................................................ 23
Section 7.01. Amendments ....................................................... 23
Section 7.02. Governing Law .................................................... 23
Section 7.03. Notices .......................................................... 23
Section 7.04. Separability Clause .............................................. 23
Section 7.05. Assignment ....................................................... 23
Section 7.06. Further Assurances ............................................... 23
Section 7.07. No Waivers; Cumulative Remedies .................................. 24
Section 7.08. Binding Effect ................................................... 24
Section 7.09. Set-Off .......................................................... 24
Section 7.10. Counterparts ..................................................... 24
</TABLE>
EXHIBIT A
Form of Supplement for Substitute Lease Contracts
EXHIBIT B
Form of Lease Contract
EXHIBIT C
Form of Assignment and Assumption Agreement
3
<PAGE> 4
This CONTRIBUTION AGREEMENT (herein, as supplemented and amended from
time to time as permitted hereby, this "Agreement"), dated as of July 1, 1995,
is entered into by T & W LEASING, INC., a Washington corporation (herein,
together with its permitted successors and assigns, the "Company"), T & W
FINANCE CORP. III, a Delaware corporation, T & W FINANCE CORP. IV, a Delaware
corporation, and T & W FINANCE COMPANY V, L.L.C, a Delaware limited liability
company (herein, each together with its permitted successors and assigns, a
"Contributor" and, collectively, the "Contributors") and T & W FUNDING COMPANY
IV, L.L.C., a Delaware limited liability company (herein, together with its
permitted successors and assigns, the "Issuer").
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture dated as of July 1, 1995 (the
"Indenture"), with Norwest Bank Minnesota, National Association, as trustee (the
"Trustee") and as back-up servicer (the "Back-up Servicer") and T & W Leasing,
Inc., as servicer (the "Servicer"), pursuant to which the Issuer intends to
issue from time to time its Lease-Backed Notes (the "Notes").
In furtherance thereof, the Issuer, the Contributors and Company have
entered into this Agreement to provide for, among other things, an agreement as
to the terms of the contribution by the Contributors of certain of their right,
title and interest in and to certain Lease Assets which the Issuer is and will
be pledging with the Trustee; in addition, the Company is herein making certain
covenants, representations and warranties with respect to Lease Contracts that
it originated on behalf of the Contributors. The Issuer will be granting to the
Trustee a security interest in such Lease Assets and Lease Contracts, as
security for the Notes. As a precondition to the effectiveness of this
Agreement, the Issuer, the Trustee, the Back-up Servicer and the Servicer will
enter into the Servicing Agreement to provide for the servicing of the Lease
Assets. In connection with the issuance of the initial Tranche of Notes, each of
the Contributors will contribute certain Lease Assets to the Issuer in exchange
for a membership interest in the Issuer and the assumption by the Issuer of
certain debt of each Contributor pursuant to a separate Assignment and
Assumption Agreement entered into between the Issuer and each Contributor. In
connection with the issuance of each subsequent Tranche of Notes and pursuant to
this Agreement, T & W Finance Corp. V, L.L.C. will contribute additional Lease
Assets to the Issuer in return for cash and an increase, as necessary, of such
Contributor's membership interest in the Issuer. The list of leases transferred
in accordance with this Agreement shall be listed on Schedule II of each such
Assignment and Assumption Agreement.
In order to further secure the Notes, the Issuer is granting to the
Trustee a security interest in, among other things, the rights of the Issuer
derived under this Agreement and the Servicing
4
<PAGE> 5
Agreement, and each of the Contributors and the Company agrees that all
covenants and agreements made by it in this Agreement with respect to the Lease
Assets shall also be for the benefit and security of the Trustee, the Bond
Insurer and all holders from time to time of the Notes.
ARTICLE 1
DEFINITIONS
Section 1.01. Defined Terms. For purposes of this 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 Indenture, or if not defined there, in the Servicing
Agreement.
"Company Address" shall mean 6416 16th Street East, Tacoma, Washington
98424.
"Contributor Address" for each Contributor, shall mean 6416 16th Street
East, Tacoma, Washington 98424.
"Eligible Lease Contract" shall mean a Lease Contract that satisfies the
selection criteria set forth in Section 3.01(a) hereof, provided that with
respect to any Substitute Lease Contract, any reference in such Section to
Cut-Off Date shall be deemed to refer to the date as of which such Eligible
Lease Contract becomes a Substitute Lease Contract.
"Issuer Address" shall mean 6416 16th Street East, Tacoma, Washington
98424.
"Lease Assets" shall mean with respect to Lease Contracts originated by
the Company on behalf of the Contributors the interest in (a) the Lease
Contracts and the Lease Receivables, including the proceeds of the Lease
Contracts and all payments received on or with respect to the Lease Contracts
after the related Cut-Off Date, other than payments of principal and interest
due on the Lease Contracts on or before the related Cut-Off Date, (b) the Lease
Contract Files, (c) the Equipment (or a security interest in Equipment which is
the subject of a Loan Contract), (d) the Insurance Policies and (e) all income
and proceeds of the foregoing or relating thereto.
"Lease Contract File" shall mean, with respect to each Lease Contract,
the following documents:
(i) a copy of the Lease Contract;
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(ii) any evidence of insurance and any other documents
evidencing or related to any Insurance Policy;
(iii) copies of such documents, if any, that the Company keeps
on file indicating that the Equipment is owned by the lessor in
accordance with its customary procedures relating to an individual Lease
Contract, Customer or Equipment; and
(iv) 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.
"Substitute Lease Contract" shall have the meaning set forth in Section
3.04(b) hereof.
"Substitution Criterion" shall have the meaning set forth in Section
3.04(b).
ARTICLE 2
DISPOSITION OF LEASE ASSETS
Section 2.01. Lease Disposition. In reliance upon the representations,
warranties and covenants set forth in this Agreement and in accordance with the
Indenture, the Issuer will grant a security interest the Lease Assets to the
Indenture Trustee.
Section 2.02. Delivery of Lease Contracts; Filing of Financing
Statements. (a) In connection with the Issuer's disposition of the Lease Assets,
the Company, on behalf of the Issuer and the Contributors, shall deliver the
original Lease Contracts to the Indenture Trustee so that the Indenture Trustee
may retain possession thereof as provided in the Transaction Documents. In
addition, the Company agrees to record and file, 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 timing and
filing requirements of the Transaction Documents.
(b) In connection with such acquisition, 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 Issuer in accordance with
this Agreement and transferred by the Issuer to the Indenture Trustee in
accordance with the Transaction Documents.
Section 2.03. Servicing of Lease Contracts and Equipment. The Servicer
shall service the Lease Contracts and the related Lease Receivables and
Equipment for the benefit of the Issuer (and its successors and assigns) in
accordance with the terms and conditions of the
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Transaction Documents. Notwithstanding the foregoing, the Company acknowledges
and agrees that its obligations under this Agreement are independent of any
obligations it may have as Servicer and that its obligations under this
Agreement will continue in full force and effect, whether or not it is acting as
Servicer, until termination of this Agreement in accordance with Section 6.01
hereof.
Section 2.04. Review of Lease Contracts. If the Company, any of the
Contributors, the Issuer or the Indenture Trustee (who shall thereupon notify
the Company) discovers 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, the Company or the
applicable Contributor shall correct or cure such omission, defect or other
irregularity within 30 days from the date the Company or the applicable
Contributor discovered, or is notified by the Indenture Trustee, the Bond
Insurer or the Issuer of, such omission or defect within such period. Otherwise,
the Company or the applicable Contributor shall purchase or replace such Lease
Contract from the Issuer in accordance with Section 3.03 hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company and the
Contributors. Each of the Contributors and the Company hereby makes the
following representations and warranties to the Issuer and for the benefit of
the Bond Insurer, the Indenture Trustee and Holders of the Notes, on which the
Issuer relies in acquiring the Lease Assets. Such representations and warranties
speak as of the related Cut-Off Date unless otherwise indicated, but shall
survive any subsequent transfer, assignment, contribution or conveyance of the
Lease Contracts and related Lease Receivables and Equipment. Each of the
Contributors makes the following representations and warranties only with
respect to Lease Assets that it is transferring to the Issuer in accordance with
this Agreement. The Company makes these representations and warranties with
respect to all Lease Contracts, whether transferred to the Issuer in accordance
with this Agreement or originated by the Company on behalf of the Issuer or an
affiliate thereof.
(a) As to each Lease Contract:
(i) The information set forth in the related Lease Schedule is
true and correct as of the related Cut-off Date.
(ii) Such Lease Contract is pursuant to its terms an absolute
and unconditional obligation of the Customer, non-cancellable and
non-prepayable prior to the expiration of the initial term of such Lease
Contract; it does not provide for the substitution, exchange
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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 any Person.
Such 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, except as set forth in Section 3.01(b)(xii).
(iii) Either the Company or one of the Contributors has
heretofore provided to the Indenture Trustee the sole original
counterpart of such Lease Contract previously in its possession, as
amended, and the terms of such Lease Contract has not been amended,
waived or modified subsequent to the above being provided to the
Indenture Trustee, and, if another original counterpart of such Lease
Contract should subsequently come into the possession of such party
hereto, it will also be so provided to the Indenture Trustee.
(iv) There is only one original executed counterpart of such
Lease Contract that constitutes "chattel paper" for purposes of Section
9-105(l)(b) and 9-308 of the UCC, and the Electronic Ledgers have been
marked as provided in Section 2.02(b) hereof.
(v) Such 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
Transaction Documents.
(vi) Such Lease Contract is, and on the related Delivery Date
will be, in full force and effect in accordance with its respective
terms, and neither the Company, any of the Contributors nor any Customer
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 related Cut-Off Date, the Customer has
not been delinquent in making payments due under such Customer's Lease
Contract for a period in excess of 30 days (without regard to advances,
if any, made by the Servicer), and there are no proceedings pending, or
to the best of the knowledge of the parties hereto, threatened asserting
insolvency of such Customer; there has been no other default, breach or
violation and no event permitting acceleration under such Lease
Contract; there are no proceedings pending, or to the best of the
knowledge of the parties hereto, threatened, wherein such Customer or
any governmental agency has alleged that 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) Such Lease Contract is the valid, binding and legally
enforceable obligation of the parties thereto enforceable in accordance
with its terms, subject, as to
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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)
and recordings as may be necessary to perfect the interest of the
Indenture Trustee in such Lease Contract and the related Lease
Receivable have been accomplished and are in full force and effect. All
filings and recordings required to perfect the interest of the Issuer
and the Indenture Trustee in the Equipment underlying such Lease
Contract have been or will be, within 30 days of the related Delivery
Date, accomplished in accordance with the Transaction Documents and are
or will be in full force and effect.
(ix) Such Lease Contract is identical to one of the form lease
contracts attached as Exhibit A hereto, except for such immaterial
modifications or deviations from such form lease contracts which appear
in certain Lease Contracts or which may appear in the future form Lease
Contracts of the Company or any of the Contributors; any such
modifications or deviations from the form lease contracts will not have
a material adverse effect on the Holders of the Notes or the Bond
Insurer and will not reduce the Scheduled Payments or other payments due
under such Lease Contract.
(x) Such Lease Contract was originated by the Company on behalf
of one of the Contributors in the ordinary course of business and meets
the Company's rating system. The origination and collection practices
used by the Company with respect to such Lease Contract have been in all
respects legal, proper, prudent and customary in the equipment financing
and servicing business; and no Customer has been involved as a debtor in
any bankruptcy or insolvency proceeding during the term of the Lease
Contract.
(xi) Any payment required to be made by a Customer subject to a
PUT ("Purchase Upon Termination") clause does not exceed five times the
largest regular rental payment due under such Lease Contract. 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 such Lease Contract.
(xii) The related Lease Receivable is under a Lease Contract
that has an original stated term of at least 6 months and not more than
84 months. Such Lease Contract is within its original term and has not
had any extensions or modifications. Such Lease Contract has a remaining
term of not more than 84 months.
(xiii) The Equipment related to such Lease Contract was properly
delivered to
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the Customer in good repair, without defects and in satisfactory order
and is in proper working order as of the related Cut-off Date. The
Customer has accepted such Equipment leased to it and, after reasonable
opportunity to inspect and test such Equipment, has not notified the
Company or any of the Contributors of any defects therein.
(xiv) With the exception of the Loan Contracts, such Lease
Contract constitutes a "true lease" for federal income tax purposes.
Such Lease Contract or Loan Contract satisfies such other ratios and tax
related criteria as maybe set forth herein.
(xv) The related Customer will have made at least one lease
payment with respect to such Lease Contract, including any security
deposit or advance payment made by the lessee upon the execution of such
Lease Contract or the delivery of the Equipment. Such 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 the related 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.
(xvi) The related Customer is not a lessee that is a merchant
with respect to the Equipment leased under such Lease Contract.
(xvii) All requirements of applicable federal, State and local
laws, and regulations thereunder, including, without limitation, usury
laws, if any, in respect of such Lease Contract have been complied with
in all material respects, and such 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.
(xviii) With the sole exception of the related Customer's right
to quiet enjoyment, such Lease Contract is not and will not be subject
to any right of rescission, set-off, counterclaim or defense, including
the defense of usury, whether arising out of transactions concerning
such Lease Contract or otherwise, and the operation of any of the terms
of such Lease Contract or the exercise by the Issuer or such Customer of
any right under such Lease Contract will not render such Lease Contract
unenforceable in whole or in part, and no such right of rescission,
set-off, counterclaim or defense, including a defense arising out of a
breach of such Customer's right of quiet enjoyment of the related
Equipment, has been asserted with respect thereto, except that certain
rights or defenses may exist under applicable law which, individually or
in the aggregate, do not make the
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remedies available to the Company, the Contributor or the Issuer with
respect to such Lease Contract inadequate for the practical realization
of the benefits provided thereby.
(xix) The Company or one of the Contributors has duly fulfilled
all obligations on the lessor's part to be fulfilled under or in
connection with such Lease Contract, including, without limitation,
giving any notices or consents necessary to effect the acquisition of
the Lease Assets by the Issuer and has done nothing to impair the rights
of the Trust and the Noteholders in the Lease Contract or payments with
respect thereto.
(xx) The Lease Contract and the Equipment have not been sold,
transferred, assigned or pledged by the Company or any of the
Contributors to any person other than the Issuer (except for security
interests in the Lease Assets which shall be terminated on or prior to
the Delivery Date), and the Issuer has all of the right, title and
interest in and to the Lease Contract, the Lease Receivables and the
related Equipment, free and clear of all liens and encumbrances, except
for the interests of the Customer pursuant to the Lease Contract.
(xxi) 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 provide self-insurance or
purchase insurance from the Issuer (which may be self-insured) 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; such insurance coverage is in full force
and effect.
(xxii) The related Equipment is not subject to any titling
requirements unless such Equipment is a Leased Vehicle.
(b) As to the Pool of Leases as of each Cut-Off Date:
(i) Customers located in any single State are obligated with
respect to Lease Contracts accounting for no more than 15% of the
Aggregate Implicit Principal Balance except for one State; Customers
located in such State are obligated with respect to Lease Contracts
accounting for no more than 50% of the Aggregate Implicit Principal
Balance. Up to 5% of the Aggregate Implicit Principal Balance of Lease
Contracts may be with Customers located in Canada, so long as such
Customers are obligated to pay any withholding taxes over and above net
rental payments.
(ii) Lease Contracts with Customers located in a particular zip
code do not account for more than 3% of the Aggregate Implicit Principal
Balance, except for zip
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code 98032, which accounts for no more than 4% of the Aggregate Implicit
Principal Balance.
(iii) No single Customer accounts for more than 2.0% of the
Aggregate Implicit Principal Balance.
(iv) Lease Contracts with rental payments that are not fixed for
the remaining term do not exceed 10% of the Aggregate Implicit Principal
Balance.
(v) The Computer Tape, from which the selection of the Lease
Contracts was made, was made available to the Issuer's accountants who
are providing a comfort letter to the Bond Insurer, the initial holders
of the Certificates and the Coordinator with respect to certain
information 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 related Cut-Off Date.
(vi) The Company used no selection procedures that identified
the Lease Contracts as being less desirable or valuable than other
comparable equipment leases owned by the Company. (vii) No more than 1%
of the Aggregate Implicit Principal Balance are Lease Contracts made to
a lessee who is an individual and who takes under the lease primarily
for a personal, family, or household purpose.
(viii) Lease Contracts containing a PUT clause account for no
more than 10% of the Aggregate Implicit Principal Balance.
(ix) The aggregate Implicit Principal Balance of the Loan
Contracts do not exceed 20% of the aggregate Implicit Principal Balance
of the Lease Contracts.
(x) Lease Contracts with a remaining term exceeding 60 months do
not account for more than 5% of the Aggregate Implicit Principal Balance
(except with respect to the initial Delivery Date, for which the
percentage may 7%).
(xi) At least 85% of the Aggregate Implicit Principal Balance is
attributable to Lease Contracts that provide that payment of the
Scheduled Payments due thereon are to be made monthly.
(xii) All Lease Contracts are denominated in U.S. dollars.
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(c) As to each of the Company and the Contributors:
(i) Each of the Company and the Contributors has been duly
organized and is validly existing and in good standing as a corporation
under the laws of its jurisdiction of incorporation with corporate power
and authority to own its properties and to transact the business in
which it is now engaged, and each 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 such entity
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 each of the Company
and the Contributors under this 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 such entity, or any material indenture, agreement, mortgage,
deed of trust or other instrument to which such entity 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 such entity pursuant to
the terms of such indenture, mortgage, deed of trust, or other agreement
or instrument to which such entity is a party or by which such entity is
bound or to which any of such entity's property or assets is subject,
nor will such action result in any violation of the provisions of such
entity's Certificate of Incorporation or By-laws 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 such entity
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 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 Agreement, the Insurance Agreement (with respect to
the Company only) and any other Transaction Document to which each of
the Company and the Contributors is a party have been duly authorized,
executed and delivered by such entity by all necessary corporate action
and such agreements are the valid and legally binding obligations of
such entity, enforceable against such entity 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
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creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a court of law or equity.
(iv) The Company Address is the chief executive office, chief
place of business and the office where the Company keeps its records
concerning the Lease Contracts, Lease Receivables and the Equipment.
(v) The Contributor Address for each of the Contributors is the
chief executive office, chief place of business and the office where
each of the Contributors keeps its records concerning the Lease
Contracts, the Lease Receivables and the Equipment.
(vi) Each of the Company and the Contributors does not believe,
nor does it have any reasonable cause to believe, that it cannot perform
each and every covenant contained in this Agreement.
(vii) The transactions contemplated by the Transaction Documents
are being consummated by each of the Company and the Contributors 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.
(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 any of the
Company or the Contributors:
(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 or
any of the Contributors will be an unreasonably small capital or
the remaining assets of any of the Company or the Contributors
will be unreasonably small in relation to its respective
business or the transaction; and
(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 or each Contributor's
assets and cash flow enable it to meet its present obligations
in the ordinary course of business as they become due.
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(ix) Both immediately before and after the transactions
contemplated by the Transaction Documents (a) the present fair salable
value of each of the Company's and each Contributor's assets,
respectively, 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 each of the Company's
and each Contributor's assets, respectively, was or will be greater than
the sum of its debts, valuing its assets at a fair salable value.
(x) There are no proceedings or investigations pending, or to
the knowledge of either the Company or any of the Contributors,
threatened, against or affecting any of the Company or the Contributors
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 either the Company or the
Contributors, or the ability of either the Company or any of the
Contributors to perform its obligations under this Agreement. Neither
the Company nor any of the Contributors is in default with respect to
any order of any court, governmental authority or agency or arbitration
board or tribunal.
(xi) All tax returns or extensions required to be filed by each
of the Company and the Contributors in any jurisdiction have in fact
been filed, and all taxes, assessments, fees and other governmental
charges upon each entity, or upon any of the respective properties,
income or franchises shown to be due and payable on such returns have
been, or will be, paid. To the best of the knowledge of the Company and
each of the Contributors, all such tax returns are true and correct and
each entity 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 each of the Company and the
Contributors are in accordance with generally accepted accounting
principles.
(xii) Neither the Company nor any of the Contributors (i) is in
violation of any laws, ordinances, governmental rules or regulations to
which it is subject, (ii) has 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 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 or any of the Contributors.
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(xiii) This Agreement does not contain any untrue statement of
material fact or omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
(xiv) The Company, each of the Contributors and the Issuer are
members of an affiliated group within the meaning of Section 1504 of the
Internal Revenue Code which has filed and will continue to file a
consolidated federal income tax return at all times until termination of
the Transaction Documents.
(xv) It is the intention of the Company and each of the
Contributors that the Lease Assets are owned by the Issuer and that the
beneficial interest in and title to the Lease Assets are not part of the
Company's or any of the Contributors' estate in the event of the filing
of a bankruptcy petition by or against the Company or any of the
Contributors under any bankruptcy law.
(xvi) Immediately prior to the pledge and grant to the Indenture
Trustee of a security interest in the Lease Contracts by the Issuer
pursuant to the Indenture, the Issuer was the sole owner of the Lease
Contracts and the related Equipment (with the exception of Equipment
which is the subject of a Loan Contract, as to which the Issuer has a
valid security interest in the related Equipment, and certain Equipment
which is being retained by affiliates of the Issuer other than the
Company), the Issuer had good and marketable title thereto, free and
clear of all liens, claims and encumbrances (except for the security
interests in the Lease Assets which shall be terminated on or prior to
the related Delivery Date) and as of such time the Issuer owned no other
assets other than the Lease Assets and the accounts established under
the Indenture.
(xvii) The Contributors and K & P Finance Corp. are the
registered owners of all of the membership interests of the Issuer, all
of which are fully paid and nonassessable and owned of record, free and
clear of all mortgages, assignments, pledges, security interest,
warrants, options and rights to purchase.
(xviii) Each of the Company, the Contributors, the Issuer and
their shareholders and members shall treat the Lease Contracts as owned
by the Issuer for Federal, State and local income tax purposes, shall
include in the computation of the Issuer's gross income for such
purposes the rental and other income from the Lease Contracts, shall
treat the Notes as debt of the Issuer for such purposes, and shall cause
the Issuer to deduct the interest paid or accrued with respect to the
Notes in accordance with its applicable method of accounting for such
purposes.
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(xix) Each of the Company and the Contributors are in compliance
with the Employee Retirement Income Security Act of 1974, as amended.
(xx) None of the Contributors will incur any indebtedness or
transact any business other than that contemplated by the Transaction
Documents.
Section 3.02. Representations and Warranties of the Issuer. The Issuer
hereby represents and warrants to, and agrees with the Company and the
Contributors for the benefit of the Bond Insurer, the Indenture Trustee and
Holders of the Notes, on which each of the Company and the Contributors relies
in entering into this Agreement with the Issuer. Such representations and
warranties speak as of the related Cut-Off Date unless otherwise indicated, but
shall survive any subsequent transfer, assignment, contribution or conveyance of
the Lease Contracts and related Lease Receivables and Equipment.
(a) The Issuer has been duly organized and is validly existing in good
standing as a special purpose limited liability company under the laws of the
Issuer State of Formation, with 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
Issuer 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 Issuer to perform its obligations under the Transaction Documents.
(b) The transfer to and receipt by the Issuer of the Lease Contracts and
the related Lease Receivables and the Equipment pursuant to this 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 Formation or Limited Liability Company
Agreement of the Issuer or any material indenture, agreement, mortgage, deed of
trust or other instrument to which the Issuer 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 Indenture) upon any of the
property or assets of the Issuer pursuant to the terms of, such indenture,
mortgage, deed of trust, or other agreement or instrument to which the Issuer is
a party or by which it is bound or to which any of the property or assets of the
Issuer is subject, nor will such action result in any violation of the
provisions of the Certificate of Formation or Limited Liability Company
Agreement of the Issuer 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 Issuer 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
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body is required for the acquisition of the Lease Contracts and the related
Lease Receivables and the Equipment hereunder.
(c) The Transaction Documents have been duly authorized, executed and
delivered by the Issuer by all necessary action and constitute valid and legally
binding obligations of the Issuer enforceable against the Issuer 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 Issuer is a
party pending or, to the knowledge of the Issuer, threatened, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality (a) asserting the invalidity of this Agreement, (b) seeking to
prevent the issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, or (c) seeking any determination or ruling that
would materially and adversely affect the performance by the Issuer of its
obligations under, or the validity or enforceability of, this 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 Agreement, have been or will
be taken or obtained on or prior to the related Delivery Date.
(f) The Issuer Address is the principal place of business and chief
executive office of the Issuer.
(g) Since the formation of the Issuer (a) the Issuer has engaged solely
in the acquisition, ownership, leasing, selling and pledging of equipment
pursuant to lease contracts substantially in the form attached hereto as Exhibit
A originated by the Company on behalf of the Issuer and the exercise of any
powers permitted to limited liability companies under the limited liability
company law of the State of Delaware which are incidental to the foregoing or
necessary to accomplish the foregoing; (b) the Issuer has incurred no debt other
than trade payables and expense accruals in connection with its operations in
the normal course of business; (c) the Issuer has maintained its books and
records separate from the books and records of any other entity, has maintained
separate bank accounts and no funds of the Issuer have been commingled with
funds of any other entity; (d) the Issuer has kept in full effect its existence,
rights and franchises as a limited liability company under the laws of the State
of Delaware, and has obtained and preserved its qualification to do business as
a foreign limited liability company in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Lease Contracts; (e) the Issuer does not own any
subsidiary and has not
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loaned or advanced any moneys to, or made an investment in, any Person; (f) the
Issuer has not made any capital expenditures; (g) the Issuer has not guaranteed
(directly or indirectly), endorsed or is otherwise contingently liable (directly
or indirectly) for the obligations of, or own or purchased any stock,
obligations or securities of or any other interest in, or made any capital
contribution to, any Person; and (h) the Issuer has not engaged in any other
action that bears on whether the separate legal identity of the Issuer will be
respected, including without limitation (1) has not held itself out as being
liable for the debts of any older party, (2) has not acted other than in its
corporate name and through its duly authorized officers or agents, and (3) has
not created, incurred, assumed, or in any manner became liable in respect of any
indebtedness and trade payables and expense accruals incurred in the ordinary
course of business and which are incidental to its business purpose.
Section 3.03. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties. Upon discovery by the Company, any of the
Contributors or the Issuer of the breach of any representations or warranties
set forth in Sections 3.01 and 3.02 hereof which materially and adversely
affects the value of a Lease Contract, the related Equipment, or the interests
of the Holders of the Notes, 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) or
3.01(a)(xx), the party discovering such breach shall give prompt written notice
to the other parties, the Bond Insurer and to the Indenture Trustee. Each of the
Company and the Contributors shall, within 30 days from the date such entity was
notified of, or otherwise discovers, such breach, cure such breach, or, (1) if
the breach relates to a particular Lease Contract and is not cured (as the
liquidated damages remedy therefor), either (a) purchase such Lease Contract and
the related Equipment from the Issuer at the Purchase Price or (b) provide a
Substitute Lease Contract 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 by the Company or the Contributor, either (a) purchase such
non-conforming Lease Contracts and the related Equipment from the Issuer 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 or the
applicable Contributor to the Indenture Trustee. The Purchase Price for a
purchased Lease Contract and the related Equipment shall be paid, and any
Substitute Lease Contract shall be delivered, by the Company or the applicable
Contributor to the Issuer in accordance with Section 3.04(c) hereof. It is
understood and agreed that the obligation of the Company and the Contributor 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 Issuer, the Holders of Notes or the Indenture Trustee on behalf of such
Holders (except for any indemnities provided under Section 4.0(j) hereof or
under the related Indenture) for any losses, claims, damages and liabilities
arising from the Issuer's ownership of such Lease Contract or the inclusion of
such Lease Contract in the Trust Estate.
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Section 3.04. Requirements for Purchase or Substitution of Lease
Contracts. (a) If the Company or any of the Contributors is required to purchase
any Lease Contract under Section 3.03 or if the Issuer is required or elects to
purchase any Lease Contract under Section 3.10 of the Servicing Agreement, such
Lease Contract shall be purchased by the Company or the applicable Contributor
at the Purchase Price. All purchases shall be accomplished at the times
specified in subsection (c) below.
(b) If the Company or any of the Contributors is required to substitute
any Lease Contract under Section 3.03, or if the Issuer is required or elects to
substitute any Lease Contract under Section 3.10 of the Servicing Agreement (a
"Substitute Lease Contract"), each such Substitute Lease Contract shall (i) be
an Eligible Lease; (ii) be with respect to types of Equipment and types of
Customers represented in the pool of Lease Contracts previously pledged to the
Indenture Trustee pursuant to the Indenture; (iii) be with a Customer whose
credit is equal to or better than that of the Customer under the withdrawn Lease
Contract; (iv) be written on one of the standard lease forms attached as Exhibit
A to this Agreement; (v) be accompanied by (A) a supplement to this Agreement
substantially in the form of Annex A hereto subjecting such Lease Contract to
the provisions hereof and providing with respect to such Substitute Lease
Contract the information required in the Lease Schedule and (B) evidence of the
UCC filings required as set forth in the Indenture; and (vi) not have been
selected using procedures that identified the Lease Contracts as being less
desirable or valuable than other comparable equipment leases owned by the
Company or any of the Contributors. In addition, such Substitute Lease Contracts
shall meet the following substitution criterion (collectively, the "Substitution
Criterion"):
(1) Such Substitute Lease Contracts have an aggregate Implicit
Principal Balance at least equal to the aggregate Implicit Principal
Balance of the Lease Contracts being withdrawn; and
(2) Such Substitute Lease Contracts have a weighted average
remaining term (determined based upon the Implicit Principal Balance of
such Substituted Lease Contracts) that is not more than 33% longer or
shorter than the weighted average remaining term of the Lease Contracts
being withdrawn (determined based upon the Implicit Principal Balance of
such withdrawn Lease Contracts).
A Substitute Lease Contract may have scheduled payments that are due
after the last day of the month preceding the stated maturity of the Notes, but
such payments shall not be counted in any Implicit Principal Balance
computation. Upon a substitution as described in this Section 3.04(b), either
the Company or the Contributor shall also pay any past due lease payments not
received through the Calculation Date preceding the date on which the
substitution occurs. Upon the substitution of any Substitute Lease Contract
pursuant to the provisions of this
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Section 3.04(b), each of the Company and the Contributors hereby agrees that
such Substitute Lease Contract will be subject to all the terms and provisions
of this Agreement, the Servicing Agreement and the Indenture just as if such
Substitute Lease Contract had been one of the original Lease Contracts acquired
on the related Acquisition Date. Upon the substitution of a Substitute Lease
Contract pursuant to this Section 3.04(b), the Issuer, the Contributors and the
Company shall also comply with the provisions and limitations set forth in the
Indenture. 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 or
any of the Contributors in accordance with Section 3.03 hereof or this Section
3.04 or by the Issuer under Section 3.10 of the Servicing Agreement shall be
made either by remittance of the Purchase Price to the Servicer for deposit into
the Collection Account in accordance with Section 3.03(a) of the Servicing
Agreement or by substitution of a Substitute Lease Contract, as applicable,
following the expiration of the cure period set forth in Section 3.03 hereof.
(d) Any voluntary purchase or substitution of a Lease Contract by the
Issuer pursuant to the terms of a related Servicing Agreement or Indenture in
the event of a default, delinquency 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 COMPANY AND THE CONTRIBUTORS
Section 4.01. Company and Contributor Covenants. Each of the Company and
the Contributors hereby covenants and agrees with the Issuer as follows:
(a) Except as hereinafter provided, such entity 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
Agreement or any of the Lease Contracts and to perform its duties
hereunder. Any person into which such entity may be merged or
consolidated, or to whom such entity has sold substantially all of its
assets, or any corporation resulting from any merger, conversion or
consolidation to which such entity shall be a party, or any Person
succeeding to the business of such entity shall be the successor of such
entity 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 (w) immediately
after giving effect to such transaction, no representation or warranty
made pursuant to Section 3.01(c) shall have been breached, (x) such
successor executes
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an agreement or assumption, in form reasonably satisfactory to the
Indenture Trustee, to perform every obligation under this Agreement, (y)
such entity shall have delivered to the Issuer a certificate of an
officer of such entity 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 Agreement relating to such transaction have
been complied with, and (z) such entity shall have delivered to the
Issuer an Opinion of Counsel either (1) stating that, in the opinion of
such Counsel, all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary fully
to preserve and protect the interest of the Issuer 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 Contributors, nor any of
the directors, officers, employees or agents of any such entity shall be
under any liability to the Issuer, the Indenture Trustee or the Holders
of Notes for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in
judgment not involving recklessness or gross negligence; provided,
however, that this provision shall not protect either such entity
against any breach of warranties or representations made herein, or
failure to perform its obligations in strict compliance with this
Agreement, or any liability which would otherwise be imposed by reason
of any breach of the terms and conditions of this Agreement. The
Company, the Contributors and any director, officer, employee or agent
of any such entity, 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. Neither the Company nor any of the
Contributors shall be under any obligation to appear in, prosecute, or
defend any legal action that is not incidental to its obligations under
this Agreement and that in its opinion may involve it in any expense or
liability.
(c) Each of the Company and the Contributors will from time to
time, at its own expense, 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) and are reasonably satisfactory in form and substance to
the Issuer; provided, however, that financing statements with respect to
the Equipment shall be filed only with respect to the Equipment
initially located in the Enumerated States and neither the Company nor
any of the Contributors will be required to file any financing
statements with any Customer as Debtor.
(d) Neither the Company nor any of the Contributors will change
its name, identity or corporate structure in any manner that would,
could, or might make any
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financing statement or continuation statement misleading within the
meaning of Section 9-402 (7) of the UCC, unless it shall have given the
Issuer and the Indenture Trustee at least 10 days' prior written notice
thereof.
(e) Each of the Company and the Contributors will give the
Issuer and the Indenture Trustee at least 10 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.
(f) Each of the Company and the Contributors 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 Issuer or the
Indenture Trustee in the Lease Contracts or the Equipment. In the event
that the rights of the Company or any of the Contributors under any
Lease Contract, any guaranty of the related Customer's obligations under
any Lease Contract, or any Insurance Policy are not assignable to the
Issuer or to the Trust, each of the Company and the Contributors will
enforce such rights on behalf of the Trust.
(g) Each of the Company and the Contributors will comply, in all
material respects, with all material acts, rules, regulations, orders,
decrees and directions of any governmental authority applicable to the
Lease Assets or any part thereof; provided, however, that each of the
Company and the Contributors may contest any act, regulation, order,
decree or direction in any reasonable manner which shall not materially
and adversely affect the rights of the Issuer or the Indenture Trustee
in the Lease Assets.
(h) Each of the Company and the Contributors will advise the
Issuer, the Bond Insurer and the Indenture Trustee promptly, in
reasonable detail, of the occurrence of any breach by the Company or any
of the Contributors following discovery by the Company or any of the
Contributors of such breach of any of its representations, warranties
and covenants contained herein.
(i) Each of the Company and the Contributors will execute or
endorse, acknowledge, and deliver to the Issuer and the Indenture
Trustee from time to time such schedules, confirmatory assignments,
conveyances, and other reassurances or instruments and take such further
similar actions relating to the Lease Contracts, the related Lease
Receivables and Equipment, and the rights covered by the Transaction
Documents, as the Issuer or the Indenture Trustee may reasonably request
to preserve and maintain title to
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the Lease Assets and the rights of the Indenture Trustee and the Holders
of Notes therein against the claims of all persons and parties.
(j) Each of the Company and the Contributors agrees to
indemnify, defend and hold the Issuer 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 or any of the Contributors 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 or any of the
Contributors 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 neither the Company nor any of the
Contributors shall 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 or
the applicable Contributor's fraud, gross negligence, bad faith or
willful misconduct. Each of the Company and the Contributors shall also
indemnify the Indenture Trustee, the Trust, the Servicer and the Bond
Insurer for any cost or expenses incurred by them in the enforcement of
this Agreement. The obligations of the Company and the Contributors
under this Section 4.01(j) shall be considered to have been relied upon
by the Issuer and shall survive the execution, delivery and performance
of this Agreement, regardless of any investigation made by or on behalf
of the Issuer, until termination of the related Indenture. If the
Company or any of the Contributors has made any indemnity payments
pursuant to this Section 4.01(j) and thereafter the recipient collects
any of such amounts from others, such party will promptly repay the
amount collected to the Company or the applicable Contributor, as
applicable, without interest.
(k) Neither the Company nor any of the Contributors will do
anything to disturb or impair the acquisition hereunder by the Issuer of
the Lease Contracts and the related Lease Receivables and Equipment.
(l) Each of the Company and the Contributors (i) will (A)
maintain its books and records separate from the books and records of
the Issuer and (B) maintain bank accounts separate from those of the
Issuer and (ii) will not (x) take any action that would cause the
dissolution or liquidation of the Issuer and (y) guarantee (directly or
indirectly), endorse or otherwise become contingently liable (directly
or indirectly) for the obligations of the Issuer, or (2) institute
against the Issuer, or join any other person in instituting against the
Issuer, any case, proceeding or other action under any existing or
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future bankruptcy, insolvency or similar laws. This subsection (1) shall
survive termination of this Agreement.
(m) Each of the Company and the Contributors shall notify the
Issuer and the Indenture Trustee promptly after becoming aware of any
Lien on any Lease Asset.
(n) On each date as of which the Company or the applicable
Contributor substitutes a Substitute Lease Contract in accordance with
Section 3.03 hereof, the Company shall provide to the Issuer a
supplement to this Agreement substantially in the form of Annex A hereto
subjecting such Lease Contract to the provisions hereof and providing
with respect to such Substitute Lease Contract the information required
in the Lease Schedule.
(o) The annual financial statements of the Company and the
Contributors will disclose the effects of the transactions contemplated
by the Transaction Documents in accordance with generally accepted
accounting principles. The financial statements of the Company, the
Contributors and the Issuer will also disclose that the assets of the
Issuer are not available to pay creditors of the Company or any of the
Contributors, as applicable. The resolutions, agreements and other
instruments underlying the Transaction Documents will be continuously
maintained by each of the Company and the Contributors as official
records.
(p) Each of the Company, the Contributors, the Issuer and their
shareholders and members shall treat the Lease Contracts as owned by the
Issuer for federal, State and local income tax purposes, shall include
in the computation of the Issuer's gross income for such purposes the
rental and other income from the Lease Contracts, shall treat the Notes
as debt of the Issuer for such purposes, and shall cause the Issuer to
deduct the interest paid or accrued with respect to the Notes in
accordance with its applicable method of accounting for such purposes.
(q) The Company 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
Issuer, the Trust and other Persons, if any, with interests in the Lease
Contracts and Equipment and (ii) mark the Lease Contracts and the
Electronic Ledger to the effect that the Lease Contracts and Equipment
have been acquired the Issuer and that they have been transferred and
assigned to the Trust pursuant to the Indenture.
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Section 4.02. Issuer Covenants. The Issuer hereby covenants and agrees
with the Company and the Contributors as follows:
(a) The Issuer 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 Issuer 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 Issuer nor any assignee of the Issuer 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) On each date as of which Lease Contracts and the related
Equipment are to be purchased or replaced by the Company or a
Contributor, as applicable, pursuant to Section 3.03, the Issuer shall
submit to the Company an instrument of assignment assigning such Lease
Contract and Equipment to the Company or a Contributor, as applicable,
signed by the president, senior vice president or any vice president of
the Issuer. Each such assignment shall operate as an assignment, without
recourse, representation, or warranty, to the Company or a Contributor,
as applicable, of all of the Issuer's right, title, and interest in and
to such Lease Contract, Equipment and any security documents relating
thereto, such assignment being an assignment outright and not for
security, and upon payment of the Purchase Price or delivery of a
Substitute Lease Contract, the Company or a Contributor, as applicable,
will thereupon own such Lease Contract and all such security and
documents, free of any further obligation to the Issuer with respect
thereto. If in any enforcement suit or legal proceeding it is held that
the Company or a Contributor, as applicable, 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 Issuer shall, at the
Issuer's expense, take such steps as the Issuer deems necessary to
enforce the Contract, including bringing suit in the Issuer's name.
(c) The Issuer warrants that 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 Issuer shall not assign, sell, pledge, or
exchange, or in any way encumber or otherwise dispose of the Equipment,
except as permitted under the Indenture.
(d) Each of the Company, the Contributors, the Issuer and their
shareholders shall treat the Lease Contracts as owned by the Issuer for
federal, State and local income tax purposes, shall include in the
computation of the Issuer's gross income for such purposes the rental
and other income from the Lease Contracts, shall treat the Notes as debt
of the Issuer for such purposes, and shall cause the Issuer to deduct
the interest paid
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or accrued with respect to the Notes in accordance with its applicable
method of accounting for such purposes.
Section 4.03. Assignment of Lease Assets. Each of the Company and the
Contributors understands that the Issuer will assign to and grant to the
Indenture Trustee a security interest in all its right, title and interest to
this Agreement and the Lease Assets. Each of the Company and the Contributors
consents to such assignment and grants and further agrees that all
representations, warranties, covenants and agreements the Company and the
Contributors made herein shall also be for the benefit of and inure to the
Indenture Trustee, the Trustee, the Bond Insurer and all Holders from time to
time of the Notes.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.01. Conditions to the Issuer's Obligations. The obligations of
the Issuer hereunder shall be subject to the satisfaction of the following
conditions:
(a) All representations and warranties of each of the Company
and the Contributors contained in this Agreement and all information
provided in the Lease Schedule shall be true and correct on the related
Delivery Date, and each of the Company and the Contributors shall have
delivered to the Issuer and the Indenture Trustee an officer's
certificate to such effect;
(b) Each of the Company and the Contributors shall have
delivered all other information theretofore required or reasonably
requested by the Issuer to be delivered by the Company and each of the
Contributors hereunder, duly certified by an officer of the Company or
the Contributor, as applicable, and each of the Company and the
Contributors shall have substantially performed all other obligations
required to be performed by the provisions of this Agreement;
(c) On or before the initial Delivery Date, the Issuer, the
Servicer, the Back-Up Servicer and the Indenture Trustee shall have
entered into the Servicing Agreement; and
(d) All of the Notes shall be issued and sold on the related
Delivery Date, and the Issuer shall receive the full consideration due
it upon the issuance of such Notes.
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Section 5.02. Conditions to the Company's and the Contributors'
Obligations. The obligations of the Company and the Contributors to enter into
this Agreement on the initial Delivery Date shall be subject to the satisfaction
of the following conditions:
(a) All representations and warranties of the Issuer contained
in this Agreement shall be true and correct with the same effect as
though such representations and warranties had been made on such date;
and
(b) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement and the
Transaction Documents shall be satisfactory in form and substance to
each of the Company and the Contributors, and each of the Company and
the Contributors shall have received from the Issuer copies of all
documents (including, without limitation, records of corporate
proceedings) relevant to the transactions herein contemplated as each of
the Company and the Contributors may reasonably have requested.
ARTICLE 6
TERM AND TERMINATION
Section 6.01. Term. This Agreement shall commence as of the date of
execution and delivery hereof and, shall continue in full force and effect until
final the later of (i) payment with respect to the last Lease Asset or (ii)
termination of the Indenture.
Section 6.02. Default by the Company or the Contributors. If either of
the Company or any of the Contributors shall be in default under this Agreement
and such default shall not have been cured for a period of 60 days, or if either
of the Company or any of the Contributors 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 or any of the Contributors, as applicable, are not
stayed or dismissed within 90 days after being commenced against the Company or
any of the Contributors, as applicable, under any bankruptcy, insolvency or
other law for the relief of debtors, the Issuer shall have the right, in
addition to any other rights it may have under any applicable law, to terminate
this Agreement upon 30 days prior written notice to the Company or any of the
Contributors, as applicable; provided that any termination of this Agreement
shall not release the Company or any of the Contributors from any obligation
under this Agreement.
ARTICLE 7
MISCELLANEOUS
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Section 7.01. Amendments. This 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. This Agreement
may be amended by the Issuer, the Contributors and the Company only with the
prior written consent of the Indenture Trustee.
Section 7.02. Governing Law. This 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 the Company Address, in the case of each of the Contributors, to the
Contributor Address, and in the case of the Issuer, to the Issuer Address. 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 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 Sections 4.01(a), this
Agreement may not be assigned or delegated by the Company or any of the
Contributors without the prior written consent of the Issuer and the Indenture
Trustee and may not be assigned or delegated by the Issuer without the prior
written consent of the Company, the Contributors and Indenture Trustee.
Section 7.06. Further Assurances. Each of the Company, the Contributors
and the Issuer agrees to do such further acts and things and to execute and
deliver to the Indenture Trustee such additional assignments, agreements, powers
and instruments as are required by the Indenture Trustee to carry into effect
the purposes of this Agreement or to better assure and confirm unto the
Indenture Trustee or the holders of the Notes their rights, powers or remedies
hereunder. If any Customer shall be in default under any Lease Contract, upon
reasonable request from the Servicer, each of the Company and the Contributors
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
Indenture Trustee and the Holders of the Notes therein against the claims of all
persons and parties to the extent such entity is capable of performing such
requested
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steps and the Servicer reasonably determines that the assistance of
the Company or any of the Contributors 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 Issuer, any of the Contributors
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 Agreement
will inure to the benefit of and be binding upon the parties hereto, the Trust,
the Bond Insurer, the Holders of Notes, and their respective successors and
permitted assigns.
Section 7.09. Set-Off. (a) Each of the Company and the Contributors
hereby irrevocably and unconditionally waives all right of set-off that it may
have under contract (including this Agreement), applicable law or otherwise with
respect to any funds or monies of the Issuer at any time held by or in the
possession of the Company.
(b) The Issuer shall have the right to set-off against the
Company or the Contributors any amounts to which the Company or the
applicable Contributor may be entitled and to apply such amounts to any
claims the Issuer may have against the Company or the applicable
Contributor from time to time under this Agreement. Upon any such
set-off the Issuer shall give notice of the amount thereof and the
reasons therefor.
Section 7.10. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall together constitute one original document.
30
<PAGE> 31
IN WITNESS WHEREOF, the Company, the Contributors and the Issuer have
caused this Agreement to be duly executed by their respective officers thereunto
duly authorized as of the date and year first above written.
T & W LEASING, INC.,
as Company
By /s/ MICHAEL A. PRICE
--------------------
Name:
Title:
T & W FINANCE CORP. III,
as Contributor
By /s/ MICHAEL A. PRICE
--------------------
Name:
Title:
T & W FINANCE CORP. IV,
as Contributor
By /s/ MICHAEL A. PRICE
--------------------
Name:
Title:
T & W FINANCE COMPANY V, L.L.C.,
as Contributor
By /s/ MICHAEL A. PRICE
--------------------
Name:
Title:
31
<PAGE> 32
T & W FUNDING COMPANY IV, L.L.C.,
as Issuer
By /s/ MICHAEL A. PRICE
--------------------
Name:
Title:
32
<PAGE> 33
EXHIBIT A
FORM OF SUPPLEMENT FOR SUBSTITUTE LEASE CONTRACTS
Pursuant to Section 3.04(b) of the Contribution Agreement dated as of
July 1, 1995 (the "Agreement") between T & W Leasing, Inc. (the "Company"), T &
W Finance Corp. III, T & W Finance Corp. IV, and T & W Finance Company V, L.L.C.
(each, a "Contributor" and collectively, the "Contributors") and T & W Funding
Company IV, L.L.C. (the "Issuer"), attached hereto is a supplement to Schedule I
of the Agreement, which includes information regarding Lease Assets that are
hereby sold, assigned, transferred and delivered by the undersigned Contributor
to the Issuer in accordance with the Agreement.
[CONTRIBUTOR]
By
Name:
Title:
<PAGE> 34
SCHEDULE I
SUPPLEMENT FOR SUBSTITUTE LEASE CONTRACTS
<PAGE> 35
EXHIBIT B
FORM OF LEASE CONTRACT
<PAGE> 1
EXHIBIT 10.16
================================================================================
FIRST AMENDMENT TO CONTRIBUTION AGREEMENT
among
T & W FUNDING COMPANY IV, L.L.C.
("Issuer")
T & W FINANCIAL CORPORATION
(formerly known as T&W LEASING, INC.)
("Company")
T & W FINANCE CORP. III
("Contributor")
T & W FINANCE CORP. IV
("Contributor")
and
T & W FINANCE COMPANY V, L.L.C.
("Contributor")
Dated as of April 30, 1996
================================================================================
<PAGE> 2
This FIRST AMENDMENT TO CONTRIBUTION AGREEMENT, dated as of April 30,
1996 (herein, as amended and supplemented from time to time as permitted hereby,
called this "First Amendment"), is entered into by and among T & W FUNDING
COMPANY IV, L.L.C., a Delaware limited liability company (herein, together with
its permitted successors and assigns, called the "Issuer"), T & W FINANCIAL
CORPORATION (formerly known as T&W LEASING, INC.), a Washington corporation
(herein, together with its permitted successors and assigns, called the
"Company"), T & W FINANCE CORP. III, a Delaware corporation, T & W FINANCE CORP.
IV, a Delaware corporation, and T & W FINANCE COMPANY V, L.L.C., a Delaware
limited liability company (herein, each together with its permitted successors
and assigns, a "Contributor" and, collectively, the "Contributors").
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture dated as of July 1, 1995 (the
"Indenture"), with T&W Financial Corporation, as Servicer (the "Servicer"), the
Trustee and the Back-up Servicer pursuant to which the Issuer has issued and
intends to issue from time to time, its Lease-Backed Notes (the "Notes"). In
furtherance thereof, the Issuer, the Contributors and the Company have entered
into the Contribution Agreement, dated as of July 1, 1995 (the "Agreement") to
provide for, among other things, an agreement as to the terms of the
contribution by the Contributors of certain of their right, title and interest
in and to certain Lease Assets which the Issuer has and will be pledging with
the Trustee; in addition the Company therein has made certain covenants,
representations and warranties with respect to Lease Contracts that it
originated on behalf of the Contributors.
The Issuer has duly authorized the execution and delivery of this First
Amendment to amend the Agreement as set forth herein. All covenants and
agreements made by the Issuer, the Company, the Contributors and the Issuer
herein are for the benefit and security of the Holders of the Notes and the Bond
Insurer. Capitalized terms not defined herein shall have the meaning set forth
in the Agreement or the Indenture.
All things necessary to make this First Amendment a valid agreement of
the Issuer, the Company and each of the Contributors in accordance with its
terms have been done.
ARTICLE I
Section 1.01 Amendment to Article III of the Agreement. (a) Clause (x)
of subparagraph (b) of Section 3.01 of the Agreement shall be removed in its
entirety and replaced with the following:
<PAGE> 3
(x) Lease Contracts with a remaining term exceeding 60 months do not
account for more than 10% of the Aggregate Implicit Principal Balance.
Section 1.02. Effect of Amendment. Except as amended hereby, the
Agreement shall remain in full force and effect in accordance with the terms set
forth therein and is hereby ratified and confirmed in all respects by the
parties thereto.
Section 1.03. Counterparts. This First Amendment 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.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Issuer, the Company and each of the Contributors have
caused this First Amendment to be duly executed by their respective officers
thereunto duly authorized as of the date and year first above written.
T & W FUNDING COMPANY IV, L.L.C.,
Issuer
By:
Name:
Title:
T & W FINANCIAL CORPORATION,
the Company
By:
Name:
Title:
T & W FINANCE CORP. III,
Contributor
By:
Name:
Title:
T & W FINANCE CORP. IV,
Contributor
By:
Name:
Title:
T & W FINANCE COMPANY V, L.L.C.,
Contributor
By:
Name:
Title:
-4-
<PAGE> 5
ACKNOWLEDGED AND ACCEPTED:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By _______________________________
Name:
Title:
MBIA INSURANCE CORPORATION, as
Bond Insurer
By _______________________________
Name:
Title:
-5-
<PAGE> 6
CONSENT TO FIRST AMENDMENT TO CONTRIBUTION AGREEMENT
The undersigned, being the only Noteholder representing 100% of the
Notes (as defined in the First Amendment to Contribution Agreement to which this
Consent is attached), hereby consents to the terms and conditions of the First
Amendment to Contribution Agreement to which this Consent is attached and the
execution thereof by the Issuer, the Company, the Contributors, the Trustee and
the Bond Insurer.
Noteholder:
TLC INVESTMENT TRUST
By: The Industrial Bank of Japan, Limited,
New York Branch, as Attorney-in-fact
By:_____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.17
================================================================================
SERVICING AGREEMENT
among
T & W FUNDING COMPANY IV, L.L.C.
("Issuer")
and
T & W LEASING, INC.
("Servicer")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
("Indenture Trustee" and "Back-up Servicer")
Dated as of July 1, 1995
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS ................................................... 1
Section 1.01. Defined Terms ............................................. 1
ARTICLE II SERVICER REPRESENTATIONS, WARRANTEES AND COVENANTS ............ 3
Section 2.01. Representations and Warranties ............................ 3
Section 2.02. Covenants ................................................. 5
ARTICLE III ADMINISTRATION AND SERVICING OF LEASE CONTRACTS ............... 5
Section 3.01. Responsibilities of Servicer .............................. 5
Section 3.02. Servicer Standard of Care ................................. 8
Section 3.03. Servicer Remittances ...................................... 8
Section 3.04. Servicer Advances ......................................... 9
Section 3.05. Financing Statements ...................................... 9
Section 3.06. Maintenance of Insurance Policy; Insurance Proceeds ....... 10
Section 3.07. Personal Property and Sales Taxes ......................... 10
Section 3.08. No Offset ................................................. 10
Section 3.09. Servicing Compensation .................................... 10
Section 3.10. Substitution or Purchase of Lease Contracts ............... 10
Section 3.11. Titles .................................................... 11
ARTICLE IV ACCOUNTINGS, STATEMENTS AND REPORTS ........................... 12
Section 4.01. Monthly Servicer's Reports ................................ 12
Section 4.02. Financial Statements; Certification as to Compliance;
Notice of Default ......................................... 12
Section 4.03. Annual Independent Accountants' Servicing Reports;
Annual Federal Tax Lien Search ............................ 14
Section 4.04. Access to Certain Documentation and Information ........... 14
Section 4.05. Other Necessary Data ...................................... 16
Section 4.06. Indenture Trustee to Cooperate ............................ 16
ARTICLE V THE SERVICER AND THE ISSUER ................................... 16
Section 5.01. Servicer Indemnification .................................. 16
Section 5.02. Corporate Existence; Reorganizations ...................... 17
Section 5.03. Limitation on Liability of the Servicer and Others ........ 18
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.04. The Servicer Not to Resign ....... ........................ 18
Section 5.05. Issuer Indemnification .................................... 18
ARTICLE VI SERVICING TERMINATION ......................................... 19
Section 6.01. Servicer Events of Default ................................ 19
Section 6.02. Back-up Servicer to Act; Taking of Bids; Appointment of
Successor Servicer ........................................ 22
Section 6.03. Notification to Noteholders ............................... 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 VII THE BACK-UP SERVICER .......................................... 24
Section 7.01. Representations of Back-up Servicer ....................... 24
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, Back-up Servicer .......................... 25
Section 7.03. Back-up Servicer Resignation .............................. 25
Section 7.04. Oversight of Servicing .................................... 25
Section 7.05. Additional Back-up Servicer Duties ........................ 27
Section 7.06. Back-up Servicer Compensation ............................. 27
ARTICLE VIII MISCELLANEOUS PROVISIONS ...................................... 27
Section 8.01. Termination of This Agreement ............................. 27
Section 8.02. Amendments ................................................ 27
Section 8.03. Governing Law ............................................. 28
Section 8.04. Notices ................................................... 28
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 Notes ..................... 30
Section 8.10. No Servicing Assignment ................................... 30
Section 8.11. Bond Insurer Default ...................................... 30
Section 8.12. Counterparts .............................................. 30
Section 8.13. Third Party Beneficiary ................................... 30
</TABLE>
<TABLE>
<S> <C>
EXHIBIT A -- Form of Monthly Servicer's Report A-1
EXHIBIT B -- Servicer Disk Information B-1
</TABLE>
3
<PAGE> 4
This SERVICING AGREEMENT (as amended and supplemented from time to time,
this "Agreement"), dated as of July 1, 1995, is entered into by and among T & W
Funding Company IV, L.L.C. (herein, together with its permitted successors and
assigns, the "Issuer"), T & W Leasing, Inc., as servicer (herein, together with
its permitted successors and assigns, the "Servicer"), and Norwest Bank
Minnesota, National Association, as indenture trustee (herein, together with its
permitted successors and assigns, the "Indenture Trustee"), and as back-up
servicer (herein, together with its permitted successors and assigns, the
"Back-up Servicer").
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture, dated as of July 1, 1995, (the
"Indenture"), with the Indenture Trustee, the Back-up Servicer and the Servicer,
pursuant to which the Issuer intends to issue from time to time its Notes,
limited to $70,000,000 in unpaid principal balance outstanding and issuable in
one or more tranches, as provided in the Indenture.
The Issuer, T & W Leasing, Inc. (the "Company") and T & W Finance Corp.
III, T & W Finance Corp. IV and T & W Finance Company V, L.L.C. (each, a
"Contributor" and collectively, the "Contributors") have entered into a
Contribution Agreement dated as of July 1, 1995 (the "Contribution Agreement"),
providing for, among other things, the agreement by the Company and the
Contributors to repurchase certain Lease Assets that are being contributed to
the Issuer and pledged to the Indenture Trustee pursuant to the Indenture as
security for the Notes. As a precondition to the effectiveness of the
Contribution Agreement, the Contribution Agreement requires that the Servicer,
the Issuer, the Indenture Trustee and the Back-up Servicer enter into this
Agreement to provide for the servicing of the Lease Assets.
In order to further secure the Notes, the Issuer is granting to the
Indenture Trustee a security interest in, among other things, the Issuer's
rights derived under this Servicing Agreement and the Contribution 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 and
security of the Indenture Trustee and all holders from time to time of the
Notes. For its services under the Servicing Agreement, the Servicer will receive
a Servicer Fee as provided herein and in the Indenture. For its services
hereunder the Back-up Servicer will receive a Back- up Servicer Fee as provided
herein and in the Indenture.
ARTICLE I
DEFINITIONS
4
<PAGE> 5
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 the Servicing 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 Indenture or, if not defined
therein, in the Contribution Agreement.
"Back-up Servicer" shall initially mean Norwest Bank Minnesota, National
Association, a national banking association.
"Company" shall mean T & W Leasing, Inc., a Washington corporation.
"Contribution Agreement" shall mean the Contribution Agreement, dated as
of July 1, 1995, between the Company, the Contributors and the Issuer, as
amended and supplemented.
"Indenture Trustee" shall initially mean Norwest Bank Minnesota,
National Association, a national banking association.
"Liquidated Lease Receivable" shall mean a Lease Receivable that has
been liquidated pursuant to Section 3.01(b) hereof.
"Local Bank" shall have the meaning specified in Section 3.03 hereof.
"Lock Box" shall have the meaning specified in Section 3.03 hereof.
"Local Bank Account" shall mean the account established in the name of
the Indenture Trustee pursuant to Section 3.03 hereof, into which account shall
be deposited payments related to the Lease Receivables.
"Monthly Servicer's Report" shall mean the report prepared by the
Servicer pursuant to Section 4.01 hereof.
"Officer's Certificate" shall mean 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.
"Reported Company" shall mean T & W Leasing, Inc. and its affiliates on
a combined basis, and if the initial Servicer is no longer acting as Servicer,
then any successor Servicer appointed pursuant to this Agreement.
5
<PAGE> 6
"Reported Company's Financial Statements" shall include the Reported
Company's audited consolidating balance sheet and income statement, consolidated
statement of sources and uses/applications of cash, consolidated statement of
change in financial position, auditors opinion letter regarding audited
financial statements, and all notes to the audited financial statements.
"Servicer" shall initially mean T & W Leasing, 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" shall have the meaning set forth in Section 3.04
hereof.
"Servicer Default" shall mean any occurrence or circumstance which with
notice or the lapse of time or both would be a Servicer Event of Default under
this Servicing Agreement.
"Servicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer State of Incorporation" means the State of Washington.
"Servicer Termination Notice" means the notice described in Section 6.01
hereof.
"Servicing Officer" shall mean 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
Indenture Trustee, the Back-up Servicer, the Bond Insurer and the Noteholders
from time to time.
"Substitution Criterion" shall have the meaning specified in the
Contribution Agreement.
ARTICLE II
SERVICER REPRESENTATIONS,
WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties. The Servicer makes the
following representations and warranties, which shall survive the Closing Date:
(a) Organization and Good Standing. The Servicer has been duly
incorporated and is validly existing in good standing as a corporation
under the laws of the Servicer State of Incorporation, with requisite
corporate power and authority to own
6
<PAGE> 7
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 Indenture 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
Indenture and the Insurance Agreement and the performance by the
Servicer of its obligations under this Agreement, the Indenture 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
By-laws, 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
Indenture 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 possibility of materially and adversely affecting
the properties, business, prospects, profits or condition (financial or
otherwise) of the Servicer and its subsidiaries, or the ability of the
Servicer to perform its obligations under this Agreement, the Indenture
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.
7
<PAGE> 8
(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) Net Worth. As of the Delivery Date, the Net Worth
Requirement is met.
Section 2.02. Covenants. (a) The Servicer covenants as to the Lease
Assets:
(i) The Servicer shall not release or assign any Lien in favor
of the Indenture Trustee on any item of Equipment related to any Lease
Contract in whole or in part, except as permitted herein or in the
Indenture.
(ii) The Servicer will in all material respects duly fulfill all
obligations on the Servicer's part to be fulfilled under or in
connection with the Lease Assets. The Servicer will not amend, rescind,
cancel or modify any Lease Contract or term or provision thereof, except
as permitted herein or in the Indenture, and the Servicer will not do
anything that would materially impair the rights of the Noteholders, the
Indenture Trustee or the Bond Insurer in the Lease Assets, except as
contemplated herein or in the Indenture.
(iii) In performing its servicing duties hereunder, the Servicer
shall collect all payments required to be made by the Customers under
the Lease Contracts, enforce all material rights of the Issuer under the
Lease Contracts and defend the Equipment against all Persons, claims and
demands whatsoever. The Servicer shall not assign, sell, pledge or
exchange or in any way encumber or otherwise dispose of the Equipment,
except as permitted hereunder or in the Indenture.
(b) The Servicer will deliver each of the accountings,
statements and reports described in Article IV hereof to each party as
set forth therein.
8
<PAGE> 9
ARTICLE III
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS
Section 3.01. Responsibilities of Servicer. (a) The Servicer, for the
benefit of the Noteholders and the Indenture Trustee, shall be responsible for,
and shall, in accordance with its customary servicing procedure, pursue the
managing, servicing, administering, enforcing and making of collections on the
Lease Contracts, the Equipment and any Insurance Policies, the enforcement of
the Trust's security interest in the Lease contracts, Lease Receivables and
Equipment granted pursuant to the Indenture, 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 Indenture and Contribution Agreement. The Servicer's
responsibilities shall include collecting 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 Indenture Trustee, the Bond Insurer, the Rating Agencies and the
Noteholders with respect to payments, making Servicer Advances, providing
appropriate federal income tax information to the Indenture Trustee for use in
providing information to the Noteholders or the Bond Insurer, collecting and
remitting sales and property taxes to taxing authorities, and using its best
efforts to maintain the perfected security interest of the Indenture Trustee in
the Trust Estate. The Servicer (at its expense), acting alone or through a
subservicer, 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. Without limiting the generality of the foregoing, the
Servicer, in its own name or in the name of a subservicer, shall, and is hereby
authorized and empowered by the Indenture Trustee, subject to Section 3.02
hereof, to execute and deliver (on behalf of itself, the Noteholders, the
Indenture 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 the Lease Files.
The Servicer, acting alone or through a subservicer, 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, neither the Servicer, nor any subservicer, shall,
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
Indenture Trustee shall, at the expense of the Servicer, furnish the Servicer,
or at the request of the Servicer, any subservicer, with any powers of attorney
and other documents necessary or appropriate to enable the Servicer or
subservicer to carry out its servicing and administrative duties hereunder, and
the Indenture Trustee shall not be responsible for the Servicer's or
subservicer's application thereof. Notwithstanding the
9
<PAGE> 10
appointment by the Servicer of a subservicer hereunder, the Servicer shall
remain primarily liable for the full performance of its obligations hereunder.
(b) The Servicer (or a subservicer) 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 Issuer, 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, 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 Issuer's rights under
the Contribution Agreement. All Recoveries or Residual Proceeds in
respect of any such Lease Receivable and the related Equipment received
by the Servicer shall be remitted to the Indenture Trustee for deposit
in the Collection Account pursuant to Section 3.03(a) hereof.
(ii) The Servicer may sue to enforce or collect upon Lease
Contracts as agent for the Issuer. 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 assignment 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
Indenture Trustee on behalf of the Issuer shall, at the Servicer's
request and expense, take such steps as the Servicer deems necessary and
instructs the Indenture Trustee in writing to take to enforce the Lease
Contract, including bringing suit in its name or the name of the Issuer,
as beneficial owner of the Lease Contract, or the names of the
Noteholders or the Bond Insurer, as third party beneficiaries
thereunder, and the Indenture Trustee shall be indemnified by the
Servicer for any such action taken;
(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. In exercising recourse
rights, the Servicer is authorized on the Indenture Trustee's behalf to
reassign 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;
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(iv) The Servicer may not accept Substitute Lease Contracts that
do not comply with Section 3.10 hereof, Sections 3.03 and 3.04 of the
Contribution Agreement and Section 4.03 of the Indenture;
(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 Noteholders or the Bond Insurer; provided, however, that (A) the
Servicer shall not forgive any payment of rent, and (B) the Servicer
shall not permit any modification with respect to any Lease Contract
that would decrease the 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. The Servicer
shall provide the Back-up Servicer, the Bond Insurer and the Indenture
Trustee with an amendment 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
Purchase 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
or any subservicer 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 promptly and consistent with the
standard of care set forth in Section 3.02 hereof. Any Recoveries or
Residual Proceeds related thereto shall be deposited in accordance with
Section 3.03(a) hereof; and
(viii) Notwithstanding any provision to the contrary contained
in this Agreement, the Servicer or any subservicer 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; 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.
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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 that which the Servicer customarily exercises with respect
to similar lease contracts and equipment owned 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 the Bond Insurer or the Noteholders in any Lease Contracts
or payments thereunder.
Section 3.03. Servicer Remittances. (a) The Servicer, as agent of the
Issuer, shall remit to the Indenture 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 through 4:00
p.m., Minneapolis time, on the preceding Business Day, so long as such amounts
exceed $1,000:
(i) all payments made under the Lease Contract relating to the
Lease Receivables, including prepayments but excluding taxes, received
directly by the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Purchase Price of any Lease Contract purchased by the
Company, any of the Sellers or the Issuer, to the extent received by the
Servicer;
(iv) all Guaranty Amounts;
(v) all Servicing Charges; and
(vi) all Insurance Proceeds.
The Servicer shall hold in trust for the benefit of the Holders of the
Notes any payment it receives relating to items (i) through (vi) above until
such time as the Servicer transfers any such payment to the Indenture Trustee
for deposit in the Collection Account.
(b) 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 Servicer as
agent of the Indenture Trustee shall deposit in the Advance Payment Account, no
later than 12:00 noon, Minneapolis
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time, the aggregate amounts of Advance Payments collected through 4:00 p.m.,
Minneapolis time, on the preceding Business Day and not previously deposited. On
the Determination Date preceding any Payment Date, the Indenture Trustee shall
withdraw from the Advance Payment Account and deposit in the Collection Account
the sum of (i) Reinvestment Income on the Advance Account and (ii) Advance
Payments related to the Due Period immediately preceding such Determination
Date, both as indicated on the Monthly Servicer's Report for such Payment Date.
(c) On each Business Day, the Servicer, under authority given to it
hereby by the Indenture Trustee, will collect from a post office box in the name
of Norwest Bank Minnesota, National Association, as Indenture Trustee (the "Lock
Box"), amounts representing payments sent by Customers and deposit such amounts
in an account (the "Local Bank Account") in a local bank (the "Local Bank"). The
Servicer will cause the Local Bank to deposit amounts in the Local Bank Account
in to the Collection Account in accordance with Section 3.03(a) and Section
3.03(b). The authority given to the Servicer by the Indenture Trustee to collect
checks from the Lock Box may be revoked at any time by the Indenture Trustee,
the Back-up Servicer or the Bond Insurer and shall be revoked in the event that
a Trigger Event has occurred and is continuing.
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 a Servicer Advance for each Lease Contract which is a Delinquent Lease
Contract on such date by remitting to the Indenture Trustee for deposit in the
Collection Account an amount equal to the Scheduled Payments, or portion
thereof, which were due in the prior Due Period but not received and deposited
in the Collection Account on or prior to such Determination Date; provided,
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 that is unlikely to be
eventually repaid from Scheduled Payments made by or on behalf of the related
Customer; further provided, that the Servicer may make a Servicer Advance with
respect to a Lease Contract once it has become a Defaulted Lease Contract if it
reasonably believes that such Servicer Advamce will increase the Recoveries
available to the Issuer. On each Determination Date, the Servicer shall deliver
to the Back-up Servicer, the Indenture Trustee, the Bond Insurer and Placement
Agent the Monthly Servicer's Report listing the aggregate amount of Scheduled
Payments not received for the immediately prior Due 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 Indenture. The
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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 Indenture Trustee hereby authorizes
the Servicer to re-perfect or to cause the re- perfection of such security
interest on its behalf as Indenture Trustee, as necessary.
Section 3.06. Maintenance of Insurance Policy; Insurance Proceeds. The
Servicer shall have no duty or obligation to verify, monitor or enforce the
acquisition and/or maintenance of Insurance Policies by a Customer. Any
Insurance Proceeds shall be remitted to the Indenture Trustee for deposit in the
Collection Account pursuant to Section 3.03(a).
Section 3.07. Personal Property and Sales Taxes. The Servicer shall, on
behalf of the Issuer, 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 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. 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 which the Servicer has or may have
against the Issuer, whether in respect of this Agreement, any Lease Contract,
Lease Receivable, Equipment or otherwise.
Section 3.09. 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 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 Issuer or the Bond Insurer purchases the last remaining Lease Contract. The
Servicer Fee shall be paid by the Issuer to the Servicer at the times and in the
priority as set forth in the Indenture. 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 Indenture Trustee, the Back-up Servicer, the Bond Insurer,
the Rating Agencies and Noteholders and shall not be entitled to reimbursement
for such expenses; provided, however, that the Servicer will be entitled to
prompt reimbursement from the Issuer 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 any Defaulted Lease Contracts.
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(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 in Section
6.02 hereof and in the Indenture.
Section 3.10. 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 from an Advance
Payment or as may be specifically required under such Lease Contract in
connection with a casualty to the related Equipment), unless the Issuer has (i)
pledged to the Indenture Trustee a Substitute Lease Contract and the related
Equipment and Lease Receivables under such Substitute Lease Contract, and
delivered to the Indenture Trustee the original executed counterpart of the
Substitute Lease Contract or (ii) purchased such prepaid Lease Contract and the
related Equipment from the Indenture Trustee by remittance of the Purchase Price
to the Servicer for deposit in the Collection Account in accordance with Section
3.03(a) hereof; provided, further, that purchases and substitutions of Lease
Contracts pursuant to this subparagraph (a) shall comply with the requirements
of Section 4.03 of the Indenture and the criteria set forth in Section 3.04 of
the Contribution Agreement.
(b) The Servicer shall permit the Issuer to (i) purchase any Defaulted
Lease Contract or Delinquent Lease Contract by remittance by the Issuer to the
Servicer for deposit in the Collection Account in accordance with Section
3.03(a) hereof or (ii) substitute for any Defaulted Lease Contract or Delinquent
Lease Contract, a Substitute Lease Contract and the related Equipment and
Receivables under such Substitute Lease Contract, upon the delivery to the
Indenture Trustee of the original executed counterpart of the Substitute Lease
Contract; provided that, purchases and substitutions of Lease Contracts pursuant
to this subparagraph (b) shall comply with the requirements of Section 4.03 of
the Indenture and the criteria set forth in Section 3.04 of the Contribution
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 Issuer has repurchased 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 or any of the Contributors is
required, as a result of the breach by it of certain representations or
warranties, to repurchase or substitute a Lease Contract pursuant to Section
3.03 of the Contribution Agreement, the Servicer shall permit such repurchase or
substitution in accordance with the terms of Sections 3.03 and 3.04 thereof.
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Section 3.11. Titles. (a) The Servicer shall submit or shall have caused
to be submitted an application for title to the applicable governmental
authority for each Leased Vehicle no later than 10 calendar days after the
Delivery Date on which the Leased Vehicle has been contributed to the Issuer. If
the new certificate of title is not received within 90 days after such Delivery
Date, the Servicer shall notify the relevant Contributor, the Indenture Trustee
and the Bond Insurer that such certificate of title has not been obtained, and
the relevant Contributor or the Servicer shall repurchase, by the last day of
the then current Collection Period, the Leased Vehicle for which the certificate
of title has not been obtained.
(b) Upon receipt of any certificate of title, the Servicer shall
promptly verify that the information contained in the certificate of title is
materially correct, and that the Indenture Trustee is shown as the lienholder of
the Leased Vehicle covered thereby. If the Servicer determines that such
information is not correct, the Servicer shall promptly so advise the Indenture
Trustee and the Bond Insurer. Certificates of title will be held by the
Indenture Trustee. The Servicer may assist the Customer in retitling a Leased
Vehicle which has been permanently moved or transported to a different state.
ARTICLE IV
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 to the
Issuer, the Back-up Servicer, the Indenture Trustee, the Bond Insurer, each
Noteholder, the Placement Agent and the Rating Agencies the Monthly Servicer's
Report in the form attached as Exhibit A with respect to the activity in the
immediately preceding Due Period. In the course of preparing the Monthly
Servicer's Report, the Servicer shall seek direction from the Issuer as to
remittance of the funds to be paid pursuant to Section 12.02(d)(xviii) of the
Indenture. Lease Contracts which have been substituted for or purchased by the
Company, any of the Contributors or the Issuer shall be identified by Customer
lease number. On each Payment Date, the Servicer shall deliver to the Back-up
Servicer and the Bond Insurer a computer disk or tape in a format acceptable to
the Back-up Servicer containing the information described on Exhibit B hereto,
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 Indenture Trustee, the Placement
Agent, the Bond Insurer, the Back-up Servicer, the Rating Agencies and to each
Noteholder of Outstanding Notes (and, upon the request of any Noteholder, to any
prospective transferee of any Note):
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(i) within 120 days after the end of each fiscal year of the
Reported Company, four copies of the Reported Company's Financial
Statements, all in reasonable detail and accompanied by an opinion of
the Independent Accountants or a firm of independent certified public
accountants of recognized national standing stating that such financial
statements present fairly the financial condition of the Reported
Company (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 Company's 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 Indenture, the Contribution 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 Company during the period covered by the
Reported Company's 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
Issuer by any governmental authority or agency, or
(B) any pending or proposed court or administrative
proceeding which involves or may involve the possibility of
materially and adversely affecting the
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properties, business, prospects, profits or condition (financial
or otherwise) of the Servicer or the Issuer,
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
which may be reasonably requested from time to time, including without
limitation any information required to be made available at any time to
any prospective transferee of any Notes in order to satisfy the
requirements of Rule 144A under the Securities Act of 1933, as amended;
and
(vi) quarterly, unaudited versions of the Reported Company's
consolidating balance sheet and income statement and consolidated
statement of sources and uses of cash.
(b) On or before each April 15, so long as any of the Notes are
outstanding, the Servicer shall furnish to the Bond Insurer and the Indenture
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 Indenture Trustee created by the Indenture 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 Indenture Trustee in the Trust Estate until the date such next
Officer's Certificate is due.
Section 4.03. Annual Independent Accountants' Servicing Reports; Annual
Federal Tax Lien Search. (a) Commencing with the 1995 fiscal year, and each
fiscal year thereafter, the Servicer, at its expense, shall cause the
Independent Accountant (who may also render and deliver other services to the
Servicer and its affiliates) to prepare a statement to the Back-up Servicer, the
Indenture Trustee, the Noteholders, the Bond Insurer, the Rating Agencies and
the Placement Agent, dated as of the close of such fiscal year, to the effect
that the Independent Accountant has 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 the Lease Files (which procedures, manuals,
guides and records shall be described in one or more schedules to such
statement), that such Independent Accountant has 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 Accountant's attention to indicate that the Servicer has not,
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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 (a) such exceptions as the Independent
Accountant shall believe to be immaterial and (b) such other exceptions as shall
be set forth in such statement. The Servicer shall deliver to the Back-up
Servicer, the Indenture Trustee, the Noteholders, the Bond Insurer and the
Rating Agencies a copy of any such statement within 120 days of the close of the
relevant fiscal year.
(b) Promptly after the end of the Servicer's fiscal year, the Servicer,
at its expense, shall cause a search of any and all federal tax liens against
the affiliated group of which the Company, the Contributors and the Issuer are
members with the meaning of Section 1504 of the Code (the "Affiliated Group") as
of the end of such fiscal year to be conducted and shall deliver to the Back-up
Servicer, the Indenture Trustee, the Noteholders and the Bond Insurer on or
before January 31 of each year, commencing January 31, 1996, an officer's
certificate signed by a Servicing Officer (i) stating that there are no
outstanding federal tax liens filed against any member of the Affiliated Group
or (ii) listing the outstanding federal tax liens filed against any member of
such Affiliated Group. 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, the Bond Insurer, the Indenture
Trustee, or any Noteholder 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 Noteholders, the
Indenture Trustee, the Back-up Servicer and the Bond Insurer 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 Lease Schedule and each of
the Monthly Servicer's Reports, indicating the cumulative addition and removal
of Lease Contracts from the Trust Estate.
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(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 and after the time of the acquisition of the Lease Assets
by the Issuer and the grant of the security interest in the Lease Contracts,
Lease Receivables and Equipment to the Indenture Trustee, the Servicer's
accounts and records (including any back-up computer archives) that refer to any
Lease Contract, Lease Receivable or Equipment indicate clearly that the Lease
Contracts, Lease Receivables and Equipment are owned by the Issuer and pledged
to the Indenture Trustee for the benefit of the Noteholders. Indication of the
Indenture 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 Issuer.
(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 Indenture Trustee, the Back-up
Servicer, the Bond Insurer or any Noteholder 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 Indenture Trustee, the Back-up Servicer,
the Bond Insurer or the Noteholder, 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
Contributors, the Issuer or the Servicer or unless ordered by a court of
appropriate jurisdiction or so required by any regulatory body having
appropriate jurisdiction; provided that the Bond Insurer may make disclosures
with respect to any of the above matters to the Rating Agencies or any entity
having regulatory authority over the Bond Insurer and provided, further, that
the Indenture Trustee may provide any such information to any Noteholder.
Section 4.05. Other Necessary Data. The Servicer shall, on request of
the Back-up Servicer, Indenture Trustee or the Bond Insurer, on reasonable
notice (i) furnish the Back-up Servicer, Indenture Trustee or the Bond Insurer
such data necessary for the administration of the
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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, provide
the Indenture Trustee and the Back-up Servicer with access to the Servicer's
existing data processing systems.
Section 4.06. Indenture Trustee to Cooperate. Upon payment (including
through application of any prepayment) in full of any Lease Contract, the
Servicer will notify the Indenture Trustee on the next succeeding Determination
Date by written certification (which certificate 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 Indenture Trustee shall within 60 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 Indenture Trustee's rights to
indemnity contained herein and in the Indenture, the Indenture Trustee shall
perform such other acts as reasonably requested in writing by the Servicer and
otherwise cooperate with the Servicer in enforcement of the Noteholders' rights
and remedies with respect to Lease Contracts.
ARTICLE V
THE SERVICER AND THE ISSUER
Section 5.01. Servicer Indemnification. (a) The Servicer agrees (1) to
indemnify, defend, and hold harmless the Indenture Trustee, the Back-up
Servicer, the Bond Insurer and the Noteholders from and against any and all
costs, expenses, losses, damages, claims and liabilities arising out of or
resulting from the use, ownership or operation by the Issuer or any affiliate
thereof of the Equipment;
(2) To indemnify, defend and hold harmless the Indenture Trustee, the
Back-up Servicer, the Bond Insurer and the Noteholders from and against any
taxes that may at any time be asserted against the Indenture Trustee or the
Noteholders with respect to the transactions contemplated herein, including,
without limitation, any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes (but, in the case of the
Noteholders, not including any taxes asserted with respect to the issuance and
original sale of the Notes or federal or other income taxes arising out of
distributions on the Notes) and costs and expenses in defending against the
same;
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(3) To indemnify, defend and hold harmless the Indenture Trustee, the
Back-up Servicer, the Bond Insurer and the Noteholders from against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent to that
such cost, expense, loss, claim, damage or liability arose out of, or was
imposed upon the Indenture Trustee or the Noteholders through the negligence,
willful misfeasance or bad faith of the Servicer in the performance of its
obligations and duties hereunder;
(4) To indemnify, defend and hold harmless the Indenture Trustee, the
Back-up Servicer, the Bond Insurer and the Noteholders from and against all
costs, expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of the duties
contained herein, except to the extent that such cost, expense, loss, claim,
damage or liability shall be due to the willful misfeasance, bad faith or gross
negligence of such Person.
(b) Indemnification under this Section 5.01 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the Servicer has made any indemnity payments to the Bond
Insurer, the Indenture Trustee, the Back- up Servicer or the Noteholders
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.
(c) The Servicer shall indemnify the Noteholders for any Breakage Costs
that are incurred on account of the Servicer allowing a Customer to terminate a
Lease Contract prior to the end of the term of such Lease Contract by depositing
an amount equal to such Breakage Costs into the Collection Account no later than
the Determination Date prior to the Payment Date on which such costs are to be
paid to the Noteholders.
Section 5.02. Corporate Existence; Reorganizations. (a) The Servicer
shall keep in full effect its existence and good standing as a corporation in
the Servicer 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 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 reincorporate 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
Noteholders.
(b) The Servicer shall not (i) (other than pursuant to one or more
additional lease financings) convey, transfer or lease substantially all of its
assets as an entirety to any Person, or
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(ii) merge or consolidate with another Person, unless such Person or the merged
or consolidated entity acquires substantially all the assets of the Servicer as
an entirety and executes and delivers to the Issuer, the Bond Insurer, the
Backup Servicer and the Indenture Trustee an agreement, in form and substance
reasonably satisfactory to the Issuer, the Bond Insurer, the Backup Servicer and
the Indenture 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. The Servicer
shall provide prompt written notice of such event to the Rating Agencies.
Section 5.03. Limitation on Liability of the Servicer and Others. Except
as provided in Section 5.01, 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 Indenture Trustee and the Bond Insurer.
(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 Issuer or the Indenture Trustee of any right
or remedy under this Agreement, or the enforcement by the Issuer, the Bond
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Insurer, the Indenture Trustee, the Back-up Servicer or any Noteholder of any
provision of the Notes or this Agreement.
Section 5.05. Issuer Indemnification. The Issuer shall indemnify and
hold harmless the Servicer (but solely from the amounts to be distributed as set
forth in Section 12.02(d)(xviii) of the Indenture) from and against any loss,
liability, expense, damage or injury suffered or sustained by the Servicer,
including but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other costs and expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, which arises
out of the Servicer's activities hereunder; provided, however, that the Issuer
shall not indemnify the Servicer if the Servicer's activities constituted fraud,
willful misconduct, gross negligence (which includes negligence with respect to
the duties of the Servicer which are explicitly set forth in this Agreement) or
breach of fiduciary duty by the Servicer.
ARTICLE VI
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 Indenture
Trustee for payment to Noteholders any proceeds or payments received
from a Customer or in respect of the Trust Estate and when required to
be so delivered under the terms of the Indenture and this Agreement that
continues unremedied until 10:00 a.m., Minneapolis time, on the second
successive Business Day, provided, however, that the Indenture 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 Indenture 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
Indenture Trustee shall give the Servicer notice of such failure.
Notwithstanding the foregoing, any failure by the Indenture Trustee to
deliver such notice to the Servicer shall not prohibit the occurrence of
a Servicer Event of Default; or
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(iii) Any failure by the Servicer to make a Servicer Advance
pursuant to Section 3.04 hereof or to deposit any Purchase 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 Purchase
Price received by it by 12:00 noon, Minneapolis time, on the
Determination Date and the Indenture Trustee has received written
notification from the Servicer by way of the Monthly Servicer's Report
or otherwise that such Servicer Advance or Purchase Price is to be paid,
the Indenture Trustee shall give the Servicer prompt written, telecopied
or telephonic notice of such failure. Notwithstanding the foregoing, any
failure by the Indenture Trustee to deliver such notice to the Servicer
shall not prevent the occurrence of a Servicer Event of Default; or
(iv) Any failure by the Servicer to make remittances or deliver
notices pursuant to Section 3.03 hereof, that continues unremedied until
10:00 a.m., Minneapolis time, of the third successive Business Day; or
(v) Any failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer, set forth in this Agreement or the Indenture, as the case may
be, or 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 the interest or
rights of the Bond Insurer, the Indenture Trustee, the Back up Servicer
or the Noteholders 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
Indenture Trustee, the Bond Insurer, the Issuer, or the Back-up
Servicer, or to a Servicing Officer of the Servicer, the Bond Insurer
and the Indenture Trustee by Holders of Notes representing not less than
25% of the aggregate principal amount of the Notes Outstanding; or
(vi) 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
(vii) 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 the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official for the Servicer or for any substantial part of
its property, or the ordering of the winding up or
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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
(viii) 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, marshalling 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
(ix) 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), (v) or (vii) above, as
applicable, the Indenture Trustee, at the direction of the Bond Insurer shall,
or if there has been a Bond Insurer Default, the Indenture Trustee, the Issuer,
or the Back-up Servicer may, 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. Notwithstanding the foregoing, a delay in or failure of performance
under Section 6.01(a)(v) hereof for a period of 30 or more Business Days, shall
not constitute a Servicer Event of Default if such delay or failure could not
have been prevented by the exercise of reasonable diligence by the Servicer and
such delay or failure was caused by acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its obligations
in a timely manner in accordance with the terms of this Agreement, and the
Servicer shall provide the Indenture Trustee, the Back-up Servicer, the Bond
Insurer, the Issuer and the Noteholders with prompt notice of such failure or
delay by it, together with a description of its efforts to so perform its
obligations.
(c) In the event of the occurrence of a Trigger Event, the Indenture
Trustee shall, at the direction of the Bond Insurer, or if there has been a Bond
Insurer Default, the Indenture Trustee, the Issuer, or the Back-up Servicer may,
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.
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(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 Notes 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 termination, 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 Indenture 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 the Advance Payment Account or thereafter received with
respect to 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 (to the extent not held
by the Indenture 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 receives a Servicer Termination Notice pursuant to
Section 6.01, 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 or, for some other reason does not serve, as successor Servicer,
another firm acceptable to the Bond Insurer shall be appointed.
(ii) The successor Servicer shall 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 or if there exists any requirement
that additional capital be maintained by the Servicer by applicable regulatory
authority and (y) shall not be liable for any
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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 the Bond
Insurer (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) Upon receipt of a Servicer Termination Notice, the Back-up Servicer
shall solicit written bids, with a copy to the Bond Insurer (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 Indenture Trustee, the
Back-up Servicer, the Servicer or the Issuer and are reasonably acceptable to
the Bond Insurer. The Issuer may also solicit additional bids from other such
entities. Any such written solicitation shall prominently indicate that any fees
and transfer costs in excess of the Servicer Fee shall be paid only pursuant to
Section 12.02(d) of the Indenture. 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 of the Indenture, receive as
compensation therefor a fee equal to the greater of the Servicer Fee or the fee
proposed in the bid so solicited which provides for the lowest Servicer Fee, as
reasonably determined by the Bond Insurer.
(c) The Servicer, the Back-up Servicer, the Issuer, the Indenture
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 Indenture Trustee or the Holders of the Notes if such Holders
have previously reimbursed the Back-up Servicer and the Indenture Trustee
therefor) shall be reimbursed for all Transition Costs 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)(xi) of the Indenture.
(d) Upon written notification to the Indenture 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 principal amount of the Notes then outstanding is less than $50,000; then
the Back-up Servicer shall be relieved of its obligation under Section
6.02(a)(i) hereof, and the Bond Insurer, or if there is a Bond Insurer Default,
the Issuer shall appoint a successor Servicer. In such event, the Bond Insurer
shall be reimbursed for any Transition Costs incurred solely pursuant to Section
6.02(b) in the manner and to the extent provided for in Section 12.02(d)(xi) of
the Indenture.
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Section 6.03. Notification to Noteholders. The Servicer shall promptly
notify the Back-up Servicer, the Bond Insurer, the Issuer and the Indenture
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 VI, the Indenture Trustee shall give
prompt written notice thereof to the Noteholders at their respective addresses
appearing in the Note Register.
Section 6.04. Waiver of Past Defaults. The Indenture Trustee shall, at
the direction of the Bond Insurer or at the direction of the Holders of Notes
representing more than 50% of the principal amount of the Notes Outstanding, on
behalf of all Noteholders, with the written consent of the Bond Insurer, so long
as there is no Bond Insurer Default, and may, if a Bond Insurer Default is
continuing, 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 III 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 Noteholder and the Bond Insurer. 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.
Section 6.05. Effects of Termination of Servicer. (a) Upon the
appointment of the successor Servicer, the predecessor Servicer shall remit any
Scheduled Payments, Advance 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, or upon any
appointment of a successor Servicer, all the rights, powers, duties and
obligations of the other parties under this Agreement,
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the Indenture, and the Contribution Agreement shall remain unaffected by such
termination or appointment and shall remain in full force and effect thereafter.
ARTICLE VII
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 Indenture and the Insurance Agreement
and to carry out its terms; and the execution, delivery, and performance
of this Agreement, the Indenture and the Insurance Agreement shall have
been duly authorized by the Back-up Servicer by all necessary corporate
action.
(c) This Agreement, the Indenture and the Insurance Agreement
shall constitute a legal, valid, and binding obligation of the Back-up
Servicer enforceable in accordance with its 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 Indenture 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.
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(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 this Agreement, the Indenture
or the Insurance Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement, the Indenture 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 Indenture or the Insurance Agreement.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, Back- up Servicer. Any Person (a) into which the Back-up
Servicer may be merged or consolidated, (b) which may result from any merger or
consolidation to which the Back-up Servicer shall be a party, or (c) 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 without 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 Indenture
Trustee set forth in the Indenture, the Back-up Servicer, upon the written
request of the Bond Insurer, 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 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 Indenture Trustee and the Bond Insurer).
Section 7.04. Oversight of Servicing. (a) 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;
and
(ii) that the amounts credited to and withdrawn from the
Collection Account, Advance Payment Account, and the Cash Collateral
Account, and the balance of such accounts, as set forth in the records
of the Indenture Trustee, are the same as the amount set forth in the
Monthly Servicer's Report.
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(b) The Back-up Servicer shall, within 30 days of the receipt thereof,
load the computer disk or tape received from the Servicer pursuant to Section
4.01 hereof, make sure such computer disk or tape is in readable form and shall:
(i) calculate the Aggregate Implicit Principal Balance as of the
most recent Calculation Date;
(ii) calculate the Principal Distribution Amount for the most
recent Payment Date; and
(iii) calculate the Annualized Default Rate and the Delinquency
Rate for the related Due Period and compare such calculated amounts with
those set forth in the most recent Monthly Servicer's Report.
(iv) confirm that the information in the fields set forth on
Exhibit B is the same in the Monthly Servicer Report (to the extent
reported therein) as it is on the computer disk delivered to the Backup
Servicer pursuant to Section 4.01 hereof.
(c) In the event of any discrepancy between the information set forth in
subparagraphs (a) and (b) of this Section as calculated by the Servicer from
that determined or calculated by the Back-up Servicer, the Back-up Servicer
shall promptly notify the Servicer 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 Bond Insurer, the Rating Agencies and the Holders of the
Notes of such discrepancy.
(d) Based solely on the information included in the Lease Schedule
delivered on the related Delivery Date and the computer disks or tapes provided
pursuant to Section 4.01 hereof, the Back-up Servicer shall determine that any
Substitute Lease Contracts delivered under Section 3.10 satisfy the Substitution
Criterion.
(e) The Back-up Servicer will make a site visit to the offices of the
Servicer within 60 days of the end of each calendar year for the purpose of
reviewing the operations of the Servicer, commencing December 31, 1995. 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 Issuer or the Servicer.
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(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. Additional Back-up Servicer Duties. In addition to its
other duties enumerated herein and in the Indenture, the Back-up Servicer shall
re-calculate the information set forth in each Funding Report within 10 Business
Days of each related Delivery Date to verify (i) that the condition set forth in
Section 4.01(c)(ix) of the Indenture has been satisfied, (ii) compliance with
the concentration limits set forth therein and (iii) that the Funding Report
reflects the interest rate reflected on the related Notes, and, with respect to
each Tranche of Floating Rate Notes, the Maximum Floating Rate as set forth in
the related Floating Rate Cap Agreement.
Section 7.06. 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.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Termination of This Agreement. (a) Absent a termination
pursuant to Section 6.01 hereof, the respective duties and obligations of the
Servicer, the Issuer, the Back-up Servicer and the Indenture Trustee created by
this Agreement shall terminate upon the discharge of the Indenture in accordance
with its terms; and the respective duties and obligations of the Indenture
Trustee shall terminate with respect to the Indenture Trustee in the event the
Indenture Trustee resigns or is replaced under Section 7.09 of the Indenture;
provided, however, that no resignation or removal of the Indenture Trustee and
no appointment of a successor Indenture Trustee shall become effective until the
acceptance of appointment by the successor Indenture Trustee under Section 7.10
of the Indenture. Upon the termination of this Agreement pursuant to this
Section 8.01(a), the Servicer shall pay all monies with respect to the Lease
Receivables and Equipment held by the Servicer and to which the Servicer is not
entitled to the Issuer or upon the Issuer's order.
33
<PAGE> 34
(b) This Agreement shall not be automatically terminated as a result of
an Event of Default under the Indenture or any action taken by the Indenture
Trustee thereafter with respect thereto, and any liquidation or preservation of
the Trust Estate by the Indenture 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) This Agreement may be amended from time to
time by the Issuer, the Servicer, the Back-up Servicer, and the Indenture
Trustee, with the consent of the Bond Insurer but without the consent of any of
the Noteholders, 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, or to add or amend any other provisions with respect to matters
or questions arising under this Agreement; provided, however, that such action
shall not, as evidenced by an opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.
(b) This Agreement may also be amended from time to time by the Servicer
and the Back-up Servicer, with the consent of the Indenture Trustee, the Bond
Insurer and the Holders of not less than 50% of the aggregate principal amount
of Notes Outstanding, 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 shall, without the consent of each Noteholder,
(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 Indenture) or any portion thereof or deprive any such
Noteholder of the benefit of this Agreement with respect to the Trust Estate or
any portion thereof; or (iii) modify this Section 8.02 or Sections 5.02 or 5.04
hereof.
(c) Promptly after the execution of any amendment, the Servicer shall
send to the Indenture Trustee, the Bond Insurer, each Holder of the Notes and
each Rating Agency a conformed copy of each such amendment.
(d) It shall not be necessary, in any consent of Noteholders under this
Section 8.02, for the Noteholders to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consent and of evidencing the
authorization of the execution thereof by Noteholders shall be subject to such
reasonable regulations as the Indenture Trustee may prescribe.
(e) Any amendment or modification effected contrary to the provisions of
this Section 8.02 shall be void.
34
<PAGE> 35
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 via telecopy or overnight or
messenger delivery, or mailed by registered or certified United States mail,
postage prepaid, and addressed as follows:
(a) if to the Issuer, at 6416 16th St. E., Tacoma, Washington
98424, Attention: President;
(b) if to the Servicer, at 6416 16th St. E., Tacoma, Washington
98424, Attention: President;
(c) if to the Back-up Servicer, at 6th Street & Marquette
Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust
Department;
(d) if to the Indenture Trustee at 6th Street & Marquette
Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust
Department;
(e) if to the Bond Insurer at 113 King Street, Armonk, New York
10504, Attention: Structured Surveillance to Insured Portfolio
Management-Structured Finance (IPM-SF);
(f) if to any Noteholder, at its address for notices specified
in the Note Register;
(g) if to the Rating Agencies, at Standard & Poors, 26 Broadway,
New York, NY 10004 and Moody's Investor Service, 99 Church Street, New
York, NY 10007, Attention: ABS Surveillance Group.
Any of the Persons in subclauses (a) through (d) and (f) above may
change the address for notices hereunder by giving notice of such change to
other Persons. Any change of address shown on the Note Register shall, after the
date of such change, be effective to change the address for such Noteholder
hereunder.
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
35
<PAGE> 36
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 Indenture Trustee, the Bond Insurer or any Noteholder. 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
Noteholders. 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 Notes. The Servicer and
the Back-up Servicer understand that the Issuer will assign to and grant to the
Indenture Trustee a security interest in its right, title and interest to this
Agreement. The Servicer and the Back-up Servicer consent to such assignment and
grant 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 Indenture Trustee and all Holders from time
to time of the Notes.
Section 8.10. No Servicing Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Sections 5.02 and 5.04 hereof,
this Agreement may not be assigned by the Issuer or the Servicer (except with
respect to the appointment of a subservicer) without the prior written consent
of the Bond Insurer [the Indenture Trustee, the Back-up Servicer] and the
Holders of Notes representing not less than 50% of aggregate principal amount of
the Notes Outstanding.
36
<PAGE> 37
Section 8.11. Bond Insurer Default. If a Bond Insurer Default occurs,
the Bond Insurer's right to consent hereunder and to direct the Indenture
Trustee shall be voided and, in such event, in all provisions of this Agreement
wherein the Bond Insurer's consent or direction is required or permitted, the
consent or direction of the Holders of Notes representing more that 50% of
aggregate principal amount of the Notes Outstanding shall be required or
permitted.
Section 8.12. Counterparts. This Servicing Agreement may be executed in
one or more counterparts, all of which together shall constitute one original
document.
Section 8.13. Third Party Beneficiary. The Bond Insurer is an express
third party beneficiary to this Agreement.
37
<PAGE> 38
IN WITNESS WHEREOF, the Issuer, the Servicer, the Back-up Servicer and
the Indenture Trustee 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.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, Indenture Trustee
By: /s/ AMY BELONGIE
----------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, Back-up Servicer
By: /s/ AMY BELONGIE
----------------
Name:
Title:
T & W FUNDING COMPANY IV, L.L.C.,
Issuer
By: /s/ MICHAEL A. PRICE
--------------------
Name:
Title:
T & W LEASING, INC., Servicer
By: /s/ MICHAEL A. PRICE
--------------------
Name:
Title:
38
<PAGE> 39
EXHIBIT A
T & W LEASING, INC.
MONTHLY SERVICER REPORT
To: Norwest Bank Minnesota, National Association,
as Indenture Trustee and Back-up Servicer
MBIA Insurance Corporation,
as the Bond Insurer
Dear Sirs:
In accordance with Section 4.01 of the Servicing Agreement, dated as of July 1,
1995 (the "SV"), by and among T & W Leasing, Inc. as Servicer, Norwest Bank
Minnesota, National Association, as Indenture Trustee and Back-up Servicer, and
T & W Funding Company IV, L.L.C., as Issuer, this letter constitutes the Monthly
Servicer's Report for the Payment Date occurring on ______________. Unless
otherwise expressly noted, all data contained herein has been calculated as of
the related Calculation Date and with respect to the related Due Period.
Reference is also made to the Indenture, dated as of July 1, 1995, by and among
the Issuer, the Servicer, the Indenture Trustee and Back-Up Servicer (the "IN").
39
<PAGE> 40
DEPOSITS INTO COLLECTION ACCOUNT
Deposits by or on behalf of the Servicer:
<TABLE>
<S> <C>
Scheduled and Overdue Payments Received
under the Lease Contracts directly by the Servicer $___________
Prepayments $___________
Residual Proceeds $___________
Recoveries $___________
Purchase Price received $___________
Guaranty Amounts $___________
Insurance Proceeds $___________
Servicer Advances $___________
Other amounts received by Servicer $___________
Total $___________
</TABLE>
Transfers made by Trustee to the Collection Account
<TABLE>
<S> <C>
Transfer from Advance Payment Account $___________
(per 3.03(c)(ii) of SV)
Advance Payment Account Investment Earnings $___________
(per 3.03(c)(i) of SV)
Transfer from Cash Collateral Account $___________
(per 12.03(d)(i) and (d)(iii) of IN)
Collection Account Investment Earnings $___________
Total $___________
Amounts from other sources (e.g., Issuer reimbursement of
losses on eligible investments) $___________
Total deposited into the Collection Account (other than payments
from the Bond Insurer) $___________
</TABLE>
40
<PAGE> 41
DISBURSEMENTS FROM COLLECTION ACCOUNT:
Prior to Payment of Principal and Interest due
<TABLE>
<S> <C>
Servicer Fee $___________
Reinvestment Income (Collection Account and Advance
Payment Account) to Servicer $___________
Reimburse Servicer and Back-up Servicer pursuant to
Section 3.09 of SV (for costs assoc with Defaulted Leases) $___________
Pay Servicer any tax amounts deposited in
Collection Account pursuant to Section 3.07 of SV $___________
Un-reimbursed Servicer Advances now collected $___________
Non-recoverable Servicer Advances $___________
Breakage Costs for voluntarily terminated leases payable from the Collection $___________
Account
Trustee Fee $___________
Backup Servicer Fee $___________
Bond Insurer Premium $___________
Trustee and Back-up Servicer expenses $___________
Total $___________
TOTAL BALANCE AVAILABLE FOR NOTEHOLDER PAYMENTS $___________
</TABLE>
Disbursements to Noteholder
<TABLE>
<S> <C>
Interest Due (current and overdue) $___________
Principal so that each Tranche is no greater than its respective IPB $___________
Principal Distribution Amount $___________
Portion covered by Bond Insurance Policy, (for every Payment
Date before Stated Maturity Date, only Interest due and amount by which unpaid
principal amount of Notes Outstanding is greater than the Aggregate Implicit
Principal Balance of Lease Contracts; for Stated Maturity Date, Interest due
plus outstanding Note Amount) $___________
Amounts received under the Bond Insurance Policy $___________
(Article 8 of IN)
TOTAL BALANCE AVAILABLE FOR OTHER PAYMENTS $___________
</TABLE>
41
<PAGE> 42
Other Disbursements
<TABLE>
<CAPTION>
<S> <C>
Unpaid Bond Insurer amounts, if any $___________
Deposit to the Cash Collateral Account $___________
to its Cash Collateral Account Required Balance (see below)
Additional Servicer Fee, if any $___________
Successor Servicer, Bond Insurer and Trustee Transition Costs
specified in 12.02(d)(xii) of IN $___________
Note Principal, if a Trigger Event has occurred $___________
(per 12.02(d)(xiii) of IN)
To the Servicer amounts specified in 12.02(d)(xiv) of IN $___________
To the Servicer any un-reimbursed Servicer Advances $___________
To Bond Insurer, amounts specified in the Insurance Agreement $___________
To Trustee and Back-Up Servicer, amounts specified in $___________
12.02(d)(xvi) of IN $___________
To the Noteholders, unpaid Breakage Costs $___________
To the Issuer, any excess amount remaining
in the Collection Account $___________
Total deposited into the Collection Account,
including payments from Bond Insurer $___________
Total disbursed from Collection Account $___________
ENDING BALANCE IN THE COLLECTION ACCOUNT $___________
SERVICER ADVANCES
Amount of Scheduled Payments not received (includes both Scheduled Payments on
Delinquent Leases as well as leases which have become Defaulted Leases in the
current Monthly
Period) $__________
Cumulative un-reimbursed Servicer Advances as of the previous
Servicer Remittance Date $__________
Plus Servicer Advances for the current Monthly Period $__________
Less Aggregate amount of Servicer Advance reimbursements
for the current Monthly Period $__________
Cumulative un-reimbursed Servicer Advances $__________
</TABLE>
42
<PAGE> 43
CASH COLLATERAL ACCOUNT
<TABLE>
<S> <C>
Beginning Balance $__________
Less amount transferred to Collection Account $__________
Plus amount transferred from Collection Account $__________
Investment earnings on Cash Collateral Account $__________
Less amounts in excess of Cash Collateral Account
Required Balance transferred to Issuer pursuant
to Section 12.03(d)(ii) of IN $__________
Ending Balance $__________
Percentage of the aggregate Note Principal Balance __________%
Cash Collateral Account Factor [ ]
Cash Collateral Account Required Balance:
Product of (a) Required Collateralization
Amount (see below) -(Implicit Principal Balance
-ending Note balance)) and (b) Cash Collateral
Account Factor or zero if a Trigger Event has occurred $__________
</TABLE>
ADVANCE PAYMENT ACCOUNT
<TABLE>
<S> <C>
Beginning Balance $__________
Plus amount received during the Monthly Period
and Remitted by Servicer $__________
Plus Investment Earnings on Advance Payment Account $__________
Less amount transferred by Trustee to Collection Account $__________
Ending Balance $__________
</TABLE>
43
<PAGE> 44
IMPLICIT PRINCIPAL BALANCE DECREASE
<TABLE>
<CAPTION>
IMPLICIT
PRINCIPAL
BALANCE # of Contracts
<S> <C> <C>
Beginning Aggregate Implicit Principal Balance $_______________ _____
Less Amortization of Scheduled Payments $_______________ _____
Less Unamortized Implicit Principal balance of:
Defaulted Contracts $_______________ _____
Matured Contracts $_______________ _____
Casualty Contracts (to extent
of Insurance Proceeds) $_______________ _____
Plus IPB of Substitute Contracts transferred
into the Trust $_______________ _____
Less IPB of Substituted Contracts transferred
out of the Trust $_______________ _____
Less IPB of Contracts repurchased by the
Seller or Transferor or purchased by the
Servicer during the current Due Period $_______________ _____
Other $_______________ _____
Aggregate Implicit Principal Balance Decrease $_______________ _____
Ending Aggregate Implicit Principal Balance $_______________ _____
</TABLE>
NOTE INFORMATION
<TABLE>
<S> <C>
Initial Note Balance $___________
Less Principal Payment $___________
Ending Note Balance $___________
</TABLE>
<TABLE>
<CAPTION>
TRANCHE #1 Tranche #2 Tranche #3
---------- ---------- ----------
<S> <C> <C> <C>
Ending Tranche Aggregate Implicit Principal
Balance: $__________ $__________ $__________
Outstanding Tranche Principal Amount: $__________ $__________ $__________
Fixed Rate or Floating Rate: $__________ $__________ $__________
</TABLE>
44
<PAGE> 45
<TABLE>
<S> <C> <C> <C>
Interest Rate for Fixed Rate Notes or Maximum
Floating Rate if Floating Rate Notes: $__________ $__________ $__________
</TABLE>
45
<PAGE> 46
REQUIRED COLLATERALIZATION AMOUNT
<TABLE>
<S> <C>
Collateralization Percentage [ ]%
A) Collateralization Percentage multiplied by
the Aggregate Implicit Principal Balance $___________
B) Implicit Principal Balance of the
3 largest Customers $___________
C) 4.0% of the Initial Aggregate Implicit Principal
Balance for all the Tranches combined $___________
Required Collateralization Amount equals the
greater of A), B) or C) $___________
Actual overcollateralization amount:
(Implicit Principal Balance plus Cash Collateral
Account balance) minus the Outstanding Note Amount $___________
</TABLE>
TRIGGER EVENT CALCULATIONS:
Calculate Annualized Default Rate:
# of days delinquent to declare Defaulted Lease: 180
<TABLE>
<S> <C>
Implicit Principal Balance of Defaulted Lease Contracts during
current Due Period (including repurchased and Substitute Contracts) $___________
Less Recoveries received during the current Due Period $___________
Less Residuals $___________
Total $___________
Current Month Annualized Default Rate ____%
</TABLE>
Detail on Defaulted Contracts (excluding Repurchased or Substituted Contracts):
<TABLE>
<CAPTION>
IMPLICIT
PRINCIPAL
BALANCE Number
--------- ------
<S> <C> <C>
Servicer did not make Advance $______________ _______
Prior Advance Deemed Unrecoverable $______________ _______
180 days delinquent $______________ _______
Total Defaulted Contracts $______________ _______
</TABLE>
46
<PAGE> 47
Calculate Delinquency Rate:
<TABLE>
<CAPTION>
% OF AGGREGATE
IMPLICIT Implicit
PRINCIPAL Principal Number of
BALANCE Balance Contracts
------- -------------- ---------
<S> <C> <C> <C>
30-59 days delinquent $__________ _______% _________
60-89 days delinquent $__________ _______% _________
90-119 days delinquent $__________ _______% _________
120-149 days delinquent $__________ _______% _________
150-179 days delinquent $__________ _______% _________
Total $__________
Current Month Delinquency Rate _______%
</TABLE>
Check Default and Delinquency Triggers:
<TABLE>
<CAPTION>
Monthly
Sum of Period
Current & Prior to
Immediately Immediately Immediately
AVERAGE Preceding Current Preceding Preceding
PAST 3 MONTHS Monthly Pd. Monthly Pd. Monthly Pd. Monthly Pd.
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Annualized
Default Rate _______% _______% _______% _______% _______%
Delinquency
Rate _______% _______% _______% _______% _______%
Applicable Maximum Default Rate ___3___%
Applicable Maximum Delinquency Rate ___7___%
</TABLE>
Net Worth:
<TABLE>
<S> <C>
Net Worth Minimum $5,000,000
</TABLE>
47
<PAGE> 48
Funding Period Net Worth Minimum $6,500,000
T & W Leasing, Inc.'s Consolidated Net Worth $_____________
(as of ___________, 199__, most recent quarterly audited or unaudited financial
statement)
48
<PAGE> 49
DETAIL ON SUBSTITUTIONS AND PURCHASES:
<TABLE>
<CAPTION>
Cumulative
IMPLICIT Implicit
PRINCIPAL Principal
BALANCE Balance
--------- ----------
<S> <C> <C> <C>
Leases Terminated or
Prepaid and Substituted
per 4.03(d) of IN $__________ $__________ ([LESS THAN] $7,000,000)
Delinquent Lease Contracts,
Substituted or Purchased
per 4.03(d) of IN $__________ $__________ ([LESS THAN] $9,450,000)
Defaulted Lease Contracts,
Substituted or Purchased
per 4.03(d) of IN $__________ $__________ ([LESS THAN] $2,275,000)
</TABLE>
TRANSITION COSTS:
Cumulative Transition Costs Paid to date
Pursuant to 12.02(d)(xii) of IN $__________
EXPLANATORY NOTES:______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Contact:________________________________________________________________________
Phone:__________________________________________________________________________
The undersigned officer of the Servicer hereby certifies that the
information contained in this Monthly Servicer Report is true and accurate in
all respects.
T & W LEASING, INC.
Servicer
By:
Name: Michael A. Price
Title: President
49
<PAGE> 50
EXHIBIT B
SERVICER DISK INFORMATION
FIELDS:
1. Acct #
2. lesse
3. eqcat
4. state
5. siccode
6. Yrs in Bus
7. Start Dt
8. FinalDt
9. Nxt date
10. basepmt
11. rec bal
12. cur recv
13. resid
14. securityop
15. lease term
16. pay term
17. status
18. zip code
19. Mos Del
<PAGE> 1
EXHIBIT 10.18
================================================================================
T & W FUNDING COMPANY IV, L.L.C.
--------------------------
NOTE PURCHASE AGREEMENT
Dated as of July 28 1995
--------------------------
Re: Lease-Backed Notes
Series 1995-1 (Issuable in Tranches)
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
- ------- ------- ----
<S> <C> <C>
Parties...................................................................... 1
SECTION 1. PROPOSED FINANCING .................................... 1
SECTION 2. DESCRIPTION OF NOTES .................................. 2
SECTION 3. SALE OF NOTES ......................................... 2
SECTION 4. HOME OFFICE PAYMENT ................................... 2
SECTION 5. REPRESENTATIONS OF THE ISSUER ......................... 3
SECTION 6. REPRESENTATIONS OF THE PURCHASER ...................... 3
SECTION 7. PURCHASER'S CLOSING CONDITIONS ........................ 4
SECTION 8. EXPENSES AND TAXES .................................... 4
SECTION 9. FACILITY FEE .......................................... 5
SECTION 10. SUCCESSORS AND ASSIGNS ................................ 5
SECTION 11. SURVIVAL OF COVENANTS AND REPRESENTATIONS ............. 5
SECTION 12. SEVERABILITY .......................................... 6
SECTION 13. COMMUNICATIONS AND NOTICES ............................ 6
SECTION 14. LAW GOVERNING ......................................... 6
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 15. COUNTERPARTS .......................................... 6
SECTION 16. HEADINGS AND TABLE OF CONTENTS ........................ 6
Signature.................................................................... 7
</TABLE>
ATTACHMENTS TO NOTE PURCHASE AGREEMENT:
Schedule I -- Name and Address of Purchaser
Exhibit A -- Closing Certificate of Issuer
-ii-
<PAGE> 4
T & W FUNDING COMPANY IV, L.L.C.
6416 16th Street East
Tacoma, Washington 98424
NOTE PURCHASE AGREEMENT
Re: Lease-Backed Notes
Series 1995-1 (Issuable in Tranches)
Dated as of
July 28, 1995
TLC Investment Trust
c/o Bank America Trust & Banking Corporation
(Cayman) Ltd.
Fort Street Grand Cayman BWI
Cayman Islands,
British West Indies
Ladies and Gentlemen:
T & W FUNDING COMPANY IV, L.L.C., a special purpose limited liability
company (the "Issuer"), agrees with you as follows:
SECTION 1. PROPOSED FINANCING.
The Issuer wishes to obtain financing and proposes to offer and sell its
Lease-Backed Notes, Series 1995-1 (Issuable in Tranches) (the "Notes"). The
Notes are to be issued in tranches (each, a "Tranche"), from time to time during
the Funding Period, pursuant to the Indenture dated as of July 1, l995 (the
"Indenture") to be entered into by the Issuer, T & W Leasing, Inc., a Washington
corporation, as Servicer (the "Servicer") and Norwest Bank Minnesota, National
Association, as Indenture Trustee (in such capacity, the "Indenture Trustee")
and as Back-up Servicer (in such capacity, the "Back-up Servicer"). A Tranche of
Notes shall only be issued upon the execution and delivery by the Issuer of a
Funding Report. The Issuer proposes to secure the Notes by, among other things,
a pledge of all of its rights, title and interests, in and to certain Lease
Receivables, Lease Contracts and Equipment (the "Collateral"), as more fully
described in the Indenture. The Collateral will be acquired from T & W Finance
Corp. III, T & W Finance Corp. IV and T & W Finance Company V, L.L.C. (the
<PAGE> 5
"Sellers"), pursuant to the Contribution Agreement dated as of the date hereof
between the Sellers, as sellers, T & W Leasing, Inc. and the Issuer, as
purchaser.
SECTION 2. DESCRIPTION OF NOTES.
The Issuer will authorize the issue and sale of its Lease-Backed Notes,
Series 1995-1 (Issuable in Tranches) in a principal amount not to exceed
$70,000,000 outstanding. Each Tranche of Notes will be dated as of its
respective Delivery Date, will bear interest from such date until its maturity
at the rate set forth in the applicable Funding Report, payable monthly on the
twentieth day of each calendar month in each year (commencing on the date set
forth in the applicable Funding Report), and will be otherwise substantially in
one of the forms included in the Indenture. Interest on a Tranche of Fixed Rate
Notes will be computed on the basis of a 360- day year of twelve 30-day months,
and interest on a Tranche of Floating Rate Notes will be computed on the basis
of a 360-day year and the actual number of days elapsed. The term "Notes" as
used herein shall include each Note issued under the Indenture. You are
hereinafter sometimes referred to as the "Purchaser." Capitalized terms used and
not otherwise defined herein shall, unless the context otherwise requires, have
the respective meanings set forth in the Indenture.
SECTION 3. SALE OF NOTES.
Subject to the terms and conditions herein contained and on the basis of
the representations and warranties hereinafter set forth, the Issuer agrees to
issue and sell to you, and you agree to purchase up until July 15, 1996 from the
Issuer on the dates specified in the first sentence of the immediately
succeeding paragraph, Notes in an amount so that the aggregate amount
outstanding does not exceed $70,000,000.
The Notes purchased by you (i) with respect to the initial Tranche will
be delivered to you on such date, not later than July 28, 1995 (the initial
"Delivery Date"), and (ii) with respect to each subsequent Tranche as the Issuer
shall specify to you by at least 10 Business Days prior written notice (or such
shorter period as is agreed to by you and the Insurer). Delivery of the Notes on
each Delivery Date will be made at the offices of IBJ International PLC, Bracken
House, One Friday Street, London EC4M 9JA. Attention: Julie Tyler, Custody
Officer, in the TLC Investment Trust Custody Account, against payment therefor
in Federal or other funds current and immediately available at the office of
Norwest Bank Minnesota, National Association, ABA No. 091000019, Clearing
Account No. 10-38-377, further credit to ____________ at 11:00 o'clock A.M.,
Central Time, on each Delivery Date. The Notes purchased by you will be
delivered to you on each Delivery Date in the form of a single registered Note
in the principal amount then to be purchased by you (unless different
-2-
<PAGE> 6
denominations are specified by you), registered in your name or in the name of
your nominee, all as you may specify at any time prior to the date fixed for
delivery.
SECTION 4. HOME OFFICE PAYMENT.
Notwithstanding any contrary provision contained in the Indenture or in
any Note, the Issuer will pay or cause the Indenture Trustee to pay all sums
becoming due on each Note registered in your name at the address and in the
manner set forth in Schedule I hereto or at such other address as you or your
successors and assigns shall from time to time designate by written notice to
the Issuer or the Indenture Trustee.
SECTION 5. REPRESENTATIONS OF THE ISSUER.
The Issuer represents and warrants that all representations set forth in
the Closing Certificate attached hereto as Exhibit A are true and correct in all
respects as of the date hereof, and on each subsequent Delivery Date, and are
incorporated herein by reference with the same force and effect as though herein
set forth in full.
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
You represent and warrant to the Issuer that on each Delivery Date:
(a) Status. You (or the account(s) as to which you exercise sole
investment discretion) are an "Accredited Investor" within the meaning
of the term as defined in Rule 501(a)(1)-(3) of the Securities Act of
1933, as amended, and you have such knowledge and experience in
financial and business matters that you are capable of evaluating the
merits and risks of an investment in the Notes.
(b) Purpose. You represent, and in entering into this Agreement
the Issuer understands, that you are acquiring the Notes for the purpose
of investment and not with a view to the distribution thereof, and that
you have no present intention of selling, negotiating or otherwise
disposing of the Notes; it being understood, however, that the
disposition of your property shall at all times be and remain within
your control.
(c) Rule 144A Purchaser. You represent that you are familiar
with the provisions of Rule 144A ("Rule 144A") under the Securities Act
of 1933 (the "Act"), that you are a "qualified institutional buyer," as
defined in Rule 144A and further, that you are aware that the Issuer may
rely on the exemption from the registration requirements of the Act
provided by Rule 144A. You further acknowledge that you have
-3-
<PAGE> 7
(i) received such information regarding the Issuer of the Notes as you
as Purchaser may require pursuant to Rule 144A or (ii) you have
determined not to request such information.
(d) Organization and Good-standing. The Purchaser is a trust
duly organized, validly existing and in good standing under the law of
the Cayman Islands.
(e) Authorization. The Purchaser has the power, authority and
legal right to execute, deliver and perform this agreement and the
execution, delivery and performance of this agreement have been duly
authorized by the Purchaser.
(f) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms except that, (i) 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 (ii) 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 therefore may be
brought, whether proceeding at law or in equity.
You further represent that either: (1) no part of the funds to
be used by you to purchase the Notes constitutes assets allocated to any
separate account maintained by you; (2) no part of the funds to be used
by you to purchase the Notes constitutes assets allocated to any
separate account maintained by you such that the application of such
funds constitutes a prohibited transaction under Section 406 of the
Employee Retirement Income Security Act of l974, as amended ("ERISA");
or (3) all or a part of such funds constitute assets of one or more
separate accounts, trusts or a commingled pension trust maintained by
you, and you have disclosed to the Issuer the names of such employee
benefit plans whose assets in such separate account or accounts or
pension trusts exceed 10% of the total assets or are expected to exceed
10% of the total assets of such account or accounts or trusts as of the
date of such purchase and the Issuer has advised you in writing (and in
making the representations set forth in this clause (3) you are relying
on such advice) that the Issuer is not a party-in-interest nor are the
Notes employer securities with respect to the particular employee
benefit plan disclosed to the Issuer by you as aforesaid (for the
purpose of this clause (3), all employee benefit plans maintained by the
same employer or employee organization are deemed to be a single plan).
As used in this Section 6(b), the terms "separate account,"
"party-in-interest," "employer securities," and "employee benefit plan"
shall have the respective meanings assigned to them in ERISA.
-4-
<PAGE> 8
SECTION 7. PURCHASER'S CLOSING CONDITIONS.
Your obligation to purchase and pay for the Notes on the initial
Delivery Date is subject to performance of the conditions set forth in Section
4.01(b) of the Indenture and on each subsequent Delivery Date to performance of
the conditions set forth in Section 4.01(c) of the Indenture.
SECTION 8. EXPENSES AND TAXES.
Whether or not any Notes are sold, the Issuer will pay all reasonable
fees and expenses relating to the Financing Documents, including but not limited
to:
(a) the cost of preparing and reproducing this Agreement, the
Indenture, the Contribution Agreement, the Servicing Agreement, the
Notes and all other documents executed in connection with the issuance
of the Notes;
(b) the cost of delivering to the Custody Account, insured to
your satisfaction, the Notes purchased by you on each Delivery Date;
(c) the fees, costs and other expenses of the Indenture Trustee
under the Indenture including the reasonable fees and expenses of its
counsel and any Servicing Fees incurred pursuant to the Servicing
Agreement;
(d) all recording and filing fees and taxes in connection with
the recordation or filing and rerecordation or re-filing of the first
priority perfected security interest in the Collateral and the
publication of notices to protect the validity of the Indenture and
other notices thereof, if necessary;
(e) all reasonable expenses relating to any proposed or actual
amendments, supplemental indentures, waivers or consents (whether or not
consummated) pursuant to the provisions of the Indenture or any
Transaction Document; and
(f) all of your and the Indenture Trustee's fees and expenses
(including reasonable fees and expenses of counsel) incurred in
connection with the enforcement of the obligations of the Issuer under
any Transaction Document.
The obligations of the Issuer under this Section 8 shall survive the
payment or prepayment of the Notes and the termination of the Transaction
Document.
SECTION 9. FACILITY FEE.
-5-
<PAGE> 9
T & W Leasing, Inc., an affiliate of the Issuer, shall pay to the
Purchaser the Facility Fee (as that term is defined in the Indenture).
SECTION 10. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the Issuer and its successors and
assigns and shall inure to your benefit and to the benefit of your successors
and assigns, including each successive holder or holders of any Notes.
SECTION 11. SURVIVAL OF COVENANTS AND REPRESENTATIONS.
All covenants, representations and warranties made by any party to any
other party herein or in any certificate delivered pursuant hereto, whether or
not in connection with a Delivery Date, shall be considered to have been relied
upon by such other party and shall survive the issuance of the Notes and the
delivery of this Agreement and shall survive until all of the Notes are paid in
full.
SECTION 12. SEVERABILITY.
Should any part of this Agreement for any reason be declared invalid,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in force and effect as if this Agreement had been
executed with the invalid portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid.
SECTION 13. COMMUNICATIONS AND NOTICES.
All communications and notices provided for under the Notes, the
Indenture or this Agreement shall be in writing and, if to you, delivered or
mailed by registered or certified mail, postage prepaid, or by telephonic
facsimile transmission and overnight delivery service, postage prepaid addressed
to you at your address set forth on Schedule I attached hereto and made a part
hereof or to such other address as you may designate to the Issuer in writing,
and, if to the Issuer, delivered or mailed by registered or certified mail,
postage prepaid, or by telephonic facsimile transmission and overnight delivery
service, postage prepaid to the Issuer at 6416 16th Street East, Tacoma,
Washington 98424, Attention: Michael A. Price, or to such other address as the
Issuer may designate to you in writing.
SECTION 14. LAW GOVERNING.
-6-
<PAGE> 10
THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 15. COUNTERPARTS.
This Agreement may be simultaneously executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but such counterparts together shall constitute but one and the same instrument.
SECTION 16. HEADINGS AND TABLE OF CONTENTS.
The headings of the sections of this Agreement and the Table of Contents
are inserted for purposes of convenience only and shall not be construed to
affect the meaning or construction of any of the provisions hereof.
-7-
<PAGE> 11
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth.
T & W FUNDING COMPANY IV, L.L.C.
By /s/ MICHAEL A. PRICE
--------------------
Its
-8-
<PAGE> 12
Accepted as of the first date written above.
TLC INVESTMENT TRUST
By /s/ [SIG]
-----------------
Its
-9-
<PAGE> 13
T & W Leasing, Inc. hereby agrees to perform the obligations set forth in
Section 9 hereof.
T & W LEASING, INC.
By /s/ MICHAEL A. PRICE
--------------------
Name:
Title:
-10-
<PAGE> 14
SCHEDULE I
(TO NOTE PURCHASE AGREEMENT)
NAME AND ADDRESS
OF PURCHASER
TLC INVESTMENT TRUST
Address: c/o Bank America Trust & Banking Corporation
(Cayman) Ltd.
Fort Street Grand Cayman BWI
Cayman Islands,
British West Indies
Attention:
Fax:
Payments:
All payments on or in respect of the Class A Notes to be by bank wire
transfer of Federal or other immediately available funds (identifying
each payment as "T & W Funding Company IV, L.L.C. Lease-Backed Notes,
Series 1995-1 (Issuable in Tranches)" to:
for credit to:
026008345
in favor of TLC Investment Trust
Account #2051-03285
<PAGE> 15
with telephone advice to:
Julie Tyler, at 171-236-1050
or
Leonard Woo, at 212-309-1842
Notices
All notices and communications to be addressed as first provided above
with a copy to the Investment Manager at:
The Industrial Bank of Japan, Ltd.
New York Branch
245 Park Avenue
New York, NY 10167
Attention: Leonard Woo
Name in which Notes are to be issued: TLC INVESTMENT TRUST
Tax ID #: None
I-2
<PAGE> 16
Exhibit A
T & W FUNDING COMPANY IV, L.L.C.
LEASE-BACKED NOTES, SERIES 1995-I (Issuable in Tranches)
CERTIFICATE PURSUANT TO SECTION 4.01(b)(iv)
OF THE INDENTURE
I, Michael A. Price, hereby certify that I am the President of T & W
Funding Company IV, L.L.C. (the "Issuer"), I have read Section 4.01(b)(iv) of
the Indenture dated as of July 1, 1995 (the "Indenture"), among the Issuer,
T & W Leasing, Inc., as Servicer (the "Servicer"), and Norwest Bank Minnesota,
National Association, as Trustee and Backup Servicer, together with the
definitions contained elsewhere in the Indenture relating to such Section, and
further:
(a) that the Issuer is not in Default under the Indenture or
the Servicing Agreement and that the issuance of the Notes will not
result in any breach of any of the terms, conditions or provisions of,
or constitute a default under, the Issuer's Certificate of Formation,
Limited Liability Company Agreement or other organizational documents,
as applicable, or any material indenture, mortgage, deed of trust or
other agreement or instrument to which the Issuer is a party or by which
it is bound, or, to the best of my knowledge, any order of any court or
administrative agency entered into any proceeding to which the Issuer is
a party or by which it may be bound or to which it may be subject;
(b) that all conditions precedent provided in the Indenture
relating to the authentication and delivery of the Notes have been
complied with; and
(c) that the Issuer reasonably believes that neither an Event
of Default nor a Trigger Event has occurred and is continuing or that
such issuance will not, based on the facts known to this officer at the
time of this certification, then or thereafter cause an Event of Default
or a Trigger Event to occur with respect to any Tranche of Outstanding
Notes.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Issuer, this 28th day of July, 1995.
T & W FUNDING COMPANY IV, L.L.C.
By [SIG]
---------------------------------
President
<PAGE> 1
EXHIBIT 10.19
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Assignment") is made as of
July 28, 1995 (the "Contribution Date"), by and between T & W Finance Corp. III,
a Delaware corporation ("Assignor"), and T & W Funding Company IV, L.L.C., a
Delaware limited liability company ("Assignee"), with reference to the following
facts:
RECITALS:
A. In connection with the contribution of certain lease assets of
Assignor in conjunction with the issuance from time to time of notes (the
"Notes") by the Assignee, Assignee and the Assignor have executed the
Contribution Agreement dated as of July 1, 1995 (the "Contribution Agreement").
B. In connection with the Contribution Agreement, the Assignor desires
to assign and transfer to Assignee all of Assignor's right, title and interest
in and to each of the assets described in Schedule II hereto, as supplemented
from time to time, and the corresponding paragraphs below (the "Assigned
Interests").
C. Assignor desires to transfer and Assignee is willing to assume
certain indebtedness of Assignor listed on Schedule I hereto.
D. Assignee desires to accept the Assignment and transfer of the
Assigned Interests and assume all duties and obligations attendant thereto,
accruing after the Contribution Date.
E. Terms used but not defined herein have the meanings ascribed to them
in the Contribution Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignor and Assignee hereby agree as follows:
1. Assignment. The Assignor hereby assigns, conveys, grants and
transfers, without recourse except as provided in the Contribution Agreement, to
Assignee (and the successors and assigns of Assignee) the following property:
<PAGE> 2
1.1. The Assignor's right, title and interest in and to the
Lease Contracts and related Lease Receivables described and listed on
Schedule II hereto.
1.2. All of Assignor's right, title and interest in and to the
equipment subject to each such Lease Contract (the "Equipment").
1.3. All of Assignor's other Lease Assets relating to each
such Lease Contract.
2. Assumption. The Assignee hereby agrees to assume the indebtedness of
Assignor listed on Schedule I hereto and to use the proceeds of the sale of
Notes to pay such indebtedness. Assignee hereby accepts the foregoing Assignment
and hereby assumes all of the other obligations incident hereto and thereto,
subject to the terms and conditions of the Contribution Agreement.
3. Further Assurance. The Assignor and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignor and Assignee hereby acknowledge that
for all purposes the Assignor and Assignee are each separate and distinct legal
entities. Accordingly, the Assignor shall not be liable to any third party for
the debts, obligations and liabilities of the Assignee; and Assignee shall not
be liable to any third party for the debts, obligations and liabilities of the
Assignor to the extent that such debts, obligations and liabilities have not
been expressly assumed by Assignee hereunder.
5. Governing Law. This Assignment shall be governed by and interpreted
in accordance with the laws of the State of Delaware, and the parties hereto
hereby acknowledge and agree that this Assignment and Assumption Agreement and
the transactions contemplated hereunder were negotiated and entered into in the
State of Delaware.
6. Authority. The Assignor and Assignee each hereby represent
respectively that they have full power and authority to enter into this
Assignment.
7. Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
8. Successors and Assigns. The Assignor and Assignee each agree that
this Assignment will be binding and will inure to the benefit of the Assignor
and its successors and assigns and the Assignee and its successors and assigns.
B-2
<PAGE> 3
IN WITNESS WHEREOF, this Assignment has been executed as of the date
first above written.
T & W FINANCE CORP. III,
Assignor
By /s/ MICHAEL A. PRICE
--------------------------------
Name:
Title:
T & W FUNDING COMPANY IV, L.L.C.,
Assignee
By /s/ MICHAEL A. PRICE
--------------------------------
Name:
Title:
B-3
<PAGE> 4
SCHEDULE I
SCHEDULE OF EXISTING INDEBTEDNESS
<TABLE>
<S> <C>
Northwest Community Bank $201,468.20
Seafirst Bank $8,947,739.88
Corestates Bank $8,219,766.62
Key Bank of Washington $6,334,295.53
</TABLE>
<PAGE> 5
SCHEDULE II
LEASE SCHEDULE
<PAGE> 1
EXHIBIT 10.20
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Assignment") is made as of
July 28, 1995 (the "Contribution Date"), by and between T & W Finance Corp. IV,
a Delaware corporation ("Assignor"), and T & W Funding Company IV, L.L.C., a
Delaware limited liability company ("Assignee"), with reference to the following
facts:
RECITALS:
A. In connection with the contribution of certain lease assets of
Assignor in conjunction with the issuance from time to time of notes (the
"Notes") by the Assignee, Assignee and the Assignor have executed the
Contribution Agreement dated as of July 1, 1995 (the "Contribution Agreement").
B. In connection with the Contribution Agreement, the Assignor desires
to assign and transfer to Assignee all of Assignor's right, title and interest
in and to each of the assets described in Schedule II hereto, as supplemented
from time to time, and the corresponding paragraphs below (the "Assigned
Interests").
C. Assignor desires to transfer and Assignee is willing to assume
certain indebtedness of Assignor listed on Schedule I hereto.
D. Assignee desires to accept the Assignment and transfer of the
Assigned Interests and assume all duties and obligations attendant thereto,
accruing after the Contribution Date.
E. Terms used but not defined herein have the meanings ascribed to them
in the Contribution Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignor and Assignee hereby agree as follows:
1. Assignment. The Assignor hereby assigns, conveys, grants and
transfers, without recourse except as provided in the Contribution Agreement, to
Assignee (and the successors and assigns of Assignee) the following property:
1.1. The Assignor's right, title and interest in and to the
Lease Contracts and related Lease Receivables described and listed on
Schedule II hereto.
<PAGE> 2
1.2. All of Assignor's right, title and interest in and to the
equipment subject to each such Lease Contract (the "Equipment").
1.3. All of Assignor's other Lease Assets relating to each
such Lease Contract.
2. Assumption. The Assignee hereby agrees to assume the indebtedness of
Assignor listed on Schedule I hereto and to use the proceeds of the sale of
Notes to pay such indebtedness. Assignee hereby accepts the foregoing Assignment
and hereby assumes all of the other obligations incident hereto and thereto,
subject to the terms and conditions of the Contribution Agreement.
3. Further Assurance. The Assignor and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignor and Assignee hereby acknowledge that
for all purposes the Assignor and Assignee are each separate and distinct legal
entities. Accordingly, the Assignor shall not be liable to any third party for
the debts, obligations and liabilities of the Assignee; and Assignee shall not
be liable to any third party for the debts, obligations and liabilities of the
Assignor to the extent that such debts, obligations and liabilities have not
been expressly assumed by Assignee hereunder.
5. Governing Law. This Assignment shall be governed by and interpreted
in accordance with the laws of the State of Delaware, and the parties hereto
hereby acknowledge and agree that this Assignment and Assumption Agreement and
the transactions contemplated hereunder were negotiated and entered into in the
State of Delaware.
6. Authority. The Assignor and Assignee each hereby represent
respectively that they have full power and authority to enter into this
Assignment.
7. Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
8. Successors and Assigns. The Assignor and Assignee each agree that
this Assignment will be binding and will inure to the benefit of the Assignor
and its successors and assigns and the Assignee and its successors and assigns.
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Assignment has been executed as of the date
first above written.
T & W FINANCE CORP. IV,
Assignor
By /s/ MICHAEL A. PRICE
-------------------------------
Name:
Title:
T & W FUNDING COMPANY IV, L.L.C.,
Assignee
By /s/ MICHAEL A. PRICE
-------------------------------
Name:
Title:
-3-
<PAGE> 4
SCHEDULE I
SCHEDULE OF EXISTING INDEBTEDNESS
<TABLE>
<S> <C>
Northwest Community Bank $201,468.20
Seafirst Bank $8,947,739.88
Corestates Bank $8,219,766.62
Key Bank of Washington $6,334,295.53
</TABLE>
<PAGE> 5
SCHEDULE II
LEASE SCHEDULE
<PAGE> 1
EXHIBIT 10.21
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Assignment") is made as of
July 28, 1995 (the "Contribution Date"), by and between T & W Finance Company V,
L.L.C., a Delaware limited liability company ("Assignor"), and T & W Funding
Company IV, L.L.C., a Delaware limited liability company ("Assignee"), with
reference to the following facts:
RECITALS:
A. In connection with the contribution, from time to time, of certain
lease assets of Assignor in conjunction with the issuance from time to time of
notes (the "Notes") by the Assignee, Assignee and the Assignor have executed the
Contribution Agreement dated as of July 1, 1995 (the "Contribution Agreement").
B. In connection with the Contribution Agreement, the Assignor desires
to assign and transfer to Assignee all of Assignor's right, title and interest
in and to each of the assets described in Schedule II hereto, as supplemented
from time to time, and the corresponding paragraphs below (the "Assigned
Interests").
C. Assignor desires to transfer and Assignee is willing to assume
certain indebtedness of Assignor listed on Schedule I hereto.
D. Assignee desires to accept the Assignment and transfer of the
Assigned Interests and assume all duties and obligations attendant thereto,
accruing after the Contribution Date.
E. Terms used but not defined herein have the meanings ascribed to them
in the Contribution Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignor and Assignee hereby agree as follows:
1. Assignment. The Assignor hereby assigns, conveys, grants and
transfers, without recourse except as provided in the Contribution Agreement, to
Assignee (and the successors and assigns of Assignee) the following property:
<PAGE> 2
1.1. The Assignor's right, title and interest in and to the
Lease Contracts and related Lease Receivables described and listed on
Schedule II hereto.
1.2. All of Assignor's right, title and interest in and to the
equipment subject to each such Lease Contract (the "Equipment").
1.3. All of Assignor's other Lease Assets relating to each
such Lease Contract.
2. Assumption. The Assignee hereby agrees to assume the indebtedness of
Assignor listed on Schedule I hereto and to use the proceeds of the sale of
Notes to pay such indebtedness. Assignee hereby accepts the foregoing Assignment
and hereby assumes all of the other obligations incident hereto and thereto,
subject to the terms and conditions of the Contribution Agreement.
3. Further Assurance. The Assignor and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignor and Assignee hereby acknowledge that
for all purposes the Assignor and Assignee are each separate and distinct legal
entities. Accordingly, the Assignor shall not be liable to any third party for
the debts, obligations and liabilities of the Assignee; and Assignee shall not
be liable to any third party for the debts, obligations and liabilities of the
Assignor to the extent that such debts, obligations and liabilities have not
been expressly assumed by Assignee hereunder.
5. Governing Law. This Assignment shall be governed by and interpreted
in accordance with the laws of the State of Delaware, and the parties hereto
hereby acknowledge and agree that this Assignment and Assumption Agreement and
the transactions contemplated hereunder were negotiated and entered into in the
State of Delaware.
6. Authority. The Assignor and Assignee each hereby represent
respectively that they have full power and authority to enter into this
Assignment.
7. Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
8. Successors and Assigns. The Assignor and Assignee each agree that
this Assignment will be binding and will inure to the benefit of the Assignor
and its successors and assigns and the Assignee and its successors and assigns.
B-2
<PAGE> 3
IN WITNESS WHEREOF, this Assignment has been executed as of the date
first above written.
T & W FINANCE COMPANY V, L.L.C.,
Assignor
By /s/ MICHAEL A. PRICE
-------------------------------
Name:
Title:
T & W FUNDING COMPANY IV, L.L.C.,
Assignee
By /s/ MICHAEL A. PRICE
-------------------------------
Name:
Title:
B-3
<PAGE> 4
SCHEDULE I
SCHEDULE OF EXISTING INDEBTEDNESS
<TABLE>
<S> <C>
Northwest Community Bank $201,468.20
Seafirst Bank $8,947,739.88
Corestates Bank $8,219,766.62
Key Bank of Washington $6,334,295.53
</TABLE>
<PAGE> 5
SCHEDULE II
LEASE SCHEDULE
<PAGE> 1
EXHIBIT 10.22
EXECUTION COPY
MBIA INSURANCE CORPORATION,
as Insurer
T & W LEASING INC.,
as Company
T & W LEASING INC.,
as Servicer
T & W FUNDING COMPANY IV, L.L.C.,
as Issuer
K & P FINANCE CORP.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Backup Servicer
INSURANCE AGREEMENT
T & W FUNDING COMPANY IV, L.L.C.
LEASE-BACKED NOTES, SERIES 1995-1
Dated as of July 1, 1995
<PAGE> 2
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall
not be deemed to be a part of this Insurance Agreement. All capitalized terms
used in this Agreement and not otherwise defined shall have the meanings set
forth in Article I of this Agreement.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions ...................................................................2
Section 1.02. Generic Terms .........................................................................4
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Company, the Issuer and the Servicer.............4
Section 2.02. Affirmative Covenants of the Company, the Issuer and the Servicer......................6
Section 2,03. Negative Covenants of the Company and Issuer..........................................11
ARTICLE III
THE NOTE INSURANCE POLICY; SECURITY
Section 3.01. Agreement To Issue the Note Insurance Policy..........................................11
Section 3.02. Conditions Precedent to Issuance of the Note Insurance Policy Relating to the Notes.. 12
Section 3.03. Premium ..............................................................................16
Section 3.04. Indemnification ......................................................................16
Section 3.05. Payment Procedure ....................................................................18
Section 3.06. Subrogation ..........................................................................18
Section 3.07. Reimbursement and Additional Payment Obligation ......................................19
Section 3.08. Reimbursement of Insurer Following Exercise of Clean-up Call .........................20
</TABLE>
<PAGE> 3
ARTICLE IV
FURTHER AGREEMENTS
<TABLE>
<S> <C>
Section 4.01. Effective Date; Term of Agreement ..............................20
Section 4.02. Waiver of Rights; Further Assurances and Corrective Instruments 20
Section 4.03. Obligations Absolute ...........................................21
Section 4.04. Assignments; Reinsurance; Third-Party Rights ...................21
Section 4.05. Liability of Insurer ...........................................22
Section 4.06. Control by Insurer .............................................22
Section 4.07. Covenants of the Indenture Trustee and Backup Servicer .........22
Section 4.08. Covenants of K & P Finance Corp ................................23
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. Defaults .......................................................23
Section 5.02. Remedies; No Remedy Exclusive ..................................24
Section 5.03. Waivers ........................................................25
Section 5.04. Insurer Will Not Institute Insolvency Proceedings ..............25
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Changes and Modifications ..........................26
Section 6.02. Notices ........................................................26
Section 6.03. Severability ...................................................27
Section 6.04. Governing Law ..................................................28
Section 6.05. Consent to Jurisdiction and Venue, Etc. ........................28
Section 6.06. Consent of Insurer .............................................29
Section 6.07. Counterparts ...................................................29
Section 6.08. Recitals .......................................................29
Section 6.09. Headings .......................................................29
Section 6.10. Parties Not To Institute Insolvency Proceedings ................29
TESTIMONIUM ..................................................................26
SIGNATURES ...................................................................26
</TABLE>
<PAGE> 4
INSURANCE AGREEMENT
THIS INSURANCE AGREEMENT is made as of July 1, 1995 by and among MBIA
INSURANCE CORPORATION (the "Insurer"), T & W LEASING INC., in its capacity as
Company (the "Company"), T & W LEASING INC., in its capacity as Servicer (the
"Servicer"), T & W FUNDING COMPANY IV, L.L.C., in its capacity as Issuer (the
"Issuer"), K & P FINANCE CORP. and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
in its capacities as Indenture Trustee (the "Indenture Trustee") and backup
servicer (the "Backup Servicer") under the Indenture (as defined below).
RECITALS:
1. The Indenture Trustee is authenticating $53,295,306.36 principal
amount of 6.19% Lease-Backed Notes, (the "Initial Notes" and together with any
additional Tranches of Notes issued pursuant to the Indenture, the "Notes"),
provided that the terms and conditions of this Agreement and the other
Transaction Documents have been satisfied, pursuant to an indenture (the
"Indenture") as more specifically defined below. The Initial Notes will be
secured by the Collateral pledged pursuant to the Indenture. The Collateral will
consist of the Trust Estate as defined in the Indenture.
2. The Company and the Issuer have requested that the Insurer issue
from time to time separate Note Insurance Policies to guarantee payment of
Insured Payments (as defined in the Note Insurance Policies), upon such terms
and conditions as were mutually agreed upon by the parties and subject to the
terms and conditions of each Note Insurance Policy.
3. The parties hereto desire to specify the conditions precedent to
the issuance of the Note Insurance Policies by the Insurer, the indemnity and
reimbursement to be provided by the Company and the Issuer in respect of amounts
paid by the Insurer under the Note Insurance Policies, the security to be
provided to the Insurer by the Company as an inducement for the Insurer to
deliver the Note Insurance Policies and to provide for certain other matters.
NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained, the Insurer, the Company, the Issuer, the Servicer, the Backup
Servicer and the Indenture Trustee agree as follows:
<PAGE> 5
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions. The terms defined in this Article I
shall have the meanings provided herein for all purposes of this Agreement,
unless the context clearly requires otherwise, in both singular and plural form,
as appropriate. Capitalized terms used in this Agreement but not otherwise
defined herein will have the meanings ascribed to such terms in the Indenture.
"Adverse Selection Procedure" means any method of selecting or
identifying Lease Contracts eligible to be included in the Collateral for
inclusion therein, other than as outlined in the Commitment, that materially and
adversely affects the representative nature of the sample of Lease Contracts so
selected and decreases the probability that the Indenture Trustee will receive
an uninterrupted flow of payments of principal and interest under the Lease
Contracts.
"Agreement" means this Insurance Agreement dated as of July 1, 1995,
including any amendments or any supplements hereto as herein permitted.
"Business Day" means 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
Corporate Trust Office of the Indenture Trustee is located, are authorized or
obligated by law or executive order to close.
"Closing Date" means July 28, 1995.
"Collateral" means the Trust Estate as defined in the Indenture.
"Commitment" means the Commitment Letter dated as of July 25, 1995
between the Company and the Insurer.
"Contribution Agreement" means The Contribution Agreement dated as of
July 1, 1995 between the Issuer, the Contributors and the Company as the same
may be amended or supplemented from time to time in accordance with the terms
thereof.
"Contributor" means each of T & W Finance Corp. III, T & W Finance Corp.
IV and T & W Finance Company V, L.L.C.
"Controlling Party" means the Insurer, so long as no Insurer Insolvency
shall have occurred or Insurer Default shall have occurred and be continuing,
and, thereafter, the Indenture Trustee.
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"Date of Issuance" means the date on which the Note Insurance Policy is
issued.
"Event of Default" means any event of default set forth in Section 5.01
hereof.
"Indenture" means the Indenture dated as of July 1, 1995 among the
Company, Servicer, Issuer, Indenture Trustee and Backup Servicer including any
amendments and supplements thereto as therein and herein permitted.
"Initial Premium" means the amount set forth in the first paragraph of
Paragraph 1.a.(i) and the first and second paragraph of Paragraph 1a.(ii) of
the Commitment.
"Insurer" means MBIA Insurance Corporation.
"Insurer Default" means the occurrence and continuance of any failure of
the Insurer to make payments under the Note Insurance Policy in accordance with
its terms.
"Insurer Insolvency" means (i) the entry of a decree or order of a court
or agency having jurisdiction in respect of the Insurer in an involuntary case
under any present or future federal or state bankruptcy, insolvency or similar
law or appointing a conservator or receiver or liquidator or rehabilitator or
other similar official of the Insurer or of any substantial part of its
property, or the entering of an order for the winding up or liquidation of the
affairs of the Insurer and the continuance of any such decree or order
undischarged or unstayed and in force for a period of 90 consecutive days; (ii)
the Insurer shall consent to the appointment of a conservator or receiver or
liquidator or other similar official in any insolvency, readjustment of debt,
marshalling of assets and liabilities, rehabilitation or similar proceedings of
or relating to the Insurer or of or relating to all or substantially all of its
property; or (iii) the Insurer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of or
otherwise voluntarily commence a case or proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar statute, make an
assignment for the benefit of its creditors, or voluntarily suspend payment of
its obligations.
"Late Payment Rate" means the rate of interest as is publicly announced
by Citibank, N.A. at its principal office in New York, New York as its prime
rate (any change in such prime rate of interest to be effective on the date such
change is announced by Citibank, N.A.) plus 2%. The Late Payment Rate shall be
computed on the basis of a year of 365 days calculating the actual number of
days elapsed. In no event shall the Late Payment Rate exceed the maximum rate
permissible under law applicable to this Agreement limiting interest rates.
"MBIA Premium" means the amount set forth in the second paragraph of
Paragraph 1a.(i) and the third paragraph of Paragraph 1a.(ii) of the Commitment.
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<PAGE> 7
"Note Insurance Policy" means any Note Insurance Policy issued with
respect to any Tranche of Notes, and any endorsement thereto issued by the
Insurer to the Indenture Trustee.
"Reported Company's Financial Statements" shall have the meaning set
forth in the Servicing Agreement.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., its successors and their assigns, and, if such corporation shall for any
reason no longer perform the functions of a securities rating agency, "S&P"
shall be deemed to refer to any other nationally recognized rating agency
designated by the Company with the approval of the Insurer.
"State" means the State of New York.
"Term of the Agreement" shall be determined as provided in
Section 4.01.
"Transaction Documents" means this Agreement, the Indenture, the
Servicing Agreement, the Contribution Agreement, the Notes and the Note
Insurance Policy.
Section 1.02. Genetic Terms. All words used herein shall be construed to
be of such gender or number as the circumstances require. This "Agreement" shall
mean this Agreement as a whole and as the same may, from time to time hereafter,
be amended, supplemented or modified. The words "herein," "hereby," "hereof,"
"hereto," "hereinabove" and "hereinbelow," and words of similar import, refer to
this Agreement as a whole and not to any particular paragraph, clause or other
subdivision hereof, unless otherwise specifically noted.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Company, the Issuer
and the Servicer. The Company, the Issuer and the Servicer represent and warrant
to, and covenant with, the other parties hereto (in each case only as to matters
concerning itself) as follows:
(a) Representations and Warranties of Company, the Issuer and
Servicer Contained in Other Transaction Documents. All of the
representations and warranties made by the Company, the Issuer or the
Servicer, as the case may be, in any of the Transaction Documents are
incorporated as if fully set forth herein for the benefit of the Insurer
and are true and correct as of the Closing Date.
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<PAGE> 8
(b) Due Qualification. Each of the Company, the Issuer and
the Servicer have obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") required to be
obtained by the Company, the Issuer and the Servicer which failure to
obtain would render any portion of the Transaction Documents
unenforceable by the Company, the Issuer, the Servicer or any other
party to the Transaction Documents, as the case may be, and would have a
material adverse effect on the Insurer or the Noteholders.
(c) Pending Litigation or Other Proceeding. There is no
pending action, proceeding or investigation before any court,
governmental or administrative agency or arbitrator against or affecting
the Company, the Issuer or the Servicer or, to the Company's, the
Issuer's or the Servicer's knowledge, any threatened action or
proceeding before any of the foregoing, which, if decided adversely to
the Company, the Issuer or the Servicer, would materially and adversely
affect the ability of the Company, the Issuer or the Servicer to perform
their respective obligations under the Transaction Documents or would
have a materially adverse effect on the Insurer or the Noteholders.
(d) Valid and Binding Agreement. The Transaction Documents
to which the Company, the Issuer or the Servicer, respectively, is a
party constitute, and when executed (if not previously) will constitute,
the legal, valid and binding agreements of the Company, the Issuer and
the Servicer, respectively, enforceable against the Company, the Issuer
and the Servicer in accordance with their respective terms, except as
the enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or limiting
creditors' rights generally or general equitable principles, as such
relate to the Company, the Issuer or the Servicer. The Company, the
Issuer and the Servicer hereby agree and covenant that each will not at
any time in the future, deny that the Transaction Documents to which the
Company, the Issuer or the Servicer, respectively, is a party constitute
the valid, legal and binding agreements of the Company, the Issuer and
the Servicer, respectively, except to the extent that the Company, the
Issuer or the Servicer is compelled to do so by law or regulation.
(e) Financial Statements. The Reported Company's Financial
Statements, copies of which have been furnished to the Insurer, (i) are,
as of the dates and for the periods referred to therein, complete and
correct in all material respects, (ii) present fairly the financial
condition and results of operations of the companies reported therein as
of the dates and for the periods indicated and (iii) have been prepared
in accordance with generally accepted accounting principles consistently
applied, except as noted therein and subject to year-end adjustments
with respect to interim statements. Since the date of the most recent
Reported Company's Financial Statements, there has been no material
adverse change in such condition or operations.
5
<PAGE> 9
(f) Compliance With Law, Regulations, Etc. None of the
Company, the Issuer or the Servicer has notice or any reason to believe
that any practice, procedure or policy employed by the Company, the
Issuer or the Servicer in the conduct of its business violates any law,
regulation, judgment or agreement applicable to the Company, the Issuer
or the Servicer which, if enforced, would have a material adverse effect
on the ability of the Servicer, the Company or the Issuer, as the case
may be, to perform its respective obligations under the Transaction
Documents. None of the Issuer, the Company and the Servicer is in breach
of or in default under any applicable law or administrative regulation
of the State of Washington or Delaware or any department, division,
agency or instrumentality thereof or of the United States or any
applicable judgment or decree or any loan agreement, note, resolution,
certificate, agreement or other instrument to which the Company is a
party or is otherwise subject which, if enforced, would have a material
adverse effect on the ability of the Servicer, the Company or the
Issuer, as the case may be, to perform its respective obligations under
the Transaction Documents.
(g) Delivery of Information. The Company alone represents
and warrants that none of the Transaction Documents nor any other
information furnished to the Insurer by or on behalf of the Company
contain any statement of a material fact by the Company which was untrue
or misleading in any material respect when made. Since the furnishing of
such information, there has been no change nor any development or event
involving a prospective change which would render any of the Transaction
Documents or other information furnished to the Insurer untrue or
misleading in a material respect.
(h) Securities Laws Compliance. The Company, the Servicer
and the Issuer represent and warrant that neither the offer nor the sale
of the Notes has been or will be in violation of the Securities Act of
1933, and none of the Company, the Issuer or the Servicer is required to
be registered as an "investment company" under the Investment Company
Act of 1940, as amended.
(i) Federal Reserve Board Regulations. No part of the
proceeds of the Notes will be used by the Company or the Issuer to
purchase or carry any "margin stock" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System.
Section 2.02. Affirmative Covenants of the Company, the Issuer and the
Servicer. The Company, the Issuer and the Servicer hereby covenant and agree
that during the term of this Agreement:
(a) Compliance With Agreements. The Company, the Issuer and
the Servicer shall comply in all material respects with the terms and
conditions of the Transaction
6
<PAGE> 10
Documents to which each, respectively, is a party and, unless the
Insurer shall otherwise consent, none of the Company, the Issuer or the
Servicer shall agree to any amendment to or modification of the terms of
any of the Transaction Documents to which each, respectively, is a
party.
(b) Corporate Existence. The Company, the Issuer and the
Servicer shall maintain their respective existences and continue to be
duly organized, duly qualified and duly authorized.
(c) The Company To Provide Financial Statements;
Accountants' Reports; Other Information. The Company and the Servicer
shall keep or cause to be kept in reasonable detail books and records of
account of the Company's or the Servicer's books and records relating to
its obligations assumed under the Transaction Documents, in accordance
with its operating rules and procedures. The Company and the Servicer
shall each furnish or cause to be furnished to the Insurer:
(i) Financial Statements. All reports required to be
furnished under Section 4.02(a) of the Servicing Agreement.
(ii) Initial and Monthly Reports. On or before the
Closing Date, the Company will provide the Insurer with the
Lease Schedule for the Notes. Thereafter, not later than 12:00
noon New York City time on each Determination Date, the Servicer
shall deliver to the Insurer the report required by Section 4.01
of the Servicing Agreement setting forth, among other things,
(A) the outstanding Aggregate Implicit Principal Balance of all
Lease Contracts, (B) the Required Collateralization Amount and
(C) the outstanding principal balance of the Notes.
(iii) Other Reports and Information. The Company shall
also furnish, with reasonable promptness, such other financial
data, financial reports relating to the Company prepared by
third parties and other data relating to the Company which are
commonly prepared and can be provided without undue effort, as
the Insurer may reasonably request. Costs associated with
providing such information shall, if requested by the Company,
be paid by the Insurer.
(d) The Issuer Member Meetings. The Issuer shall have annual
meetings of its members and shall prepare income and franchise tax
returns as appropriate. The Issuer shall deliver to the Insurer copies
of the minutes of such meetings no later than April 30 of each year and
such tax returns promptly upon filing but in no event later than August
31 of each year, beginning in 1996.
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<PAGE> 11
(e) Certificate of Compliance. The Servicer shall deliver to
the Insurer concurrently with the delivery of the Financial Statements
required pursuant to paragraph (c) above the reports to the Indenture
Trustee and other statements required to be delivered under Sections
4.02, 4.03 and 4.05 of the Servicing Agreement.
(f) Access to Records; Discussions With Officers and
Accountants. The Company, the Issuer and the Servicer shall, upon the
request of the Insurer, permit the Insurer, or its authorized agent, at
reasonable times and upon reasonable notice:
(i) to inspect such books and records of the
Company, the Issuer or the Servicer, as the case may be, as may
relate to the Notes, the Lease Contracts, the obligations of the
Company, the Issuer or the Servicer, as the case may be, under
the Transaction Documents and the transactions consummated in
connection herewith;
(ii) to discuss the affairs, finances and accounts of
the Company, the Issuer or the Servicer as such relate to the
performance by it of its obligations under the Transaction
Documents with an appropriate officer of the Company, the Issuer
or the Servicer, as the case may be; and
(iii) to discuss the affairs, finances and accounts of
the Company, the Issuer or the Servicer as such relate to the
performance by it of its obligations under the Transaction
Documents with the Company's, the Issuer's or the Servicer's
independent public accountants, as the case may be, provided
that an appropriate officer of the Company, the Issuer or the
Servicer, as the case may be, shall have the right to be present
during such discussions, and provided further that the Insurer
shall pay any fees of such accountants associated with such
discussions.
Such inspections and discussions shall be conducted during
normal business hours and shall not unreasonably disrupt the business of
the Company, the Issuer or the Servicer. The books and records of the
Company will be maintained at the address of the Company designated
herein for receipt of notices, unless the Company shall otherwise advise
the parties hereto in writing, the books and records of the Issuer will
be maintained at the address of the Issuer designated herein for receipt
of notices, unless the Issuer shall otherwise advise the parties hereto
in writing, and the books and records of the Servicer will be maintained
at the address of the Servicer designated herein for receipt of notices,
unless the Servicer shall otherwise advise the parties hereto in
writing.
The Insurer shall keep confidential any matter of which it
becomes aware through such inspections or discussions, except as may be
otherwise required, by regulation, law or
8
<PAGE> 12
court order or requested by appropriate governmental authorities or as
necessary to enforce any of the provisions of the Transaction Documents.
(g) Inform Insurer of Material Events. Each of the Company,
the Issuer and the Servicer shall promptly inform, the Insurer and the
Indenture Trustee in writing of the following:
(i) any default or any fact or event which results,
or which with notice or the passage of time, or both, would
result in an Event of Default or Servicer Event of Default under
any Transaction Document or would constitute a material breach
of a representation, warranty or covenant by it under any
Transaction Document;
(ii) the submission of any claim or the initiation of
any legal process, litigation or administrative or judicial
investigation against it in any federal, state or local court or
before any governmental body or agency, or before any
arbitration board, or any such proceedings threatened by any
governmental agency, which, if adversely determined, would have
a material adverse effect upon its ability to perform its
obligations under any Transaction Document;
(iii) the submission of any claim or the initiation of
any legal process, litigation or administrative or judicial
investigation in any federal, state or local court or before any
arbitration board, or any such proceeding threatened by any
governmental agency, which, if adversely determined, would have
a material adverse effect on the Trust Estate;
(iv) the commencement of any proceedings under any
applicable bankruptcy, reorganization, liquidation, insolvency
or other similar law now or hereafter in effect or of any
proceeding in which a receiver, liquidator, trustee or other
similar official shall have been, or may be, appointed or
requested; and
(v) the receipt of notice from any agency or
governmental body having authority over the conduct of its
business that it is to cease and desist, or to undertake any,
practice, program, procedure or policy employed by it in the
conduct of the business of either of them, and such cessation or
undertaking will materially adversely affect its ability to
perform its obligations under the Transaction Documents.
9
<PAGE> 13
(h) Further Assurances. The parties hereto agree to
reasonably cooperate with S&P and Moody's in connection with any review
which may be undertaken by S&P and Moody's after the date hereof.
(i) Redemption of Notes. The Issuer shall, on or before the
fifteenth day preceding the date on which any party exercises its right
to cause the redemption of all Notes pursuant to Section 10.01 of the
Indenture, deliver written notice to the Insurer of such election
containing the information required to be delivered to the Noteholders
pursuant to Section 10.03 of the Indenture.
(j) Servicing of Lease Contracts. The Servicer shall perform
such actions with respect to the Lease Contracts as are provided in
Articles 3 and 4 of the Servicing Agreement. The parties hereto, with
the exception of the Indenture Trustee and the Backup Servicer, will
provide the Insurer with written notice of any change or amendment to
any Transaction Document as currently in effect and agree not to make
any change or amendment to any Transaction Document without the prior
written consent of the Insurer.
(k) Third-Party Rights. Subject to the prior rights of the
Noteholders, the Company agrees that the Insurer shall have all of the
rights of a third-party beneficiary of, and pursuant to, the Company's
agreements under the Contribution Agreement, and the Servicer and Issuer
agree that the Insurer shall have all of the rights of a third-party
beneficiary of, and pursuant to, the Servicer's and the Issuer's
agreements under the Indenture and the Servicing Agreement.
(l) Maintenance of Trust Estate. On or before each April 15,
so long as any of the Notes are outstanding, the Servicer shall furnish
to the Insurer and the Indenture Trustee an officer's certificate either
stating that such action has been taken with respect to the recording,
filing, rerecording and refiling of any financing statements and
continuation statements as is necessary to maintain the interest of the
Indenture Trustee created by the Indenture with respect to the
Collateral and reciting the details of such action or stating that no
such action is necessary to maintain such interests. 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 Indenture Trustee in
the Collateral until the date such next officer's certificate is due.
The Servicer will use its best efforts to cause any necessary recordings
or filings to be made with respect to the Collateral.
(m) [RESERVED].
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<PAGE> 14
(n) Servicer's Indemnity. Notwithstanding anything in
subsection 3.07(a) hereof, the Servicer shall pay to the Insurer an
amount equal to any amount paid by the Insurer because of the Servicer's
failure to deposit into the Collection Account any amount required to
be so deposited by it pursuant to the Indenture or the Servicing
Agreement, together with interest on any and all amounts remaining
unreimbursed (to the extent permitted by law, if in respect to any
unreimbursed amounts representing interest) from the date such amounts
became due until paid in full (after as well as before judgment) at a
rate of interest equal to the Late Payment Rate.
Section 2.03. Negative Covenants of the Company and Issuer. The Company
and the Issuer agree and covenant with the Insurer that at all times during the
Term of the Agreement:
(a) Adverse Selection Procedure. The Company and the Issuer
will not use any Adverse Selection Procedure in selecting the Lease
Contracts to be pledged to the Indenture Trustee from the outstanding
Lease Contracts that qualify under the Indenture for inclusion in the
Collateral.
(b) Impairment of Rights. The Company and the Issuer each
agree and covenant with the Insurer that at all times during the Term of
the Agreement the Company and the Issuer shall not take any action, or
decline to take any action if reasonably requested by the Insurer, if
such action or failure to take action will interfere with the
enforcement of any rights under any of the Transaction Documents.
(c) Amendment to Certificate of Incorporation. The Issuer
shall not amend its certificate of incorporation without the Insurer's
prior written consent.
ARTICLE III
THE NOTE INSURANCE POLICIES; SECURITY
Section 3.01. Agreement To Issue the Note Insurance Policies. The
Insurer agrees, subject to the conditions set forth in Section 3.02(a) hereof,
to issue the Note Insurance Policy relating to the Initial Notes on the Closing
Date. The Insurer agrees, subject to the conditions set forth in Section 3.02(b)
hereof, to issue additional Note Insurance Policies relating to additional
tranches of Notes on the related Delivery Dates.
Section 3.02. Conditions Precedent. (a) To Issuance of the Initial Note
Insurance Policy. The Company and the Issuer shall have complied with the terms
and satisfied the conditions precedent set forth below:
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<PAGE> 15
(i) Payment of the premium in accordance with Section 3.03 hereof;
(ii) Payment of or satisfactory arrangements for payment by the
Company or the Issuer of (a) rating agency fees of S&P and Moody's; and (b) the
fees and expenses incurred by the Insurer in connection with the issuance of
such Note Insurance Policy and the offer and sale of the Initial Notes,
including fees and expenses of counsel to the Insurer and accountants for the
Insurer, all in accordance with the terms of the Commitment. The fees for any
other rating agency shall be paid by the party requesting such other agency's
rating, unless such other agency is a substitute for S&P or Moody's in the event
that S&P or Moody's is no longer rating securities, in which case the cost for
such agency shall be paid by the Company or the Issuer;
(iii) Receipt by the Insurer of a fully executed copy of the
Transaction Documents;
(iv) Receipt by the Insurer of certified copies of the resolutions
of the board of directors of the Company authorizing the execution and delivery
and performance of the Transaction Documents and the other matters contemplated
thereby, and of all other documents evidencing any other action of the Company
necessary to enter into the Transaction Documents, all in form and substance
acceptable to the Insurer and its counsel;
(v) Receipt by the Insurer of certified copies of the resolutions of
the board of directors of the Issuer authorizing the execution and delivery and
performance of the Transaction Documents and the other matters contemplated
thereby, and of all other documents evidencing any other action of the Issuer
necessary to enter into the Transaction Documents, all in form and substance
acceptable to the Insurer and its counsel;
(vi) Receipt by the Insurer of favorable opinions of counsel,
including counsel to the Company, the Issuer, the Indenture Trustee and
transaction counsel, addressed to the Insurer in form and substance reasonably
acceptable to the Insurer and its counsel;
(vii) Receipt by the Insurer of true and correct copies of any
governmental approvals necessary for the transactions contemplated by the
Transaction Documents;
(viii) Receipt from S&P and Moody's of the highest long-term rating on
the Initial Notes;
(ix) The Insurer shall have received a certificate of an authorized
officer of the Company certifying the name and true signatures of the officers
of the Company executing the Transaction Documents;
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<PAGE> 16
(x) The Insurer shall have received a certificate of an authorized
officer of the Issuer certifying the name and true signatures of the officers of
the Issuer executing the Transaction Documents;
(xi) The Insurer shall have received a certificate of the Company to
the effect that (i) the Reported Company's Financial Statements which have been
furnished to the Insurer are, as of the date thereof, complete and correct in
all material respects; present fairly the financial condition of the Company, as
of the date thereof; and have been prepared in accordance with generally
accepted accounting principles consistently applied (except as noted therein and
subject to year-end adjustments for interim statements) and (ii) there has been
no material adverse change in such conditions or operations;
(xii) The Insurer shall have received copies of any agreements
relating to the placement of the Initial Notes, and specifically be entitled to
rely on such agreements;
(xiii) The Insurer shall have received copies of each of the documents,
and specifically be entitled to rely on the documents, required to be delivered
to the Indenture Trustee pursuant to Section 4.01 of the Indenture, except that
the Insurer shall not receive copies of the original executed counterparts of
each Lease Contract or the related Lease Contract File;
(xiv) Delivery of such other documents, customary closing
certificates, instruments, approvals or opinions as are reasonably requested by
the Insurer;
(xv) Compliance with all other terms, conditions and requirements of
the Commitment;
(xvi) The Insurer and its counsel shall have determined that all the
Lease Contracts, documents, certificates and opinions to be delivered in
connection with the Initial Notes conform to the terms of the Indenture, the
Commitment and this Agreement; and
(xvii) S&P shall have informed the Insurer that S&P will assign a
shadow rating of at least "BBB-" on the Initial Notes.
Issuance of such Note Insurance Policy will be conclusive evidence of
satisfaction or waiver of any of the conditions set forth in this Section
3.02(a).
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<PAGE> 17
(b) To Issuance of Additional Note Insurance Policies Relating to the Additional
Tranches of Notes. The Company and the Issuer shall have complied with the terms
and satisfied the conditions precedent set forth below:
(i) Payment of the premium in accordance with Section 3.03 hereof;
(ii) Payment of or satisfactory arrangements for payment by the
Company or the Issuer of (a) rating agency fees of S&P and Moody's; and (b) the
fees and expenses incurred by the Insurer in connection with the issuance of
such Note Insurance Policy and the offer and sale of the Notes, including fees
and expenses of accountants for the Insurer, all in accordance with the terms of
the Commitment. The fees for any other rating agency shall be paid by the party
requesting such other agency's rating, unless such other agency is a substitute
for S&P or Moody's in the event that S&P or Moody's is no longer rating
securities, in which case the cost for such agency shall be paid by the Company
or the Issuer;
(iii) Receipt by the Insurer of a fully executed copy of the
Transaction Documents;
(iv) Receipt by the Insurer of certified copies of the resolutions of
the board of directors of the Company authorizing the execution and delivery and
performance of the Transaction Documents and the other matters contemplated
thereby, and of all other documents evidencing any other action of the Company
necessary to enter into the Transaction Documents, all in form and substance
acceptable to the Insurer and its counsel;
(v) Receipt by the Insurer of certified copies of the resolutions of
the board of directors of the Issuer authorizing the execution and delivery and
performance of the Transaction Documents and the other matters contemplated
thereby, and of all other documents evidencing any other action of the Issuer
necessary to enter into the Transaction Documents, all in form and substance
acceptable to the Insurer and its counsel;
(vi) Receipt by the Insurer of favorable opinions of counsel,
including counsel to the Company, the Issuer, the Indenture Trustee and
transaction counsel, (including "bring downs" of the true sale and perfection
opinions delivered on the Closing Date) addressed to the Insurer in form and
substance reasonably acceptable to the Insurer and its counsel;
(vii) Receipt by the Insurer of true and correct copies of any
governmental approvals necessary for the transactions contemplated by the
Transaction Documents;
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(viii) The Rating Agencies shall not have notified the Issuer, the
Servicer, the Back-up Servicer, the Bond Insurer and the Indenture Trustee in
writing that such issuance will result in a reduction or withdrawal of the
rating assigned by it to the Outstanding Notes of any Tranche including the
Tranche to be issued;
(ix) The Insurer 4a have received copies of any agreements relating
to the placement of the Notes, and specifically be entitled to rely on such
agreements;
(x) The Insurer shall have received copies of each of the documents,
and specifically be entitled to rely on the documents, required to be delivered
to the Indenture Trustee pursuant to Section 4.01 of the Indenture, except that
the Insurer shall not receive copies of the original executed counterparts of
each Lease Contract or the related Lease Contract File;
(xi) Delivery of such other documents, customary closing
certificates, instruments, approvals or opinions as are reasonably requested by
the Insurer;
(xii) Compliance with all other terms, conditions and requirements of
the Commitment;
(xiii) The Issuer shall have delivered to the Indenture Trustee, the
Bond Insurer and the Coordinator the related Funding Report at least one
Business Day prior to the related Delivery Date, in a form satisfactory to the
Indenture Trustee, to be acknowledged by each of the Indenture Trustee, the Bond
Insurer and the Coordinator;
(xiv) The Issuer shall have delivered to the Indenture Trustee the
original executed counterpart of each Lease Contract identified in the related
Lease Schedule and the Lease Contract File relating to such Lease Contract;.
(xv) The Insurer shall have determined that the Lease Contracts, all
documents, certificates and opinions to be delivered in connection with the
Notes conform to the terms of the Indenture, the Commitment and this Agreement;
(xvi) S&P shall have informed the Insurer that S&P will assign a
shadow rating of at least "BBB-" on the Notes.
(xvii) The Issuer shall have notified the Insurer in writing of the
intended issuance of any additional Tranche of Notes not later than ten Business
Days before the intended Delivery Date, and the Servicer shall have provided the
Insurer all information necessary
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for the Insurer to determine the accuracy of the proposed funding amount
and compliance with any concentration restrictions, not later than five
Business Days before the intended date of issuance;
(xviii) The Issuer shall issue additional Tranches of fixed rate
Notes in minimum size of $5,000,000 and additional Tranches of floating
rate Notes in minimum size of $ 1,000,000 per Tranche; and
(xix) Prior to the issuance of additional Tranches of floating
rate Notes, the Issuer shall provide a Floating Rate Cap Agreement that is
satisfactory to the Insurer and its counsel.
Issuance of such Note Insurance Policy will be conclusive evidence of
satisfaction or waiver of any of the conditions set forth in this Section
3.02(b).
Section 3.03. Premium. In consideration of the issuance by the Insurer
of each Note Insurance Policy, the Issuer shall pay to the Insurer on the
Closing Date the Initial Premium. The MBIA Premium shall be payable in
accordance with Section 12.02(d)(v) of the Indenture commencing on the
applicable dates set forth in the Commitment so long as no Insurer Default or
Insurer Insolvency has occurred. The Initial Premium and the MBIA Premium shall
be nonrefundable without regard to whether the Insurer makes any payment under
any Note Insurance Policy or any other circumstances relating to the Notes or
provision being made for payment of the Notes prior to maturity.
Section 3.04. Indemnification. (a) In addition to any and all rights of
indemnification or any other rights of the Insurer pursuant hereto or under law
or equity, the Company and the Issuer agree to pay, and to protect, indemnify
and save harmless, the Insurer and its officers, directors, shareholders,
employees, agents, including each person, if any, who controls the Insurer
within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities and Exchange Act of 1934, as amended,
from and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever (herein collectively referred to as "Liabilities") of any nature
arising out of or relating to the transactions contemplated by the Transaction
Documents by reason of:
(i) any act or omission of the Company, Servicer or the
Issuer in connection with the offering, issuance, sale or delivery of
the Notes other than by reason of false or misleading information
provided by the Insurer in writing in connection with such offering;
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(ii) the misfeasance or malfeasance of, or negligence or
theft committed by, any director, officer, employee or agent of the
Company, the Servicer or the Issuer;
(iii) the violation by the Company, the Servicer or the Issuer
of any federal or state securities, banking or antitrust laws, rules or
regulations in connection with the issuance, offer and sale of the Notes
or the transactions contemplated by the Transaction Documents;
(iv) the violation by the Company, the Servicer or the Issuer
of any federal or state laws, rules or regulations relating to the
maximum amount of interest permitted to be received on account of the
loan of money or with respect to the Lease Contracts;
(v) the breach by the Company, the Servicer or the Issuer of
any of its obligations under this Agreement or any of the Transaction
Documents; and
(vi) the breach by the Company, the Servicer or the Issuer of
any representation or warranty on the part of the Company, the Servicer
or the Issuer contained in the Transaction Documents or in any
certificate furnished or delivered to the Insurer thereunder.
This indemnity provision shall survive the termination of this Agreement and
shall survive until the statute of limitations has run on any causes of action
which arise from one of these reasons and until all suits filed as a result
thereof have been finally concluded.
Notwithstanding any provision or obligation to the contrary set forth in
this Agreement or any instrument now or hereafter securing, affecting or
relating to any obligation of the Company, the Servicer or the Issuer under this
Agreement, including, without limitation, the Indenture, no individual
representative of the Company, the Servicer or the Issuer (including, without
limitation, employees, officers, directors and shareholders thereof) shall have
any personal liability under this Agreement including, without limitation, any
liability for the performance or observance or nonperformance or nonobservance
of any covenant or obligation of the Company, the Servicer or the Issuer or for
breach of any representation or warranty contained in this Agreement.
(b) Any party which proposes to assert the right to be indemnified
under this Section 3.04 will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
is to be made against the Company, the Servicer or the Issuer under this Section
3.04, notify the Company, the Servicer or the Issuer of the commencement of such
action, suit or proceeding, enclosing a copy of all papers served. In case any
action, suit or proceeding shall be brought against any indemnified party and it
shall notify the Company, the Servicer or the Issuer of the commencement
thereof, the Company, the Servicer or
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the Issuer shall be entitled to participate in, and, to the extent that it shall
wish, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the Company, the Servicer or the Issuer
to such indemnified party of its election so to assume the defense thereof, the
Company, the Servicer or the Issuer shall not be liable to such indemnified
party for any legal or other expenses other than reasonable costs of
investigation subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall have the right to employ its
counsel in any such action the defense of which is assumed by the Company, the
Servicer or the Issuer in accordance with the terms of this subsection (b), but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless the employment of counsel by such indemnified party has
been authorized by the Company, the Servicer or the Issuer. The Company, the
Servicer or the Issuer shall not be liable for any settlement of any action or
claim effected without its consent.
Section 3.05. Payment Procedure. If the Insurer makes any payment under
the Note Insurance Policy, the Company, the Servicer and the Indenture Trustee
shall accept, except in the case of manifest error, a voucher or other evidence
of payment as prima facie evidence that such payment was properly made. In the
event of any payment by the Insurer, the Company, the Servicer and the Indenture
Trustee agree to accept a voucher or other evidence of payment complete on its
face as prima facie evidence of the propriety thereof and the liability therefor
of the Insurer except in the case of manifest error. All payments to be made to
the Insurer under this Agreement shall be made to the Insurer in lawful currency
of the United States of America in immediately available funds at the notice
address for the Insurer as specified in the Indenture on the date when due.
Payments to be made to the Insurer under this Agreement shall bear interest
payable to the extent provided in this Agreement at the Late Payment Rate from
the date when due to the date paid.
Section 3.06. Subrogation. Upon any payment by the Insurer pursuant to
the Note Insurance Policy, the Insurer shall be fully subrogated to the rights
of the Noteholders to the extent of such payment, pursuant to the priority set
forth in Section 6.08 of the Indenture. The Indenture Trustee acknowledges such
subrogation and, further, agrees to execute such instruments prepared by the
Insurer and to take such reasonable actions as, in the sole judgment of the
Insurer, are necessary to evidence such subrogation and to perfect the rights of
the Insurer to receive any moneys paid or payable under the Indenture, provided
that the Indenture Trustee can legally take such action consistent with its
obligations under the Indenture, and the Indenture Trustee shall be indemnified
by the Insurer for any reasonable expense that results from such action.
Section 3.07. Reimbursement and Additional Payment Obligation. (a) To
the extent provided in Section 6.08 of the Indenture, after the required payment
of the MBIA Premium therefrom, the Insurer shall be entitled to reimbursement
for any payment made by the Insurer under the Note Insurance Policy, in an
amount equal to the amount so paid and all amounts
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previously paid that remain unreimbursed, together with interest on any and all
amounts remaining unreimbursed (to the extent permitted by law, if in respect of
any unreimbursed amounts representing interest) from the date such amounts
became due until paid in full (after as well as before judgment), at a rate of
interest equal to the Late Payment Rate; provided that, the sole source of
reimbursement for payments made by the Insurer under the Note Insurance Policy
shall be pursuant to Section 6.08 of the Indenture and no person or entity shall
be personally liable for the payment of such amounts.
(b) The Company and the Issuer agree to pay to the Insurer as follows:
anything in subsection 3.07(a) hereof to the contrary notwithstanding, the
Insurer shall be entitled to reimbursement from the Company for payments made
under the Note Insurance Policy arising as a result of the Company's or the
Issuer's, as the case may be, failure to repurchase any Lease Contract if it is
not repurchased when required to be repurchased by it pursuant to Section 4.03
of the Indenture, Section 3.03 of the Contribution Agreement or Section 3.10 of
the Servicing Agreement, together with interest on any and all amounts remaining
unreimbursed (to the extent permitted by law, if in respect of any unreimbursed
amounts representing interest) from the date such amounts became due until paid
in full (after as well as before judgment), at a rate of interest equal to the
Late Payment Rate.
(c) The Company, the Issuer and the Servicer agree to pay to the Insurer
as follows: any and all charges, fees, costs and expenses that the Insurer may
reasonably pay or incur, including, but not limited to, attorneys' and
accountants' fees and expenses, in connection with (i) any accounts established
to facilitate payments under the Note Insurance Policy to the extent the Insurer
has not been immediately reimbursed on the date that any amount is paid by the
Insurer under the Note Insurance Policy, (ii) the enforcement, defense or
preservation of any rights in respect of any of the Transaction Documents,
including defending, monitoring or participating in any litigation or proceeding
(including any insolvency or bankruptcy proceeding in respect of the Company,
the Issuer or the Servicer or any affiliate of any of them) relating to any of
the Transaction Documents or any party to any of the Transaction Documents in
its capacity as such a party, or (iii) any amendment, waiver or other action
with respect to, or related to, any Transaction Document, whether or not
executed or completed; costs and expenses shall include a reasonable allocation
of compensation and overhead attributable to the time of employees of the
Insurer spent in connection with the actions described in clause (ii) above, and
the Insurer reserves the right to charge a reasonable fee as a condition to
executing any waiver or consent proposed in respect of any of the Transaction
Documents.
(d) All amounts to be paid pursuant to subsection (a) above shall be due
and payable without demand, and all amounts to be paid pursuant to subsection
(b) above shall be due and payable upon demand. All such amounts shall be
payable in the priority and in the manner provided in the Transaction Documents
relating thereto, provided that upon the occurrence of any
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Servicer Event of Default under the Servicing Agreement, the Insurer shall have
the rights provided for herein and therein.
Section 3.08. Reimbursement of Insurer Following Redemption at the
Option of the Issuer. Following termination of the Indenture pursuant to Section
10.01 of the Indenture, the Issuer agrees to reimburse the Insurer for any
Insured Payments required to be made pursuant to the Note Insurance Policy
subsequent to the date of such termination.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement. This Agreement shall
take effect on the Date of Issuance and shall remain in effect until such time
as the Insurer is no longer subject to a claim under any Note Insurance Policy
and all amounts payable by the Company, the Issuer or the Servicer hereunder or
under the Indenture and under the Notes have been paid in full.
Section 4.02. Waiver of Rights; Further Assurances and Corrective
Instruments. (a) Excepting at such times as an Insurer Insolvency or default in
payment under any Note Insurance Policy shall exist or shall have occurred and
be continuing, none of the Company, the Issuer, the Servicer or the Indenture
Trustee shall grant any waiver of rights under any of the Transaction Documents
to which any of them is a party without the prior written consent of the
Insurer, and any amendment or supplement to the Transaction Documents without
the written consent of the Insurer shall be null and void and of no force or
effect.
(b) Each of the Company, the Issuer, the Servicer and the Indenture
Trustee agrees that it will, from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such supplements
hereto and such further instruments as the Insurer may reasonably request and as
may reasonably be required to effectuate the intention of or facilitate the
performance of this Agreement, provided that the Company, the Indenture Trustee
(consistent with its obligations under the Indenture), the Issuer or the
Servicer, as the case may be, can legally take such action and the Company, the
Issuer, the Indenture Trustee or the Servicer, as the case may be, shall be
indemnified by the Insurer for any reasonable expenses resulting from such
action.
Section 4.03. Obligations Absolute. The obligations of the Company, the
Issuer and the Servicer hereunder shall be absolute and unconditional, and shall
not be subject to, and the Company, the Issuer and the Servicer hereby waive any
of their rights of, abatement, diminution, postponement or deduction, or to any
defense other than payment, or to any right of setoff or recoupment arising out
of any breach under any of the Transaction Documents, by any party thereto or
any beneficiary thereof, or out of any obligation at any time owing to the
Company, the
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Issuer or the Servicer. Nothing herein shall be construed as prohibiting the
Company, the Issuer or the Servicer from pursuing any rights or remedies they
may have against any other person or entity in a separate legal proceeding. The
obligations of the Company, the Issuer and the Servicer hereunder are absolute
and unconditional and will be paid or performed strictly in accordance with this
Agreement.
Section 4.04. Assignments; Reinsurance; Third-Party Rights. (a) This
Agreement shall be a continuing obligation of the Company, the Issuer and the
Servicer and shall (i) be binding upon the Company, the Issuer and the Servicer
and their respective successors and assigns and (ii) inure to the benefit of and
be enforceable by the Insurer and its successors, transferees and assigns.
Neither the Company, the Issuer nor the Servicer may assign this Agreement, or
delegate any of its duties hereunder, without the prior written consent of the
Insurer.
(b) The Insurer shall have the right to give participations in its
rights under this Agreement and to enter into contracts of reinsurance with
respect to any Note Insurance Policy and each such participant or reinsurer
shall be entitled to the benefit of any representation, warranty, covenant and
obligation of the Company, the Issuer and the Servicer hereunder as if such
participant or reinsurer was a party hereto; provided that no such grant of
participation shall operate to relieve the Insurer of liability on any Note
Insurance Policy, and provided further that no such participation or contract of
reinsurance shall require the Servicer, the Indenture Trustee, the Company or
the Issuer to deal with any person other than the Insurer.
(c) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or claim,
express or implied, upon any person, including, particularly, any Noteholder,
other than the Insurer, against the Company, the Issuer or the Servicer, and all
the terms, covenants, conditions, promises and agreements contained herein shall
be for the sole and exclusive benefit of the parties hereto and their
successors. Neither the Indenture Trustee nor any Noteholder shall have any
right to payment from the premium paid pursuant to Section 3.03 hereof.
Section 4.05. Liability of Insurer. The Insurer shall not be responsible
for any act or omission of the Indenture Trustee with respect to its use of any
Note Insurance Policy. Neither the Insurer nor any of its officers, directors or
employees shall be liable or responsible for: (a) the use which may be made of
any Note Insurance Policy by or for any acts or omissions of the Indenture
Trustee in connection therewith; or (b) the validity, sufficiency, accuracy or
genuineness of documents, or of any endorsement(s) thereon, submitted by any
person in connection with a claim under any Note Insurance Policy, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged. In furtherance and not in limitation of the
foregoing, the Insurer may accept documents that appear on their face to be in
order, without responsibility for further investigation.
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Section 4.06. Control by Insurer. So long as an Insurer Default
has not occurred and so long as no Insurer Insolvency has occurred, upon
the occurrence and during the continuation of any Servicer Event of
Default described in Section 6.01 of the Servicing Agreement, the
Insurer shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture
Trustee provided that such direction shall not be in conflict with any
rule of law or with any provision of this Agreement or the Indenture.
Section 4.07. Covenants of the Indenture Trustee and Backup
Servicer. The Indenture Trustee and the Backup Servicer shall comply in
all material respects with the terms and conditions of the Transaction
Documents to which each, respectively, is a party, and, provided there
does not exist an Insurer Insolvency or Insurer Default, neither the
Indenture Trustee nor the Backup Servicer shall agree to any amendment
to or modification of the terms of any of the Transaction Documents to
which each, respectively, is a party unless the Insurer shall otherwise
consent.
Section 4.08. Covenants of K & P Finance Corp.
(a) Meetings. K & P Finance Corp. shall have annual meetings
of its shareholders and shall prepare income and franchise tax returns
as appropriate. The Issuer shall deliver to the Insurer copies of the
minutes of such meetings no later than April 30 of each year and such
tax returns promptly upon filing but in no event later than August 31 of
each year, beginning in 1996.
(b) Amendment to Certificate of Incorporation. K & P Finance
Corp. shall not amend its certificate of incorporation without the
Insurer's prior written consent.
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. Defaults. The occurrence of any of the following
events shall constitute an Event of Default:
(a) Any representation or warranty made by the
Company, the Issuer or the Servicer hereunder or under the
Transaction Documents, or in any certificate furnished hereunder
or under the Transaction Documents, shall prove to be untrue or
incomplete in any material respect;
(b)(i) The Company or the Issuer shall fail to pay when
due any amount payable by the Company or the Issuer hereunder or
(ii) a legislative body has enacted any law that declares or a
court of competent jurisdiction shall find or rule that any of
the Transaction
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Documents are not valid and binding on the Company, the Servicer or the Issuer
to which it is a party;
(c) The occurrence and continuance of a "Servicer Event of Default"
under the Servicing Agreement (as defined therein);
(d) Any failure on the part of the Company, the Issuer or the Servicer
duly to observe or perform in any material respect any other of the covenants or
agreements on the part of the Company, the Issuer or the Servicer contained in
this Agreement or in any other Transaction Document which continues unremedied
for a period of 45 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Company, the
Issuer or the Servicer, as the case may be, by the Insurer (with a copy to
Indenture Trustee) or by the Indenture Trustee (with a copy to the Insurer);
(e) Any material party thereto shall breach any material representation
or warranty or fail to observe any material covenant or agreement contained in
any Transaction Document (except for the obligations described under paragraph
(a) or (c) above), and such failure shall continue for a period of 45 days after
written notice given to the Company or such other party; provided that, if such
failure shall be of a nature that it cannot be cured within 45 days, such
failure shall not constitute an Event of Default hereunder if within such 45-day
period the Company or such other party shall have given notice to the Insurer of
corrective action it proposes to take, which corrective action is agreed in
writing by the Insurer to be satisfactory and the Company or such other party
shall thereafter pursue such corrective action diligently until such default is
cured;
(f) A decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator or other similar official in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Company, the Issuer or the Servicer and such
decree or order shall have remained in force undischarged or unstayed for a
period of 90 consecutive days;
(g) The Company, the Issuer or the Servicer shall consent to the
appointment of a conservator or receiver or liquidator or other similar official
in any insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Company, the Issuer or the Servicer
or of or relating to all or substantially all of the property of either; or
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(h) The Company, the Issuer or the Servicer shall admit in
writing its inability to pay its debts generally as they become due,
file a petition to take advantage of or otherwise voluntarily commence a
case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its
obligations.
Section 5.02. Remedies; No Remedy Exclusive. (a) Upon the occurrence of
an Event of Default, the Controlling Party may exercise any one or more of the
rights and remedies set forth below against the party in default:
(i) declare all indebtedness of every type or description
owed by such party to the Insurer to be immediately due and payable, and
the same shall thereupon be immediately due and payable;
(ii) exercise any rights and remedies under any of the
Transaction Documents in accordance with the terms of such Transaction
Document or direct the Indenture Trustee to exercise such remedies in
accordance with the terms of the Indenture or the Servicing Agreement;
or
(iii) take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the amounts then due
and thereafter to become due under any of the Transaction Documents or
to enforce performance and observance of any obligation, agreement or
covenant of the Company, the Issuer or the Servicer under any of the
Transaction Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved to the Controlling Party is intended to be exclusive of any
other available remedy, but each remedy shall be cumulative and shall be in
addition to other remedies given under any of the Transaction Documents or
existing at law or in equity. No delay or omission to exercise any right or
power accruing under any of the Transaction Documents upon the happening of any
event set forth in Section 5.01 hereof shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Insurer to exercise any remedy reserved to the Insurer in this
Article, it shall not be necessary to give any notice, other than such notice as
may be required in this Article.
Section 5.03. Waivers. (a) No failure by the Insurer to exercise, and no
delay by the Insurer in exercising, any right hereunder shall operate as a
waiver thereof. The exercise by the Insurer of any right hereunder shall not
preclude the exercise of any other right, and the remedies
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provided herein to the Insurer are declared in every case to be cumulative and
not exclusive of any remedies provided by law or equity.
(b) The Insurer shall have the right, to be exercised in its
complete discretion, to waive any Event of Default hereunder, by a writing
setting forth the terms, conditions and extent of such waiver signed by the
Insurer and delivered to the Indenture Trustee, the Company and the Servicer.
Unless such writing expressly provides to the contrary, any waiver so granted
shall extend only to the specific event or occurrence which gave rise to the
Event of Default so waived and not to any other similar event or occurrence
which occurs subsequent to the date of such waiver.
Section 5.04. INSURER WILL NOT INSTITUTE INSOLVENCY PROCEEDINGS. So long
as this Agreement is in effect, the Insurer 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 Issuer.
ARTICLE VI
MISCELLANEOUS
Section 6.01. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may
be amended, changed, modified, altered or terminated only by written instrument
or written instruments signed by the parties hereto. The Company hereby agrees
to promptly provide a copy of any amendment to this Agreement to the Indenture
Trustee. The Company and the Insurer also agree to provide prior written
notification to both Moody's and S&P of any amendment to this Agreement.
Section 6.02. NOTICES. All demands, notices and other communications to
be given hereunder shall be in writing (except as otherwise specifically
provided herein) and shall be mailed by registered mail or personally delivered
or telexed or telecopied to the recipient as follows:
To the Insurer: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Structured Surveillance to Insured Portfolio
Management - Structured Finance (IPM-SF)
Telecopy No.: (914) 765-3810
Confirmation: (914) 765-3781
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To the Company: T & W Leasing, Inc.
6416 16th Street East
Tacoma, WA 98424
Attention: Mr. Michael Price
Telecopy No.:(206) 926-0739
Confirmation: (206) 922-5164
To the Issuer: T & W Funding Company IV, L.L.C.
6416 16th Street East
Tacoma, WA 98424
Attention: Mr. Michael Price
Telecopy No.: (206) 926-0739
Confirmation: (206) 922-5164
To the Servicer: T & W Leasing, Inc.
6416 16th Street East
Tacoma, WA 98424
Attention: Mr. Michael Price
Telecopy No.: (206) 926-0739
Confirmation: (206) 922-5164
To K & P Finance Corp. K & P Finance Corp.
6416 l6th Street East
Tacoma, WA 98424
Attention: Mr. Michael Price
Telecopy No.: (206) 926-0739
Confirmation: (206) 922-5164
To the Backup Servicer: Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0069
Attention: Corporate Trust Department
Telecopy No.: (612) 667-9825
Confirmation: (612) 667-8040
26
<PAGE> 30
To the Indenture Trustee: Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0069
Attention: Corporate Trust Department
Telecopy No.: (612) 667-9825
Confirmation: (612) 667-8040
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon delivery, except when telexed
or telecopied, in which case, effective upon telex or telecopy against receipt
of answerback or written confirmation.
An affidavit by any Person representing or acting on behalf of any party
hereto, as to such mailing, having the registry receipt attached, shall be
conclusive evidence of the mailing of such demand, notice or communication.
Section 6.03. SEVERABILITY. In the event any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
the parties hereto agree that such holding shall not invalidate or render
unenforceable any other provision hereof. The parties hereto further agree that
the holding by any court of competent jurisdiction that any remedy pursued by
the Insurer hereunder is unavailable or unenforceable shall not affect in any
way the ability of the Insurer to pursue any other remedy available to it.
Section 6.04. GOVERNING LAW. This Agreement shall be construed, and the
obligations, rights and remedies of the parties hereunder shall be determined,
in accordance with the laws of the State of New York.
Section 6.05. CONSENT TO JURISDICTION AND VENUE, ETC. The Company, the
Issuer, the Servicer, the Indenture Trustee and the Backup Servicer each
irrevocably (a) agrees that any suit, action or other legal proceeding arising
out of or relating to this Agreement, the Indenture or any of the other
Transaction Documents may be brought in a court of record in the State of New
York or in the Courts of the United States of America located in such state, (b)
consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which they may have to the laying of
venue of any such suit, action or proceeding in any of such courts and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. The Company, the Issuer, the Servicer, the Indenture Trustee and the
Backup Servicer each hereby irrevocably appoint CT Corporation System, Suite
1301, 116 John Street, New York, New York 10038, as their agent to receive on
behalf of the Company, the Issuer, the Servicer, the Indenture Trustee and the
Backup Servicer, as the case may be, and their respective properties service of
copies of the summons and complaint and other process which may be served in any
such suit,
27
<PAGE> 31
action or proceeding (the "Process Agent"). Such service may be made by mailing
or delivering a copy of such process to the Company, the Issuer, the Servicer,
the Indenture Trustee or the Backup Servicer, as the case may be, in care of the
Process Agent at the Process Agent's above address, and the Company, the Issuer,
the Servicer, the Indenture Trustee and the Backup Servicer each hereby
irrevocably authorize and direct the Process Agent to accept such service on
their behalf. The Insurer agrees to mail to the Company, the Issuer, the
Servicer, the Indenture Trustee or the Backup Servicer, as the case may be, at
its address provided in Section 6.02 hereof a copy of any summons, complaint or
other process mailed or delivered by it to the Process Agent. As an alternative
method of service, the Company, the Issuer, the Servicer, the Indenture Trustee
and the Backup Servicer each also irrevocably consent to the service of any and
all process in any such action or proceeding by mailing of copies of such
process to the Company, the Issuer, the Servicer, the Indenture Trustee or the
Backup Servicer, as the case may be, at its address provided in Section 6.02
hereof. The Company, the Issuer, the Servicer, the Indenture Trustee and the
Backup Servicer each agree that a final, nonappealable judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by execution on the judgment or in any other manner provided by
law. All mailings under this Section 6.05 shall be by certified mail, return
receipt requested.
Nothing in this Section 6.05 shall affect the right of the Insurer to
serve legal process in any other manner permitted by law or affect the right of
the Insurer to bring any suit, action or proceeding against the Company, the
Issuer, the Servicer, the Indenture Trustee or the Backup Servicer or their
respective property in the courts of any other jurisdiction.
Section 6.06. CONSENT OF INSURER. In the event that the Insurer's
consent is required under the terms hereof or any term of any other Transaction
Document, it is understood and agreed that the determination whether to grant or
withhold such consent shall be made solely by the Insurer in its absolute
discretion. The Insurer hereby agrees that it will respond to any request for
consent in a timely manner, taking into consideration the business of the
Company, the Issuer and the Servicer.
Section 6.07. COUNTERPARTS. This Agreement may be executed in
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 6.08. RECITALS. All of the recitals hereinabove set forth are
incorporated in this Agreement by reference.
Section 6.09. HEADINGS. The headings of sections contained in this
Agreement are provided for convenience only. They form no part of this Agreement
and shall not affect its construction or interpretation. All references to
sections or subsections of this Agreement refer to the corresponding sections or
subsections of this Agreement.
28
<PAGE> 32
Section 6.10. PARTIES NOT TO INSTITUTE INSOLVENCY PROCEEDINGS. So
long as this Agreement is in effect, and for one year following its termination,
none of the parties hereto will file any involuntary petition or otherwise
institute any bankruptcy, reorganization, moratorium, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law against the Issuer.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
29
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all
as of the day and year first above mentioned.
MBIA INSURANCE CORPORATION
By /s/ UNINTELLIGIBLE
----------------------------------------
T & W LEASING, INC., as Company
By /s/ MICHAEL A. PRICE
----------------------------------------
T & W LEASING, INC., as Servicer
By /s/ MICHAEL A. PRICE
----------------------------------------
T & W FUNDING COMPANY IV, L.L.C., as
Issuer
By /s/ MICHAEL A. PRICE
----------------------------------------
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By /s/ AMY BELONGIE
----------------------------------------
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Backup Servicer
By /s/ AMY BELONGIE
----------------------------------------
K & P FINANCE CORP.
By /s/ MICHAEL A. PRICE
----------------------------------------
<PAGE> 1
EXHIBIT 10.23
[MBIA LOGO]
NOTE INSURANCE POLICY
$53,295,306.36
OBLIGATIONS: T & W Funding Company IV, L.L.C. Policy Number 604810
6.19% Lease-Backed Notes, Series 1995-1, Tranche A
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Note Insurance Policy
(this "Policy"), hereby unconditionally and irrevocably guarantees to any Owner
that an amount equal to each full and complete Insured Payment will be received
by Norwest Bank Minnesota, National Association, or its successor, as trustee
for the Owners (the "Trustee"), on behalf of the Owners from the Insurer, for
distribution by the Trustee to each Owner of each Owner's proportionate share
of the Insured Payment. The Insurer's obligations hereunder with respect to a
particular Insured Payment shall be discharged to the extent funds equal to the
applicable Insured Payment are received by the Trustee, whether or not such
funds are properly applied by the Trustee. Insured Payments shall be made only
at the time set forth in this Policy, and no accelerated Insured Payments shall
be made regardless of any acceleration of the Obligations, unless such
acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Issuer or the Trustee
for withholding taxes, if any (including interest and penalties in respect of
any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of
such Preference Amount, (ii) an opinion of counsel satisfactory to the Insurer
that such order is final and not subject to appeal, (iii) an assignment in such
form as is reasonably required by the Insurer, irrevocably assigning to the
Insurer all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or otherwise
with respect to such preference payment and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Owner in any legal
proceeding related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon, New York City time, on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
<PAGE> 2
The Insurer will pay any other amount payable hereunder no later than
12:00 noon, New York City time, on the later of the Payment Date on which the
related Deficiency Amount is due or the Business Day following receipt in New
York, New York on a Business Day by State Street Bank and Trust Company, N.A.,
as Fiscal Agent for the Insurer or any successor fiscal agent appointed by the
Insurer (the "Fiscal Agent") of a Notice (as described below); provided that if
such Notice is received after 12:00 noon, New York City time, on such Business
Day, it will be deemed to be received on the following Business Day. If any
such Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim hereunder, it shall be deemed not
to have been received by the Fiscal Agent for purposes of this paragraph, and
the Insurer or the Fiscal Agent, as the case may be, shall promptly so advise
the Trustee and the Trustee may submit an amended Notice.
Insured Payments due hereunder, unless otherwise stated herein, will be
disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Insured Payment
less, in respect of Insured Payments related to Preference Amounts, any amount
held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds
to make payments due under this Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated
to the rights of each Owner to receive payments under the Obligations to the
extent of any payment by the Insurer hereunder.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Indenture dated as of July 1, 1995 among T & W
Funding Company IV, L.L.C., T & W Leasing, Inc., as servicer and the Trustee,
as trustee and backup servicer, without regard to any amendment or supplement
thereto unless such amendment or supplement has been approved in writing by the
Insurer in accordance with the terms of the Agreement.
"Business Day" means 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
corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"Deficiency Amount" means for any Payment Date, any shortfall in
amounts available in the Collection Account to pay the interest due on the Note
under Section 12.02(d)(vi) of the Agreement after payment of all amounts
payable pursuant to Section 12.02(d)(i) through (v) of the Agreement, plus any
shortfall in amounts available in the Collection Account to pay principal in
accordance with Section 12.02(d)(vii) of the Agreement after the payment of all
amounts payable pursuant to Section 12.02(d)(i) through (vi) of the Agreement.
<PAGE> 3
"Insured Payment" means (i) as of any Payment Date any Deficiency
Amount and (ii) any unpaid Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached hereto,
the original of which is subsequently delivered by registered or certified
mail, from the Trustee or Servicer on behalf of the Trustee specifying the
Insured Payment which shall be due and owing on the applicable Payment Date.
"Owner" means each Holder (as defined in the Agreement) who, on the
applicable Payment Date, is entitled under the terms of the applicable Notes to
payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner
on the Notes that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment to
or modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent of the
Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
This Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to
the conflict of laws principles thereof.
<PAGE> 4
[MBIA LOGO]
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this Policy
is not refundable for any reason including payment, or provision being made for
payment, prior to maturity of the Obligations.
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 28th day of July 1995.
MBIA Insurance Corporation
By /s/ RICHARD WEILL
-----------------------
President
Attest:
By /s/ [SIG]
-------------------
Assistant Secretary
<PAGE> 5
[MBIA LOGO]
EXHIBIT A
TO NOTE INSURANCE POLICY
NUMBER: 604810
NOTICE UNDER NOTE
INSURANCE POLICY NUMBER: 604810
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of , as trustee
(the "Trustee"), hereby certifies to State Street Bank and Trust Company, N.A.
(the "Fiscal Agent") and MBIA Insurance Corporation (the "Insurer"), with
reference to Note Insurance Policy Number: 604810 (the "Policy") issued by the
Insurer in respect of the $53,295,306.36 T & W Funding Company IV, L.L.C. 6.19%
Lease-backed Notes, 1995-1, Tranche A (the "Obligations"), that:
(i) the Trustee is the trustee under the Indenture dated as
of July 1, 1995, among T & W Funding Company IV, L.L.C., T & W Leasing,
Inc., as servicer and the Trustee, as trustee for the Owners;
(ii) the amount payable pursuant to Sections 12.02(d)(vi) and
(vii) for the Payment Date occurring on (the "Applicable
Payment Date") is $ (the "Required Distribution Amount"),
(iii) the amount available in the Collection Account after the
payment of all amounts payable pursuant to Sections 12.02(d)(i) through
(v) of the Agreement is $ (the "Available Amount");
(iv) the amount by which the Required Distribution Amount
exceeds the Available Amount is $ (the "Deficiency Amount");
<PAGE> 6
[MBIA LOGO]
(v) the amount of previously distributed payments under the
Notes that are recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the Bankruptcy Code in
accordance with a final nonappealable order of a court having competent
jurisdiction is $ (the "Preference Amount");
(vi) the total Insured Payment due is $ , which amount
equals the sum of the Deficiency Amount and the Preference amount;
(vii) the Trustee is making a claim under and pursuant to the
terms of the Policy for the dollar amount of the Insured Payment set
forth in (iv) above to be applied to the payment of the Deficiency
Amount for the Applicable Payment Date in accordance with the Agreement
and for the dollar amount of the Insured Payment set forth in (v) above
to be applied to the payment of any Preference Amount;
(viii) the Trustee directs that payment of the Insured Payment
be made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the
Policy: [TRUSTEE'S ACCOUNT].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance
Company Or Other Person Files An Application For Insurance Or Statement Of Claim
Containing Any Materially False Information, Or Conceals For The Purpose Of
Misleading, Information Concerning Any Fact Material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A Civil
Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The Claim
For Each Such Violation.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of , .
as Trustee
By
Title
<PAGE> 1
(Multicurrency--Cross Border)
EXHIBIT 10.24
[ISDA LOGO]
International Swap Dealers Association, Inc.
MASTER AGREEMENT
Dated as of August 1, 1995
--------------
MERRILL LYNCH CAPITAL SERVICES, INC. and T & W FUNDING COMPANY IV, L.L.C.
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) Definitions. The terms defined in Section 14 and in the Schedule
will have the meanings therein specified for the purpose of this Master
Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than
by payment), such delivery will be made for receipt on the due date in
the manner customary for the relevant obligation unless otherwise
specified in the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.
<PAGE> 2
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction.
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii)
above will not, or will cease to, apply to such Transactions from such date).
This election may be made separately for different groups of Transactions and
will apply separately to each pairing of Offices through which the parties make
and receive payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such deduction
or withholding is required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, then in effect. If a party is so
required to deduct or withhold, then that party ("X") will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y
under this Section 2(d)) promptly upon the earlier of determining
that such deduction or withholding is required or receiving notice
that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement,
such additional amount as is necessary to ensure that the net
amount actually received by Y (free and clear of Indemnifiable
Taxes, whether assessed against X or Y) will equal the full amount
Y would have received had no such deduction or withholding been
required. However, X will not be required to pay any additional
amount to Y to the extent that it would not be required to be paid
but for:--
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure would
not have occurred but for (I) any action taken by a taxing
authority, or brought in a court of competent jurisdiction, on
or after the date on which a Transaction is entered into
(regardless of whether such action is taken or brought with
respect to a party to this Agreement) or (II) a Change in Tax
Law.
2
<PAGE> 3
(ii) Liability. If:-
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to make
any deduction or withholding in respect of which X would not be
required to pay an additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into and, in the case of the representations in Section 3(f), at all times
until the termination of this Agreement) that:-
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws
of the jurisdiction of its organisation or incorporation and, if
relevant under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorise such execution, delivery and
performance;
(iii) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment of
any court or other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting it or any
of its assets;
(iv) Consents. All governmental and other consents that are required
to have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and
any Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
3
<PAGE> 4
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency
or official or any arbitrator that is likely to affect the legality, validity
or enforceability against it of this Agreement or any Credit Support Document
to which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(f) is accurate
and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-
(a) Furnish Specified Information. It will deliver to the other party or,
in certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:-
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to
allow such other party or its Credit Support Provider to make a payment
under this Agreement or any applicable Credit Support Document without
any deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and to
be executed and to be delivered with any reasonably required
certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party and will use all reasonable
efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated.
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organised, managed and controlled, or considered to have its seat, or in which
a branch or office through which it is acting for the purpose of this Agreement
is located ("Stamp Tax Jurisdiction") and will indemnify the other party
against any Stamp Tax levied or imposed upon the other party or in respect of
the other party's execution or performance of this Agreement by any such Stamp
Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) Events of Default. The occurrence at any time with respect to a party
or, if applicable, and Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:-
(i) Failure to Pay or Deliver. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section 2(a)(i)
or 2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d) to be complied with
or performed by the party in accordance with this Agreement if such
failure is not remedied on or before the thirtieth day after notice of
such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support Document
or the failing or ceasing of such Credit Support Document to be in
full force and effect for the purpose of this Agreement (in either
case other than in accordance with its terms) prior to the
satisfaction of all obligations of such party under each
Transaction to which such Credit Support Document relates without
the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party in
this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to
any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction. (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified Transaction
(or such default continues for at least three Local Business Days if
there is no applicable notice requirement or grace period or (3)
disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
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described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in the Schedule)
which has resulted in such Specified Indebtedness becoming, or becoming
capable at such time of being declared, due and payable under such
agreements or instruments, before it would otherwise have been due and
payable or (2) a default by such party, such Credit Support Provider or
such Specified Entity (individually or collectively) in making one or
more payments on the due date thereof in an aggregate amount of not less
than the applicable Threshold Amount under such agreements or
instruments (after giving effect to any applicable notice requirement or
grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights,
or a petition is presented for its winding-up or liquidation,
and, in the case of any such proceeding or a petition instituted
or presented against it, such proceeding or petition (A) results
in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (6) seeks
or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or
substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to it which,
under the applicable laws of any jurisdiction, has an analogous
effect to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any
of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support
Provider of such party consolidates or amalgamates with or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer.--
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit Support
Provider under this Agreement or any Credit Support Document to
which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other
party to this Agreement; or
(2) the benefits of any Credit Support Document fail to
extend (without the consent of the other party) to the
performance by such resulting, surviving or transferee entity of
its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party
or, if applicable any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event
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Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below: --
(i) Illegality. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into, or
due to the promulgation of, or any change in, the interpretation by any
court, tribunal or regulatory authority with competent jurisdiction of
any applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party): --
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material
provision of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party
(or such Credit Support Provider) has under any Credit Support
Document relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action
is taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii)
or 6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount
is required to be paid in respect of such Tax under Section 2(d)(i)(4)
(other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been
deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either
case as a result of a party consolidating or amalgamating with, or
merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers
all or substantially all its assets to, another entity and such action
does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) Additional Termination Event. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
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6. EARLY TERMINATION
(a) Right to Terminate Following Event of Default. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4), or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
Party is the Affected Party, the Affected Party will, as a condition to
its right to designate an Early Termination Date under Section 6(b)(iv),
use all reasonable efforts (which will not require such party to incur a
loss, excluding immaterial, incidental expenses) to transfer within 20
days after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event
ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party
will use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) Right to Terminate. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected
with respect to all Affected Transactions within 30 days after
an Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected
Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the case
of a Credit Event Upon Merger or an Additional Termination Event if
there is only one Affected Party may, by not more than 20 days notice to
the other party and provided that the relevant Termination Event is then
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving details
of the relevant account to which any amount payable to it is to be paid.
In the absence of written confirmation from the source of a quotation
obtained in determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of
any Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding) the date such amount
is paid, at the Applicable Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an
Event of Default:--
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party over (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A)
the sum of the Settlement Amount (determined by the
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Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party
will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's Loss
in respect of this Agreement. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting
Party; if it is a negative number, the Non-defaulting Party will
pay the absolute value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if
Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed to
be references to the Affected Party and the party which is not the
Affected Party, respectively, and, if Loss applies and fewer than
all the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a)
one-half of the difference between the Settlement Amount of
the party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement
Amount ("Y") and (b) the Termination Currency Equivalent of
the Unpaid Amounts owing to X less (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the party with the
lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if
it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will
be subject to such adjustments as are appropriate and permitted by law
to reflect any payments or deliveries made by one party to the other
under this Agreement (and retained by such other party) during the
period from the relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
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7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) Payment in the Contractual Currency. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable law,
any obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any lender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment
or order expressed in a currency other than the Contractual Currency is
rendered (i) for the payment of any amount owing in respect of this Agreement,
(ii) for the payment of any amount relating to any early termination in respect
of this Agreement or (iii) in respect of a judgment or order of another court
for the payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such
party. The term "rate of exchange" includes, without limitation, any premiums
and costs of exchange payable in connection with the purchase of or conversion
into the Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the
party to which any payment is owed and will not be affected by judgment being
obtained or claim or proof being made for any other sums payable in respect of
this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
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9. MISCELLANEOUS
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced
by a facsimile transmission) and executed by each of the parties or confirmed by
an exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in
respect to it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by
facsimile transmission) or be created by an exchange of telexes or by an
exchange of electronic messages on an electronic messaging system, which
in each case will be sufficient for all purposes to evidence a binding
supplement to this Agreement. The parties will specify therein or
through another effective means that any such counterpart, telex or
electronic message constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organization of such party, the
obligations of such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be deemed to be
repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a
Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees
and Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12
<PAGE> 13
to which the Defaulting Party is a party by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on
the date it is delivered;
(ii) if sent by telex, on the date the recipient's
answerback is received;
(iii) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the
recipient in legible form (it being agreed that the burden of
proving receipt will be on the sender and will not be met by a
transmission report generated by the sender's facsimile
machine);
(iv) if sent by certified or registered mail (airmail, if
overseas) or the equivalent (return receipt requested), on the
date that mail is delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date
that electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change
the address, telex or facsimile number or electronic messaging system details
at which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating
to this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in
New York City, if this Agreement is expressed to be governed by the laws
of the State of New York; and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court, waives
any claim that such Proceedings have been brought in an inconvenient
forum and further waives the right to object, with respect to such
Proceedings, that such court does not have any jurisdiction over such
party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgment Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent
(if any) specified opposite its name in the Schedule to receive, for it and on
its behalf, service of process in any Proceedings. If for any
13
<PAGE> 14
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(D) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:--
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the
date on which the relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified
as such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
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<PAGE> 15
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such
recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority)
and "LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for
performance with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be
its total losses and costs (or gain, in which case expressed as a negative
number) in connection with this Agreement or that Terminated Transaction or
group of Terminated Transactions, as the case may be, including any loss of
bargain, cost of funding or, at the election of such party but without
duplication, loss or cost incurred as a result of its terminating, liquidating,
obtaining or reestablishing any hedge or related trading position (or any gain
resulting from any of them). Loss includes losses and costs (or gains) in
respect of any payment or delivery required to have been made (assuming
satisfaction of each applicable condition precedent) on or before the relevant
Early Termination Date and not made, except, so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a
party's legal fees and out-of-pocket expenses referred to under Section 11. A
party will determine its Loss as of the relevant Early Termination Date, or, if
that is not reasonably practicable, as of the earliest date thereafter as is
reasonably practicable. A party may (but need not) determine its Loss by
reference to quotations of relevant rates or prices from one or more leading
dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition
precedent) by the parties under Section 2(a)(i) in respect of such Terminated
Transaction or group of Terminated Transactions that would, but for the
occurrence of the relevant Early Termination Date, have
15
<PAGE> 16
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as
of the same day and time (without regard to different time zones) on or as soon
as reasonably practicable after the relevant Early Termination Date. The day
and time as of which those quotations are to be obtained will be selected in
good faith by the party obliged to make a determination under Section 6(e),
and, if each party is so obliged, after consultation with the other. If more
than three quotations are provided, the Market Quotation will be the arithmetic
mean of the quotations, without regard to the quotations having the highest and
lowest values. If exactly three such quotations are provided, the Market
Quotation will be the quotation remaining after disregarding the highest and
lowest quotations. For this purpose, if more than one quotation has the same
highest value or lowest value, then one of such quotations shall be
disregarded. If fewer than three quotations are provided, it will be deemed
that the Market Quotation in respect of such Terminated Transaction or group of
Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding whether to offer or
to make an extension of credit and (b) to the extent practicable, from among
such dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organised, managed and controlled or
considered to have its seat, (b) where an Office through which the party is
acting for purposes of this Agreement is located, (c) in which the party
executes this Agreement and (d) in relation to any payment, from or through
which such payment is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference
to any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
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<PAGE> 17
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Terminated Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obligated to make a determination under Section 6(e), be selected
in good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
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<PAGE> 18
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for such delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
MERRILL LYNCH CAPITAL SERVICES, INC. T&W FUNDING COMPANY IV, L.L.C.
- ------------------------------------ ------------------------------
(Name of Party) (Name of Party)
By: /s/ KIM CRONIN By: /s/ JIM PRICE
-------------------------------- -------------------------
Name: Kim Cronin Name: Jim Price
Title: VP Title:
Date: 8/23/95 Date: 8/9/95
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<PAGE> 19
SCHEDULE
TO THE
MASTER AGREEMENT
DATED AS OF AUGUST 1, 1995
BETWEEN
MERRILL LYNCH CAPITAL SERVICES, INC.
("PARTY A")
and
T&W FUNDING COMPANY IV, L.L.C.
("PARTY B")
PART 1
TERMINATION PROVISIONS
In this Agreement:-
(a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:-
Section 5(a)(v), Not Applicable
Section 5(a)(vi), Not Applicable
Section 5(a)(vii), Not Applicable
Section 5(b)(iv), Not Applicable
in relation to Party B for the purpose of:-
Section 5(a)(v), Not Applicable
Section 5(a)(vi), Not Applicable
Section 5(a)(vii), Not Applicable
Section 5(b)(iv), Not Applicable
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14 of
this Agreement unless another meaning is specified here: No change from Section
14.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party A and
not to Party B.
If such provisions apply:-
"SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 14 of this
Agreement unless another meaning is specified here: No change from Section 14.
"THRESHOLD AMOUNT" means, in respect of Party A, U.S. $20,000,000 or its
equivalent in other currencies.
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<PAGE> 20
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will apply to
Party A and not to Party B. Notwithstanding Section 5(b)(iv) of the Agreement
"Credit Event Upon Merger" means that a Designated Event (as defined below)
occurs with respect to Party A or its Specified Entity and such action does not
constitute an event described in Section 5(a)(viii) but that, in the reasonable
opinion of MBIA Insurance Corporation ("MBIA"), the creditworthiness of the
successor, surviving or transferee entity (which will be the Affected Party) is
materially weaker than that of its predecessor, immediately prior to the
occurrence of the Designated Event. For purposes hereof, a Designated Event
means that, after the Trade Date of a Transaction:
(i) Party A consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets (or any substantial part
of the assets comprising the business conducted by Party A as of the
Trade Date of that Transaction) to, or receives all or substantially all
the assets and obligations of, another entity;
(ii) any person or entity acquires directly or indirectly the beneficial
ownership of equity securities having the power to elect a majority of
the board of directors of Party A; or
(iii) Party A enters into any agreement providing for any of the
foregoing.
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will not apply
to Party A or to Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this
Agreement:-
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) "TERMINATION CURRENCY" means United States Dollars.
(h) ADDITIONAL TERMINATION EVENT will apply. The following shall constitute
and Additional Termination Event:
The rating of the long-term unsecured senior debt of Merrill Lynch &
Co. is downgraded to below (i) A- as determined by Standard & Poor's, a
division of The McGraw Hill Companies, Inc. or (ii) A3 as determined by
Moody's Investors Service Inc., in either case Party A shall be the
Affected Party.
PART 2
TAX REPRESENTATIONS
(a) PAYER REPRESENTATIONS. For the purpose of Section 3(e) of this Agreement,
Party A and Party B will make no representations:-
(b) PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of this Agreement,
Party A and Party B make no representations.
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<PAGE> 21
PART 3
AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents as applicable:
(a) Tax forms, documents or certificates to be delivered are:- None.
(b) Other Documents to be delivered are: -
<TABLE>
<CAPTION>
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY SECTION 3(d)
DELIVER DOCUMENT CERTIFICATE DELIVERED REPRESENTATION
------------------ -------------- ------------------- -----------------------
<S> <C> <C> <C>
Party A. Annual audited financial Promptly after request. Yes.
statements (in the case
of Party A, of its Credit
Support Provider) prepared
in accordance with generally
accepted accounting principles
in the country in which the
party is organized.
Party A. Quarterly unaudited financial Promptly after request. Yes.
statements (in the case of
Party A, of its Credit Support
Provider) prepared in
accordance with generally
accepted accounting principles
in the country in which the
party is organized.
Party A. A duly executed copy of the At execution hereof. No.
Credit Support Document
specified in Part 4 of the
Schedule.
Party A/Party B. Certificate or other documents At the execution of this Yes.
evidencing the authority of the Agreement, and, if a
party entering into this Agreement Confirmation so requires
or a Confirmation, as the case may it on or before the date set
be. forth therein.
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY SECTION 3(d)
DELIVER DOCUMENT CERTIFICATE DELIVERED REPRESENTATION
- ------------------- ------------------------------ ---------------------------- -----------------------
<S> <C> <C> <C>
Party A/Party B. Opinion of outside counsel At the execution of this No.
substantially in the form of Agreement, and, if a
Exhibit B hereto and otherwise Confirmation so requires it,
in form and substance on or before the date
acceptable to Party A. specified therein.
</TABLE>
PART 4
MISCELLANEOUS
(a) ADDRESSES FOR NOTICES: For the purpose of Section 12(a) of this Agreement:-
Address for notices or communications to Party A:-
Address: Merrill Lynch World Headquarters, World Financial Center, North
Tower, 22nd Floor, 250 Vesey Street,
New York, New York 10281-1322
Attention: Swap Group
Telex No.: 6716341 Answerback: MLB SCTR
Facsimile No.: 212 449-1788 Telephone No.: 212 449-0291
(For all purposes)
Address for notices or communications to Party B:-
Address: T&W Funding Company IV, L.L.C., 6416 Pacific Highway East,
Tacoma, WA 98424
Attention: Mike Price
Facsimile No.: 206 926-0739 Telephone No.: 206 922-5164
With copy to:
Address: Norwest Bank Minnesota, National Association, Norwest Center,
6th and Marquette, Minneapolis, MN 55479-0069
Attention: Amy Belongie
Facsimile No.: 612 667-9825 Telephone No.: 612 667-5701
With copy to:
Address: MBIA Insurance Corporation, 113 King Street, Armonk, NY 10504
Attention: Investment Portfolio Management - Structured Finance
Facsimile No.: 914 765-3810 Telephone No.: 914 765-3790
(For all purposes)
(b) PROCESS AGENT. For the purpose of Section 13(c):-
Party A appoints as its Process Agent: Not Applicable.
Party B appoints as its Process Agent: Not Applicable.
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<PAGE> 23
(c) OFFICES. The provisions of Section 10(a) will apply to this Agreement.
(d) MULTIBRANCH PARTY. For the purpose of Section 10(c) of this Agreement:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:-
Party A:- Guarantee of Merrill Lynch & Co., Inc. ("ML & Co.") in the form
attached hereto as Exhibit A.
Party B:- None.
(g) CREDIT SUPPORT PROVIDER.
Credit Support Provider means in relation to Party A, ML & Co.
Credit Support Provider means in relation to Party B, Not Applicable.
(h) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine.
(i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this Agreement
will not apply to all Transactions under this Agreement.
(j) "AFFILIATE" will have the meaning specified in Section 14 of this
Agreement.
PART 5
OTHER PROVISIONS
(1) Section 3 of the Agreement is hereby amended by adding at the end thereof
the following subsection (g):
"(g) ELIGIBLE SWAP PARTICIPANT. It is an "eligible swap participant"
within the meaning of Part 35.1(b)(2) of the General Regulations under the
Commodity Exchange Act."
(2) Party B acknowledges and agrees that (i) Party A is acting solely in the
capacity of an arm's-length contractual counterparty, with respect to this
Agreement and any Transaction hereunder, (ii) Party A is not acting as a
financial advisor or fiduciary of Party B (or in any similar capacity) with
respect to this Agreement and any Transaction hereunder and (iii) any advice
given by Party A under or in connection with this Agreement or any Transaction
is and will be merely incidental to the provision of Party A's services
hereunder and does not and will not serve as a primary basis of any investment
decision by Party B. Party B represents to Party A (which representation shall
be deemed to be repeated by Party B on each date on which a Transaction is
entered into) that its decision to enter into each Transaction has been based
solely on the independent evaluation of Party B and its representatives.
23
<PAGE> 24
(3) Notwithstanding the terms of Sections 5 and 6 of this Agreement, if at any
time and so long as one of the parties to this Agreement ("X") shall have
satisfied in full all its payment and delivery obligations under Section 2(a)(i)
of this Agreement and shall at the time have no future payment or delivery
obligations, whether absolute or contingent, under such Section, then unless the
other party ("Y") is required pursuant to appropriate proceedings to return to X
or otherwise returns to X upon demand of X any portion of any such payment or
delivery, (a) the occurrence of an event described in Section 5(a) of this
Agreement with respect to X, any Credit Support Provider of X or any Specified
Entity of X shall not constitute an Event of Default or a Potential Event of
Default with respect to X as the Defaulting Party and (b) Y shall be entitled to
designate an Early Termination Date pursuant to Section 6 of this Agreement only
as a result of the occurrence of a Termination Event set forth in Section
5(b)(i) of this Agreement with respect to Y as the Affected Party.
(4) Sole Transaction. Notwithstanding anything else in this Agreement to the
contrary, only one Transaction shall be governed by this Agreement, which shall
be a fully paid transaction, where Party B is the party which has fully paid its
obligations with respect to such Transaction (a "Party B Fully Paid
Transaction"). No other Transaction may be executed under this Agreement without
the prior written consent of MBIA Insurance Corporation ("MBIA").
(5) No suspension of payments. Notwithstanding Section 2(a)(iii) of this
Agreement, Party A shall not suspend any payments due under Section 2(a)(iii)
unless Party A is also able to designate an Early Termination Event pursuant to
Part 5(3) of this Schedule.
(6) Third-party beneficiary. Party A and Party B hereby each acknowledge and
agree that MBIA shall be an express third-party beneficiary (and not merely and
incidental third-party beneficiary) of this Agreement and the obligations of
such party under the Party B Fully Paid Transaction, and as such, entitled to
enforce the Agreement and the terms of any such Party B Fully Paid Transaction
against such party on its own behalf and/or on behalf of the holders of the T&W
Funding Company IV, L.L.C. Lease-Backed Notes, Series 1995-1, ("the Notes")
issued by T&W Funding Company IV, L.L.C.
(7) Assignment on Claim. Party A and Party B hereby acknowledge that to the
extent of payments made by MBIA under any Note Insurance Policy issued by MBIA
relating to the Notes ("the Note Insurance Policy"), Party B has agreed to
assign its right to receive payments under the Party B Fully Paid Transaction
(including, but not limited to, the right to receive payment from Party B and
the enforcement of any remedies) to MBIA. Party A agrees to such assignment if
any claim is ever paid under any Note Insurance Policy relating to the Notes;
but Party A shall be under no obligation to make any payments to MBIA which
would otherwise have been made to Party B until after notice of such claim and
receipt of a copy of such assignment. Party B hereby acknowledges and agrees
that upon receipt of such instrument of assignment by Party A, all amount owed
by Party A to Party B under this Agreement shall be paid to MBIA until MBIA
directs otherwise and payments of such amounts by Party A shall constitute
performance of the related obligation of Party A hereunder.
(8) Assignments. No Party B Fully Paid Transaction may be assigned by either
Party A or Party B without the prior written consent of MBIA. However, Party A
may make such an assignment to an Affiliate of Party A without MBIA's prior
written consent, if Party A's Credit Support Provider provides a guaranty of the
Transaction substantially in the form attached hereto.
(9) Amendment/waivers. No provision of this Agreement may be amended or waived
without the prior written consent of MBIA.
24
<PAGE> 25
EXHIBIT A
GUARANTEE OF MERRILL LYNCH & CO., INC.
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, MERRILL
LYNCH & CO., INC., a corporation duly organized and existing under the laws of
the State of Delaware ("ML & CO."), hereby unconditionally guarantees to T&W
FUNDING COMPANY IV, L.L.C. (the "Company"), the due and punctual payment of any
and all amounts payable by Merrill Lynch Capital Services, Inc., a corporation
organized under the laws of the State of Delaware ("MLCS"), under the terms of
the Master Agreement between the Company and MLCS, dated as of August 1, 1995
(the "Agreement"), including, in case of default, interest on any amount due,
when and as the same shall become due and payable, whether on the scheduled
payment dates, at maturity, upon declaration of termination or otherwise,
according to the terms thereof. In case of the failure of MLCS punctually to
make any such payment, ML & Co. hereby agrees to make such payment, or cause
such payment to be made, promptly upon demand made by the Company to ML & Co.;
provided, however that delay by the Company in giving such demand shall in no
event affect ML & Co.'s obligations under this Guarantee. This Guarantee shall
remain in full force and effect or shall be reinstated (as the case may be) if
at any time any payment guaranteed hereunder, in whole or in part, is rescinded
or must otherwise be returned by the Company upon the insolvency, bankruptcy or
reorganization of MLCS or otherwise, all as though such payment had not been
made.
ML & Co. hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Agreement; the absence of any action to enforce the same; any waiver or consent
by the Company concerning any provisions thereof; the rendering of any judgment
against MLCS or any action to enforce the same; or any other circumstances that
might otherwise constitute a legal or equitable discharge of a guarantor or a
defense of a guarantor. ML & Co. covenants that this guarantee will not be
discharged except by complete payment of the amounts payable under the
Agreement. This Guarantee shall continue to be effective if MLCS merges or
consolidates with or into another entity, loses its separate legal identity or
ceases to exist.
ML & Co. hereby waives diligence; presentment; protest; notice of protest,
acceleration, and dishonor; filing of claims with a court in the event of
insolvency or bankruptcy of MLCS; all demands whatsoever, except as noted in the
first paragraph hereof; and any right to require a proceeding first against
MLCS.
ML & Co. hereby certifies and warrants that this Guarantee constitutes the
valid obligation of ML & Co. and complies with all applicable laws.
This Guarantee shall be governed by, and construed in accordance with, the
laws of the State of New York.
Notwithstanding the foregoing, in the event that MLCS transfers its
obligations to any Affiliate (as defined in the Agreement) pursuant to the
Agreement, the obligations of the Affiliate under such transaction shall be
guaranteed hereunder.
This Guarantee becomes effective concurrent with the effectiveness of the
Agreement, according to its terms.
1
<PAGE> 26
IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed
in its corporate name by its duly authorized representative.
MERRILL LYNCH & CO., INC.
By:
----------------------------------
Name:
Title:
Date:
---------------------------
2
<PAGE> 27
EXHIBIT B
[LETTERHEAD OF PARTY B'S COUNSEL]
[DATE]
Merrill Lynch Capital Services, Inc.
World Financial Center North Tower
New York, NY 10281-1322
and
MBIA Insurance Corporation
113 King Street
Armonk, N.Y. 10504
Dear Sirs:
This opinion is furnished to you pursuant to a Master Agreement dated as
of_____________, 19__ (the "Agreement"), between _____________ ("_________")and
Merrill Lynch Capital Services, Inc. ("MLCS"). Terms defined in the Agreement
are used herein as defined in the Agreement.
I am counsel to _______________________ and in that capacity have examined such
documents and have conducted such investigations of fact and law as I have
deemed necessary or advisable for the opinions expressed herein. The opinions
expressed herein are limited to questions arising under the laws of ___________.
Upon the basis of the foregoing, I am of the opinion that:
1. ________ is a ________ validly organized and existing and in good
standing under the laws of ____________________.
2. The execution, delivery and performance of the Agreement and any
Confirmation, dated on or prior to the date hereof, by _____ are within
___________ 's [corporate] power, have been duly authorized by all necessary
corporate action and do not conflict with, or constitute a default under any
provisions of ____'s articles of incorporation or by-laws (or equivalent
constituent documents) or any applicable law or regulation or of any agreement,
decree, order, judgment, injunction or other instrument known to me and binding
on or affecting ____________'s property or assets.
3. The Agreement has been duly executed and delivered by
___________ and constitutes, and when duly executed and delivered any
Confirmation, dated on or prior to the date hereof, together with the Agreement,
will constitute, a valid and binding obligation of _____________ enforceable
against _________ in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or
other laws affecting the enforcement of creditor's rights generally or by
general equity principles; provided that such counsel does not express any
opinion as to the binding effect of any provision of the Agreement that purports
to make any determination conclusive or conclusive absent manifest error unless
such determination is made reasonably and in good faith.
4. To the best of my knowledge, no consent, authorization, license
or approval of, or registration filing, or declaration with, any governmental
authority of ________________ is required in connection with the execution,
delivery and performance of the Agreement or any Confirmation by
______________________.
<PAGE> 28
MERRILL LYNCH LOGO
LAURENCE D. DOBOSH
Vice President
Senior Counsel
Office of General Counsel
World Financial Center
North Tower
New York, New York 10281-1315
212 449 7406
FAX 212 449 6993
August 24, 1995
T & W Funding Company IV, L.L.C.
6416 Pacific Highway East
Tacoma, WA 98424
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Dear Sirs:
This opinion is furnished to you pursuant to the Master Agreement,
dated as of August 1, 1995 (the "Agreement"), between T & W Funding Company IV,
L.L.C. and Merrill Lynch Capital Services, Inc. ("MLCS"). Capitalized terms used
but not defined herein have the meanings set forth in the Agreement.
I am employed by Merrill Lynch & Co., Inc. and act as counsel to
MLCS, and in that capacity I have examined such documents and have conducted
such investigations of fact and law as I have deemed necessary or advisable for
the opinions expressed herein. In connection therewith, I have relied as to
certain matters on information obtained from public officials, and employees,
representatives and officers of MLCS and other sources believed by me to be
reliable, and I have assumed that the signatures on all documents examined by me
are genuine and that the Agreement has been duly executed and delivered by you
pursuant to appropriate corporate authority, assumptions which I have not
independently verified.
Upon the basis of the foregoing, I am of the opinion that:
1. MLCS is a corporation validly organized and existing and in good
standing under the laws of the State of Delaware.
2. The execution, delivery and performance of the Agreement, and
any Confirmation dated on or prior to the date hereof, by MLCS are within MLCS's
corporate power, have been duly authorized by all necessary corporate action and
do not conflict with, or constitute a default under, any provisions of MLCS's
certificate of incorporation or by-laws or any applicable law or regulation or
any agreement, decree, order, judgment, injunction or other instrument known to
me and binding on or affecting MLCS's property or assets.
<PAGE> 29
MERRILL LYNCH LOGO
T&W Funding Company IV, L.L.C.
MBIA Insurance Corporation
August 24, 1995
Page Two
3. The Agreement has been duly executed and delivered by MLCS and
constitutes and when duly executed and delivered any Confirmation dated on or
prior to the date hereof, together with the Agreement, will constitute, a valid
and binding obligation of MLCS enforceable against MLCS in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equity principles; provided that I
do not express any opinion as to the binding effect of any provision of the
Agreement that purports to make any determination conclusive or conclusive
absent manifest error unless such determination is made reasonably and in good
faith.
4. To the best of my knowledge, no consent, authorization, license
or approval of, or registration, filing, or declaration with, any governmental
authority of the United States or the State of New York is required in
connection with the execution, delivery and performance of the Agreement or any
Confirmation dated on or prior to the date hereof by MLCS.
I am a member of the bar of the State of New York, and the opinions
expressed herein are limited to questions arising under the laws of the State of
New York and, to the extent relevant to the opinions expressed herein, the
Delaware General Corporation Law and the Federal laws of the United States.
This opinion is provided solely for your benefit in connection with
the Agreement and may not be relied on by, nor copies hereof delivered to, any
other person or entity without my prior written consent.
Very truly yours,
/s/ LAURENCE D. DOBOSH
Laurence D. Dobosh
Vice President and Senior Counsel
<PAGE> 30
LAURENCE D. DOBOSH
Vice President
Senior Counsel
Office of General Counsel
World Financial Center
North Tower
MERRILL LYNCH LOGO New York, New York 10281-1315
212 449 7406
FAX 212 449 6993
August 23, 1995
T & W Funding Company IV, L.L.C.
6416 Pacific Highway East
Tacoma, WA 98424
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Dear Sirs:
I am an attorney employed by Merrill Lynch & Co., Inc., a corporation
organized under the laws of the State of Delaware ("Merrill Lynch"), and am
delivering this opinion in connection with the Guarantee of Merrill Lynch
furnished to you pursuant to the Master Agreement (the "Agreement"), dated as of
August 1, 1995 between Merrill Lynch Capital Services, Inc. and T & W Funding
Company IV, L.L.C..
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or appropriate for purposes of this
opinion.
Upon the basis of the foregoing, I am of the opinion that:
(1) Merrill Lynch is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(2) The Guarantee has been duly authorized, executed and delivered by
Merrill Lynch and constitutes the valid and legally binding obligation
of Merrill Lynch enforceable in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and
to general equity principles.
(3) Merrill Lynch is not required to obtain any authorization, consent,
approval, exemption or license from, or to file any registration with
any governmental authority of the United States of America or the State
of New York as a condition to the validity of, or for the execution,
delivery, and performance of, the Guarantee, or to the exercise by you
of your rights thereunder.
<PAGE> 31
MERRILL LYNCH LOGO
August 23, 1995
Page Two
(4) The execution, delivery and performance of the Guarantee by Merrill
Lynch will not contravene or constitute a default under any statute,
regulation, or rule of any governmental authority of the United States
of America or the State of New York, the violation of which would have a
material adverse effect on Merrill Lynch's ability to perform its
obligations under the Guarantee, under its certificate of incorporation
or by-laws (or equivalent constituent documents) or, to the best of my
knowledge, under any order judgement, mortgage, indenture, contract or
other undertaking to which Merrill Lynch is a party or by which Merrill
Lynch or any of Merrill Lynch's property or assets is bound,
I have relied as to certain matters on information obtained from public
officials, officers of Merrill Lynch and other sources believed by me to be
responsible and I have assumed that the signatures on all documents examined by
me are genuine, assumptions which I have not independently verified.
This opinion is limited to the laws of the State of New York, the Delaware
General Corporation Law and the Federal laws of the United States. The opinions
in this letter are expressed solely as of the date hereof for your benefit and
for the benefit of your successors and permitted assigns under the Agreement and
may not be relied upon in any manner or for any purposes by any other person.
Very truly yours,
/s/ LAURENCE D. DOBOSH
----------------------------
Laurence D. Dobosh
Senior Counsel
<PAGE> 32
GUARANTEE OF MERRILL LYNCH & CO., INC.
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, MERRILL
LYNCH & CO., INC., a corporation duly organized and existing under the laws of
the State of Delaware ("ML & CO."), hereby unconditionally guarantees to T&W
FUNDING COMPANY IV L.L.C. (the "Company"), the due and punctual payment of any
and all amounts payable by Merrill Lynch Capital Services, Inc., a corporation
organized under the laws of the State of Delaware ("MLCS"), under the terms of
the Master Agreement between the Company and MLCS, dated as of August 1, 1995
(the "Agreement"), including, in case of default, interest on any amount due,
when and as the same shall become due and payable, whether on the scheduled
payment dates, at maturity, upon declaration of termination or otherwise,
according to the terms thereof. In case of the failure of MLCS punctually to
make any such payment, ML & Co. hereby agrees to make such payment, or cause
such payment to be made, promptly upon demand made by the Company to ML & Co.;
provided, however that delay by the Company in giving such demand shall in no
event affect ML & Co.'s obligations under this Guarantee. This Guarantee shall
remain in full force and effect or shall be reinstated (as the case may be) if
at any time any payment guaranteed hereunder, in whole or in part, is rescinded
or must otherwise be returned by the Company upon the insolvency, bankruptcy or
reorganization of MLCS or otherwise, all as though such payment had not been
made.
ML & Co. hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Agreement; the absence of any action to enforce the same; any waiver or consent
by the Company concerning any provisions thereof; the rendering of any judgment
against MLCS or any action to enforce the same; or any other circumstances that
might otherwise constitute a legal or equitable discharge of a guarantor or a
defense of a guarantor. ML & Co. covenants that this guarantee will not be
discharged except by complete payment of the amounts payable under the
Agreement. This Guarantee shall continue to be effective if MLCS merges or
consolidates with or into another entity, loses its separate legal identity or
ceases to exist.
ML & Co. hereby waives diligence; presentment; protest; notice of protest,
acceleration, and dishonor; filing of claims with a court in the event of
insolvency or bankruptcy of MLCS; all demands whatsoever, except as noted in the
first paragraph hereof; and any right to require a proceeding first against
MLCS.
ML & Co. hereby certifies and warrants that this Guarantee constitutes the
valid obligation of ML & Co. and complies with all applicable laws.
This Guarantee shall be governed by, and construed in accordance with, the
laws of the State of New York.
This Guarantee may be terminated at any time by notice by ML & Co. to the
Company given in accordance with the notice provisions of the Agreement,
effective upon receipt of such notice by the Cornpany or such later date as may
be specified in such notice; provided, however, that this Guarantee shall
continue in full force and effect with respect to any obligation of MLCS under
the Agreement entered into prior to the effectiveness of such notice of
termination.
This Guarantee becomes effective concurrent with the effectiveness of the
Agreement, according to its terms.
1
<PAGE> 33
IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed in
its corporate name by its duly authorized representative.
MERRILL LYNCH & CO., INC.
By: /s/ MARLENE DEBEL
---------------------------
Name: Marlene Debel
Title: Designated Signatory
Date: August 9, 1995
-------------------------
2
<PAGE> 1
EXHIBIT 10.25
EXTRA COPY
ASSET PURCHASE AGREEMENT
Between
COMMERCIAL CAPITAL CORPORATION, JAMES NEESE,
LARRY RICE, TRUSTEE AND LARRY RICE, INDIVIDUALLY
and
T & W FUNDING COMPANY VI, L.L.C.
Dated as of
June 2, 1997
<PAGE> 2
LIST OF EXHIBITS
1. 1. 1 (a) List of operating assets, furniture, fixtures, machinery,
equipment, computers, etc.
1.1.1(d) List of trademarks, trade names, copyrights and other
intellectual property rights
1.1.1(j) List of permits, licenses and governmental approvals
1.1.1(k) List of contracts and leases (including residuals)
1.1.2 List of excluded assets
1.2 List of assumed liabilities
1.3 Form of Employment and Noncompetition Agreements
2.3 Form of Promissory Note
2.4(a) Form of Unconditional Guaranty
2.4(b) Form of Security Agreement
4.4 Form of Assignment, Assumption and/or Consent
DISCLOSURE SCHEDULES
4.3 Liens, encumbrances and charges
4.4 Real and personal property leases
4.5 Contracts, agreements and commitments
4.8 Financial Statements
4.9 Litigation
-i-
<PAGE> 3
ASSET PURCHASE AGREEMENT
The parties to this Agreement are (i) T & W FUNDING COMPANY VI, L.L.C., a
Delaware limited liability company ("Purchaser"); (ii) COMMERCIAL CAPITAL
CORPORATION, a Kansas corporation ("Seller"); (iii) JAMES NEESE ("Neese"); (iv)
LARRY RICE, Trustee of the Sharon K. Rice Revocable Trust ("Rice, Trustee"); (v)
LARRY E. RICE, individually ("Rice") (vi) MICHAEL A. PRICE (" M. Price"); (vii)
THOMAS W. PRICE ("T. Price"); (viii) KENNETH W. McCARTHY, JR. ("McCarthy"); (ix)
PAUL B. LUKE ("Luke"); and (x) T & W FINANCIAL CORPORATION ("T & W Financial").
The shareholders of Seller (Neese and Rice, Trustee) are collectively referred
to herein as the "Shareholders." T&W Financial, M. Price, T. Price, McCarthy and
Luke are collectively referred to herein as the "Guarantors."
Seller desires to sell to Purchaser and Purchaser desires to acquire upon
the terms and conditions set forth in this Agreement substantially all of the
property, assets and business of Seller.
The Shareholders are all of the shareholders of Seller.
In consideration of the mutual agreements set forth below, the parties
agree:
1. SALE AND PURCHASE OF ASSETS. On the terms and subject to the conditions
of this Agreement, at Closing Seller will sell, assign and convey to Purchaser
and Purchaser will purchase from Seller, all of Seller's right, title and
interest in and to the "Assets," as defined below, free and clear of all liens,
claims and encumbrances except as otherwise provided in this Agreement.
1.1 DESCRIPTION OF ASSETS. The "Assets" are all of the assets and
properties of Seller, except as specifically excluded below, existing as of
Closing.
1.1.1 Assets Included. The Assets include, without
limitation all of the following:
(a) Operating assets, furniture, fixtures, machinery,
equipment, computers (and related peripherals and software), including but not
limited to the specific items listed in Exhibit 1.1.1(a) attached to this
Agreement;
(b) Leasehold improvements at the leased premises occupied
by Seller;
(c) Accounts receivable;
(d) Trademarks, trade names (including the name
"Commercial Capital Corporation" and any variation thereof), trade secrets,
proprietary information, and other intellectual property rights of any and
every nature, including but not limited
-1-
<PAGE> 4
to the specific items listed in Exhibit 1.1.1(d) attached to this Agreement;
(a) Other tangible assets;
(f) Business and accounting records, including
customer lists and supplier lists (including all such records and lists stored
on computer disks and other similar media); provided, that Seller and
Shareholders shall have a continuing right of access to such records for tax
purposes;
(g) Telephone and fax numbers and post office boxes
(effective as of Closing, Seller grants Purchaser the right to open all mail
delivered to such post office boxes);
(h) Credits and deposits with suppliers, utilities,
taxing authorities and all other persons and entities;
(i) Product warranties from Seller's suppliers;
(j) Permits, licenses and governmental approvals
including but not limited to the specific items listed in Exhibit 1.1.1(j)
attached to this Agreement;
(k) The contracts and leases to which Seller is a party
and which are listed in Exhibit 1.1.1(k) to this Agreement; and
(l) Cash on hand and in Seller's bank and/or brokerage
accounts at Closing.
1.1.2 Assets Excluded. Except as provided elsewhere herein, the
Assets do not include the following:
(a) Corporate minute books, stock books and corporate
seal; and
(b) Those specific items described in Exhibit
1.1.2 attached to this Agreement.
1.2 Liabilities And Obligations. Except for the Leases, the Scheduled
Contracts and those liabilities, debts or obligations listed on Exhibit 1.2 to
this Agreement, which Purchaser shall assume at Closing, Purchaser assumes no
liabilities, debts or obligations of Seller or the Shareholders of any nature
whatsoever, whether absolute, accrued, contingent or otherwise, or whether due
or to become due, including any liability for taxes.
1.3 Employment and Noncompetition Agreements. At Closing, T&W Financial
Corporation (Purchaser's affiliate) and each of Neese and Rice shall execute and
deliver Employment and Noncompetition Agreements in the form attached as Exhibit
1.3 to this Agreement (the "Employment and Noncompetition Agreements").
-2-
<PAGE> 5
2. PURCHASE PRICE.
2.1 AMOUNT. The purchase price ("Purchase Price") for the Assets
is 2.5 X GAAP total shareholders' equity in Seller adjusted to the date of
Closing less the excluded assets described in Exhibit 1.1.2 and liabilities
not assumed hereunder. The Closing Date shall be May 31, 1997, but preliminary
closing figures shall be based on the preliminary internal financial
statements as of April 30, 1997 (such amount being $5,558,063.00), applying
consistent GAAP accounting principles with reference to the October 31, 1996
fiscal year-end audited financial statements. As soon as practicable after
Closing, post-closing adjustments shall be made to reflect the change in total
shareholder's equity from the preliminary internal financial statements as of
April 30, 1997 to May 31, 1997.
2.2 Purchase Price Adjustment Based on Termination of
Employment. The Purchase Price shall also be reduced in the following manner
upon the happening of any one of the following events which are more fully
described in the Employment and Noncompetition Agreements to be executed by
Neese and Rice.
(a) If Purchaser terminates a Shareholder's employment pursuant
to an Employment and Noncompetition Agreement without cause, there shall not be
a reduction and Seller and the Shareholders shall be entitled to one hundred
percent (100%) of the Purchase Price.
(b) Provided that Purchaser is not in default of its any of its
obligations hereunder, if both Shareholders terminate their employment
voluntarily in accordance with their Employment and Noncompetition Agreements
during the first twenty-four (24) months of their employment, then Seller shall
forfeit One Million Dollars ($1,000,000) of the remainder of the unpaid Purchase
Price as of the effective date of termination of employment; and provided
further, that death or disability shall not be deemed a voluntary termination.
2.3 Manner of Payment.
(a) Ten percent (10%) of the Purchase Price is payable in cash
at Closing by cashier's check or wire transfer of current funds;
(b) An additional fifteen percent (15%) of the Purchase Price
shall be payable on the one (1) year anniversary date of T & W Financial
Corporation's initial public offering; and
(c) The balance of the Purchase Price is payable pursuant to
the terms of the promissory note attached hereto as Exhibit 2.3 (the "Note").
2.4 Security. As security for the Mote:
-3-
<PAGE> 6
(a) T & W Financial Corporation, Michael A. Price, Katherine M.
Price, Thomas A. Price, Patricia A. Price, Ken McCarthy, Jr., Carol L. McCarthy
and Paul Luke shall execute and deliver to Seller an Unconditional Guaranty,
whereby they shall jointly and severally guarantee the payment of the balance of
the Purchase Price. The form of the Unconditional Guaranty is attached hereto as
Exhibit 2.5(a) (the "Guaranty"); and
(b) Purchaser shall grant to Seller a security interest in the
Assets pursuant to a written Security Agreement, the form of which is attached
as Exhibit 2.5(b).
2.6 Allocation of Purchase Price. As soon as practicable after
Closing, the parties shall agree upon an allocation of the Purchase Price among
the Assets.
2.7 Income Tax Warranty. Purchaser and Guarantors, jointly and
severally, warrant to Seller, Shareholders and Rice that the income tax effect
of the sale contemplated by this Asset Purchase Agreement shall be identical, in
all respects, to the income tax effect that would occur if this transaction had
been structured as a sale of all of Shareholder's stock of Seller instead of as
an asset purchase agreement. Purchaser and Guarantors, jointly and severally,
agree to pay on or before the due date of such tax liability any additional tax
resulting from structuring this transaction as an Asset Purchase Agreement and,
further, agree to indemnify Seller, Shareholders and Rice from any loss, cost,
expense or additional tax whatsoever arising as a result of structuring this
transaction as an asset purchase agreement. After closing, Seller's accountants
shall determine and report to the parties the estimated amount of Purchaser and
Guarantor's liability under this paragraph, but such estimate shall not limit
the liability of Purchaser and Guarantors.
3. CLOSING. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Seller in Prairie
Village, Kansas on June 2, 1997, or at such other date and place as Purchaser
and Seller shall mutually agree in writing ("Closing Date"); provided, however,
that the effective date of the purchase of the Assets shall be January 1, 1997.
Conveyance, transfer, assignment and delivery of the Assets shall be by bills of
sale, certificates of transfer, endorsements, assignments and other instruments
of transfer and conveyance in such form as Purchaser may reasonably request.
Seller and the Shareholders will from time to time after the Closing make such
further conveyances, transfers, assignments and deliveries, and execute such
further instruments and documents, as Purchaser deems reasonably necessary in
order to effectuate and confirm the sale of Assets and other transactions
contemplated by this Agreement.
3.1 Possession. Purchaser shall take possession of the Assets
immediately following Closing.
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3.2 Taxes and Fees.
(a) Any transfer, sales or use tax payable as a result of
the sale of the Assets pursuant to this Agreement shall be paid by Purchaser.
(b) All personal property taxes attributable to any of the
Assets and payable in the year in which Closing occurs shall be apportioned and
prorated as of Closing. The prorated of such taxes shall be made on the basis of
the tax rate for the most recent tax year available applied to the latest
assessed valuation of the Assets, and when the tax rate and assessed valuation
are fixed for the tax year in which Closing occurs, Purchaser and Seller shall
adjust such proration and, if necessary, refund or pay such sums to the other
party as necessary to effect such readjustment.
(c) Except as provided above, all of Seller's taxes which are
not yet due and payable and which relate to periods prior to Closing shall be
paid by Seller no later than the date such payments are due.
3.3 Deliveries by Seller, Shareholders and Rice at Closing. At or
before Closing, Seller and the Shareholders shall deliver to Purchaser the
following instruments, documents and agreements duly executed by the appropriate
persons and entities:
(a) Bills of sale, certificates of transfer, certificates of
title, endorsements, assignments and other instruments of transfer and
conveyance in such form as Purchaser may reasonably request;
(b) A certificate of Seller's Chief Executive Officer
certifying that all representations and warranties made by Seller and the
Shareholders in this Agreement are true and correct as of the Closing Date;
(c) The Employment and Noncompetition Agreements;
(d) Keys for access to the post office box and the office
space to be leased by Purchaser following Closing; and
(e) Such other items, documents, instruments and agreements
necessary or appropriate to carry out the provisions of this Agreement.
3.4 Deliveries by Purchaser at Closing. At or before Closing,
Purchaser shall deliver to Seller the following instruments, documents and
agreements duly executed by the appropriate persons and entities:
(a) A certified check, a cashier's check or other immediately
available funds in the amount of ten percent (10%) of the Purchase Price;
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(b) The Note referred to in section 2.3 of this Agreement;
(c) The Unconditional Guaranty referred to in section 2.4(a)
of this Agreement;
(d) The Security Agreement and accompanying UCC-1 Financing
Statement referred to in section 2.4(b) of this Agreement;
(e) An assumption of the liabilities and obligations that
Purchaser is to assume pursuant to section 1.2 of this Agreement;
(f) A certificate of Purchaser's members certifying that all
representations and warranties made by Purchaser in this Agreement are true and
correct as of the Closing Date; and
(g) Such other documents, instruments and agreements as are
necessary or appropriate to carry out the provisions of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS. The
"Disclosure Schedules" shall mean all of the disclosure schedules required by
this Agreement, which are simultaneously delivered to Purchaser. As of the date
of this Agreement and as of Closing, Seller and the Shareholders, jointly and
severally, represent and warrant to the Purchaser that the following are true
and complete:
4.1 Organization, Good Standing, Power. Seller (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Kansas; and (b) has the requisite power and authority to own,
lease and operate its properties and to carry on its business as currently
conducted. Neese and Rice, Trustee are all of the shareholders of Seller.
4.2 Authorization. The Shareholders and Seller have taken all
necessary and proper corporate action to authorize and approve this Agreement,
its consummation and the performance by Seller and the Shareholders of all terms
and conditions of this Agreement.
4.3 Property. Seller has good and marketable title to all of the
Assets, free and clear of all liens, security interests, mortgages, conditional
sale agreements, encumbrances or other charges whatsoever, except as set forth
on Disclosure Schedule 4.3 and at Closing, Purchaser will obtain good and
marketable title to the Assets, free and clear of all liens, security
interests, mortgages, conditional sale agreements, encumbrances or other charges
whatsoever, except as set forth on Disclosure Schedule 4.3.
4.4 Leases. All leases under which Seller leases real or
personal property as the "lessee" or "tenant" are listed in
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Disclosure Schedule 4.4 (the "Leases"). All such leases are valid and subsisting
and no default exists under any of them and no known event exists which, with
the giving of notice or the passage of time, or both, will be a default. Seller
shall obtain prior to Closing, an Assignment, Assumption and Consent with
respect to each lease identified in Disclosure Schedule 4.4 that Purchaser has
agreed to assume in such form as Purchaser may reasonably request.
4.5 Contracts. Except for this Agreement, the Leases and the
contracts and agreements set forth in Disclosure Schedule 4.5, Seller is not a
party to or subject to any agreements, contracts or other commitments (written
or oral). All of the contracts and agreements listed on Disclosure Schedule 4.5
(the "Scheduled Contracts") are valid and subsisting. The Scheduled Contracts
are freely assignable to Purchaser.
4.6 Taxes, Etc. Seller has filed all tax returns and paid all
taxes or installments thereof, and all employment security premiums, workers'
compensation premiums and other governmental charges, required under applicable
federal, state and other laws and regulations and will timely pay all such taxes
and other items not yet due and payable which are owing with respect to any
period before Closing.
4.7 Effect of Agreement. The execution, delivery and
performance of this Agreement by Seller and Shareholders and the consummation of
the transactions contemplated by it will not: (a) violate any provision of law,
statute, rule or regulation to which Seller or Shareholders are subject; (b)
violate any judgment, order, writ or decree of any court, arbitrator or
governmental agency applicable to Seller or Shareholders; or (c) result in the
breach of or conflict with any material term, covenant, condition or provision
of, or result in the modification or termination of, any charter, bylaw,
commitment, contract or other agreement or instrument, to which Seller or any
Shareholder is a party.
4.8 Financial Statements: Absence of Undisclosed Liabilities.
(a) The financial statements of Seller audited by the
accounting firm of BDO Seidman, LLP and dated as of October 31, 1996 and all
other financial statements including unaudited financial statements dated April
30, 1997 (collectively, the "Financial Statements") as set forth in Disclosure
Schedule 4.8 are correct and complete and fairly present the financial position
of Seller as of the date thereof, and no event has occurred since the date of
the Financial Statements which would render them misleading or inaccurate or
incomplete in any material respect.
(b) Except to the extent reflected or reserved against or
otherwise disclosed on the Financial Statements, as of the date of the Financial
Statements, Seller had no liabilities, debts or obligations of any nature,
whether absolute, accrued, contingent or otherwise, or whether due or to become
due including,
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without limitation, liabilities for taxes. Subsequent to the date of the
Financial Statements Seller has not incurred or become subject to any
liabilities, debts or obligations other than in the ordinary course of business
or otherwise disclosed in the Disclosure Schedules. Since the date of the
Financial Statements, no debts or liabilities of or to Seller have been
forgiven, settled or compromised except for full consideration or except in the
ordinary course of business, the aggregate amount of which has not had a
material adverse effect on Seller's financial condition.
4.9 Litigation. Except as set forth on Disclosure Schedule
4.9, there is no claim, action, suit, proceeding, arbitration, investigation or
inquiry pending before any federal, state, municipal, foreign or other court or
any governmental, administrative or self-regulatory body or agency, or any
private arbitration tribunal, or threatened against, relating to or affecting
Seller, the Shareholders or any of the assets, properties, employees or
businesses of Seller, nor is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry which may have a material
adverse effect upon the assets, properties or business of Seller or the
transactions contemplated by this Agreement.
4.10 Powers of Attorney. No person has any power of attorney to
act on behalf of Seller in connection with any of Seller's properties or
business affairs.
4.11 No Broker. Neither Seller nor the Shareholders have
taken any action which would give to any firm, corporation, agency or other
person a right to a consultant's or finder's fee or any type of brokerage
commission in connection with the transactions contemplated by this Agreement as
a result of any agreement with, or action by, Seller or the Shareholders.
4.12 Absence of Certain Changes or Events. Since March 31,
1997, Seller has not:
(a) Incurred any obligation or liability (of fixed or
variable amount, absolute or contingent) except trade or business obligations
incurred in the ordinary course of business;
(b) Suffered the occurrence of any events or gained the
knowledge of the possibility of any events occurring (including, without
limitation, events concerning customers, suppliers, equipment, employees,
facilities, environmental issues or any other matter that is material to
Seller's business) which, individually or in the aggregate, have had, or might
reasonably be expected to have, a material adverse effect on Seller's financial
condition, results of operations, properties, business or prospects;
(c) Incurred damage to or destruction or other loss of any
of its assets, in any material amount;
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(d) Discharged or satisfied any lien or encumbrance or
incurred or paid any obligation or liability (fixed or variable in amount,
absolute or contingent), except (i) obligations and liabilities included in the
Financial Statements and (ii) obligations and liabilities incurred since the
date of the Financial Statements, in the ordinary course of business;
(e) Mortgaged, pledged or subjected to lien or any other
encumbrance any of its assets or properties other than in the ordinary course of
business;
(f) Sold, transferred or leased any of its assets or
properties, except for the sale, transfer or lease of assets in the ordinary
course of business;
(g) Transferred or granted any rights under any licenses,
agreements, patents, inventions, trademarks, trade names, service marks,
copyrights, or with respect to know-how;
(h) Made or entered into any contract or commitment to
make any material expenditures other than in the ordinary course of business; or
(i) Made any commitments to any employees, manufacturers,
sales agents, suppliers or customers, except in the ordinary course of business,
consistent with Seller's past practices.
4.13 Trade Names and Trademarks. Seller has the right to use
the trade names and trademarks currently used in its business. Seller does not
have any knowledge of any claim of infringement or other complaint that Seller's
operations violate or infringe upon the rights or the trade names or trademarks
of others. Seller does not know of any other entity which owns any common law
right, title or interest in or to or has any right whatsoever to such trade
names.
4.14 Environmental Matters. Neither Seller nor the Shareholders
have any knowledge that they have caused or permitted any activities at any
premises occupied by Seller which directly or indirectly could result in such
premises or any other property being contaminated with hazardous or toxic waste
or substances.
4.15 Employee Matters. All obligations of Seller, whether
arising by operation of law, by contract, by past custom or practice or
otherwise, for salaries, vacation and holiday pay, bonuses and other forms of
compensation which were payable to its officers, directors or other employees up
through Closing have been paid or adequate accruals therefor have been made and
will be paid on a timely basis by Seller.
4.16 Trade Accounts Receivable. All of the accounts receivable
of Seller are bona fide receivables relating to goods
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provided, services actually rendered or valid leases entered into, by Seller,
but Seller makes no warranty of collectibility.
4.17 Labor Matters. Seller has no union contracts or collective
bargaining agreements with, or any other obligations to, employee organizations
or groups. There is no pending or threatened labor dispute, strike or work
stoppage affecting Seller's business.
4.18 Condition of Assets. The portion of the Assets composed of
tangible personal property sold by Seller to Purchaser hereunder are sold "AS IS
AND WHERE IS." Purchaser acknowledges that it has either inspected these assets
of Seller and is satisfied with their condition or has waived the right to do
so.
4.19 Accuracy and Completeness of Representations and
Warranties. No representations or warranties made by Seller and the Shareholders
in this Agreement and no statement contained in any document or instrument
delivered or to be delivered to Purchaser pursuant hereto contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact, necessary to make the statements contained herein or therein,
not misleading.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to Seller and the Shareholders:
5.1 Organization, Good Standing, Power. Purchaser (a) is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and (b) has all requisite power and
authority to execute, deliver and perform this Agreement and consummate the
transactions contemplated by this Agreement.
5.2 Authorization. Purchaser has taken all necessary and proper
action to authorize and approve this Agreement, its consummation and the
performance by Purchaser of all terms and conditions hereof and this Agreement
constitutes the valid and binding obligation of the Purchaser fully enforceable
in accordance with its terms.
5.3 Effect of Agreement, Consents, Etc. No consent,
authorization or approval or exemption by, or filing with, any governmental or
public body or authority is required in connection with the execution, delivery
and performance by the Purchaser of this Agreement or the taking of any action
hereby contemplated by this Agreement.
5.4 No Broker. There is no firm, corporation, agency or other
person that is entitled to a consultant's or finder's fee or any type of
brokerage commission in connection with the transactions contemplated by this
Agreement as a result of any agreement with, or action by, Purchaser.
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5.5 Effect of Agreement. The execution, delivery and performance
of this Agreement by Purchaser and the consummation of the transactions
contemplated by this Agreement will not (a) violate any provision of law,
statute, rule or regulation to which Purchaser is subject; (b) violate any
judgment, order, writ or decree of any court, arbitrator or governmental agency
applicable to Purchaser; (c) have any effect on any of the permits, licenses,
orders or approvals of Purchaser or the ability of Purchaser to make use of such
permits, licenses, orders or approvals; or (d) result in the breach of or
conflict with any term, covenant, condition or provision of, or result in the
modification or termination of, any articles of organization, commitment,
contract or other agreement or instrument, to which Purchaser is a party.
5.6 Accuracy and Completeness of Representations and Warranties.
No representations or warranties made by Purchaser in this Agreement and no
statement contained in any document or instrument delivered or to be delivered
to Seller or the Shareholders pursuant hereto contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact, necessary to make the statements contained herein or therein, not
misleading.
5.7 Organization, Good Standing, Power of T&W Financial
Corporation. T&W Financial Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington and has
all requisite power and authority to execute, deliver and perform this Agreement
and the Unconditional Guaranty. Further, T&W Financial Corporation has taken all
necessary and proper action to authorize and approve this Agreement and the
Unconditional Guaranty. The consummation and performance of all terms and
conditions of this Agreement and the Unconditional Guaranty constitute valid and
binding obligations of T&W Financial Corporation which are fully enforceable
according to their terms.
6. INDEMNIFICATION.
6.1 Seller's and Shareholders' Indemnification. Seller and
Shareholders will jointly and severally, defend, indemnify and hold harmless
Purchaser and any person claiming by or through either Purchaser or its
respective successors and assigns (individually, an "Indemnified Party") from
and against any and all costs, losses, claims, liabilities, fines, penalties,
damages and expenses (including, without limitation, all legal expenses and
reasonable fees and disbursements of attorneys and expert witnesses, with or
without suit, on appeal and in bankruptcy or other insolvency proceedings)
arising in connection with:
(a) Any breach of (i) any of the representations and
warranties of Seller or the Shareholders or (ii) any covenant
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or agreement made by Seller or the Shareholders in this Agreement; and/or
(b) Any liability or obligation of Seller or Shareholders,
whether known or unknown, absolute or contingent, except as specifically assumed
by Purchaser under this Agreement.
6.2 Purchaser Indemnification. Purchaser will defend, indemnify
and hold harmless Seller and the Shareholders and any person or entity claiming
by or through either Seller, Shareholders or their respective successors and
assigns from and against any and all costs, losses, claims, liabilities, fines,
penalties, damages and expenses (including without limitation, all legal
expenses and fees and disbursements of attorneys and expert witnesses, with or
without suit, on appeal and in bankruptcy or other insolvency proceedings) which
arise in connection with:
(a) Any breach of (i) any of the representations and
warranties of Purchaser or (ii) any covenant or agreement made by Purchaser in
this Agreement; and/or
(b) Any liability or obligation relating to Purchaser's
ownership or use of the Assets after Closing.
6.3 Procedure for Indemnification. If a party hereto becomes
aware of an event which gives rise to a claim for indemnification hereunder,
such party shall give the other party prompt written notice of any such action,
claim, liability, assessment or notice of deficiency received by such party
which might result in any liability under this provision. Any party who may
claim a right of indemnification hereunder agrees to refrain from paying,
settling or compromising any such claim for which indemnification may be sought
without giving notice of same to the other party. If the other party wishes to
contest or defend such third party claim, then the party against whom the claim
was made shall be obligated to cooperate fully with such party in contesting and
preserving all rights with respect to such contest; provided, however, if the
other party does not wish to challenge or contest such third party claim, then
the party against whom the claim was being made may settle same on terms and
conditions it deems to be the most favorable the party can obtain and then
assert the indemnification claim against the other party hereto. When giving
notice under this provision, a party may specify a time for a response from the
other party as to whether such other party wishes to contest or defend such
third party claim. Such deadline for response may be established consistent with
the facts and circumstances surrounding the situation. Failure of the other
party to respond within such time period shall constitute such other party's
decision not to contest or defend such claim. If a party hereunder claims
indemnification for a claim other than a third party claim, the party seeking
indemnification shall notify the indemnifying party in writing of the basis for
such claim setting forth the nature and amount of the damages resulting from
such claim. To the extent a party is deemed to have ultimately
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been responsible for indemnification, then interest shall be deemed to accrue on
the unpaid amount of indemnification, then interest shall be deemed to accrue on
the unpaid amount of indemnification obligation (at the prime rate of interest
as published in the "Money Rates" section of the Wall Street Journal), such
interest to be calculated based on the actual number of days elapsed from the
date each indemnification obligation becomes due and owing until paid in full
and based on a 365 day year.
6.4 Limitation on Seller's Indemnification. Notwithstanding any
other provision hereof, no person or entity shall be entitled to indemnification
under the provisions of this Agreement unless such party shall have given
written notice to the Seller or Purchaser, as the case may be, setting forth
such party's claim for indemnification in reasonable detail. Seller shall not be
obligated to indemnify against claims of less than Twenty Thousand Dollars
($20,000), and the maximum amount that either Seller or Purchaser shall be
obligated to pay as a result of claims requiring indemnification shall be equal
to the Purchase Price.
6.5 Offset. The amounts owed to Seller, Shareholders and Rice as
a result of this Asset Purchase Agreement and the Exhibits attached hereto shall
be payable to Seller, Shareholders and Rice, as the case may be, without
deduction or offset of any claims by Purchaser arising under this Agreement or
otherwise unless (1) the person or entity against which such deduction or offset
is claimed consents to such deduction or offset in writing or, (2) Purchaser
obtains a final, nonappealable judgment against the person or entity which such
deduction or offset is sought. The rights provided in this Section 6.5 are in
addition to any other remedies which Purchaser may have against Seller,
Shareholders or Rice.
7. COVENANTS OF SELLER, SHAREHOLDERS AND PURCHASER.
7.1 Confidentiality. From the date hereof through Closing and
thereafter, if the transaction contemplated by this Agreement does not close,
neither Purchaser, Seller nor the Shareholders shall publish, disclose or use
and shall not authorize or permit any of its members, officers, employees,
directors, agents, representatives attorneys or accountants or any third party
to publish, disclose or use any trade secrets, or other confidential information
or use any data or business or financial books, records or other information of
or pertaining to the Purchaser or Seller, which has been furnished to it by the
other or to which it or any of its members, officers, employees, directors,
agents, representatives, attorneys or accountants has had access during any
investigation made in connection with this Agreement, and which is not otherwise
available to it, except as required by law.
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7.2 Employees.
(a) Immediately prior to Closing and effective no later
than Closing, Seller will discharge and terminate the employment of each of its
employees, contractors and others working in its business in compliance with any
employment agreements then in effect and with applicable laws and regulations in
a manner such as to ensure that those persons cannot succeed in any claim
against Purchaser for reemployment, back pay, vacation or sick leave, vacation
pay, expense reimbursements, benefits or any other obligations of Seller,
whether arising under any such employment agreement or otherwise imposed by
statute or common law, or otherwise. Upon such termination, Purchaser will have
no obligation to any such persons (except as created by or at the direction of
Purchaser) under any pension, profit-sharing, other benefit plans for Seller's
employees or otherwise.
(b) Purchaser will offer employment to those former
employees of Seller, as shall be determined by Purchaser after consultation with
Neese and Rice, on such terms and conditions as Purchaser shall determine.
7.3 Access. Seller shall give to Purchaser and its
representatives, from and after the date of this Agreement, such access to the
premises, employees and agents of Seller as is reasonable to enable Purchaser to
inspect and evaluate Seller's business in such a way as to avoid unreasonable
disruption of Seller's business.
7.4 Conduct of Business. Except to the extent otherwise consented
to in writing by Purchaser, from the date of this Agreement until Closing,
Seller and the Shareholders shall use their best efforts to conduct Seller's
business in all respects in such a manner that each and every warranty and
representation of Seller in this Agreement will be true, complete and accurate
in all respects as of the date of Closing.
8. CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller under
this Agreement are subject to the fulfillment, at or prior to the Closing, of
each of the following conditions, any or all of which may be waived in writing
by Seller, in its sale discretion:
8.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Purchaser contained in this Agreement shall be
true in all material respects on and as of Closing with the same force and
effect as though made on and as of Closing, except as affected by transactions
contemplated by this Agreement.
8.2 Performance of Covenants. Purchaser shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by it on or before Closing pursuant to this
Agreement.
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8.3 Litigation. No claim, action, suit, proceeding, arbitration,
investigation or hearing or notice of hearing shall be pending or threatened
against or affecting Purchaser which might result, or has resulted, either in an
action to enjoin or prevent or delay the consummation of the transactions
contemplated by this Agreement or in such an injunction.
8.4 Employment Agreements. Purchaser and each of Rice and Neese
shall have executed and delivered the Employment and Noncompetition Agreements.
8.5 Unconditional Guaranty. The Guarantors (and their spouses
where applicable) shall have executed and delivered the Unconditional Guaranty.
9. CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of Purchaser
under this Agreement are subject to the fulfillment, at or prior to Closing, of
each of the following conditions, any or all of which may be waived in writing
by Purchaser, in its sole discretion:
9.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Seller and/or the Shareholders contained in
this Agreement shall be true in all material respects on and as of Closing with
the same force and effect as though made on and as of Closing, except as
affected by transactions contemplated by this Agreement.
9.2 Performance of Covenant. Seller and the Shareholders shall
have performed and complied in all material respects with all covenants,
obligations and agreements to be performed or complied with by them on or before
Closing pursuant to this Agreement.
9.3 Lease Negotiation. Purchaser shall have received the
necessary consents, satisfactory to Purchaser in its sole discretion, to the
assignment of those certain leases described in Exhibit 1.1.1(k) and Disclosure
Schedule 4.4. If Purchaser has not received such consents by the Closing Date,
Purchaser may terminate this Agreement by written notice to Seller, which notice
shall be delivered by the Closing Date. If Purchaser has not terminated this
Agreement pursuant to this section, Purchaser shall be deemed to have waived
this condition to Closing.
9.4 Permits and Licenses. Purchaser shall have received all
permits and licenses required, in its sole judgment, for it to operate a
business in the same manner as Seller is currently operating their business.
9.5 Employment Agreements. Purchaser and each of Rice and Neese
shall have executed and delivered the Employment and Noncompetition Agreements.
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9.6 Consents and Approvals. Seller shall have obtained all
consents and approvals of third parties necessary for the assignment to
Purchaser of all of the Leases and Scheduled Contracts.
10. TERMINATION. This Agreement may be terminated prior to Closing by
either party:
10.1 No Closing. If the Closing has not taken place on or before
June 2, 1997; provided, however, that such termination shall not relieve any
party from liability if such party, as of the termination date, is in breach of
any of the provisions of this Agreement; and provided, further, that if the
delay is caused by the act or omission of a particular party, such party shall
not have the right to terminate this Agreement; or
10.2 Failure of Conditions. If on Closing, any of the conditions
set forth in section 8 or 9 have not been satisfied, or waived by the Purchaser
or Seller, as applicable.
11. POST-CLOSING COVENANTS OF SELLER AND SHAREHOLDERS.
11.1 Protection of Trade Name. After Closing, Seller and
Shareholders shall cooperate with Purchaser to perfect Seller's trade name in
Purchaser and shall exercise their reasonable efforts to ensure that no
third-party shall use the trade name "Commercial Capital" or any variation
thereof.
11.2 Covenant Not to Compete.
11.2.1 Noncompetition. Seller hereby agrees that for the
period of thirty-six (36) months following Closing, it shall not, without the
prior written consent of Purchaser, directly or indirectly, whether as principal
or as agent, consultant or otherwise, alone or in association with any other
person or business organization:
(a) Enter into, participate in, engage in or own
any interest in the business of equipment leasing and related financial services
of any person, firm, corporation or other business organization (other than the
Purchaser or its affiliates) which is engaged in or proposes to become engaged
in the business of equipment leasing and related financial services which is or
becomes competitive with the business of Purchaser; or
(b) Solicit or conduct any business related to
equipment leasing or related financial services of any type now or hereafter
engaged in by Purchaser from or with any clients, customers, former customers or
clients, or prospects of Seller.
The period of time during which Seller is prohibited from engaging in
certain activities pursuant to the terms of this section shall be extended by
the length of time during which Seller is in breach of the terms of this
section.
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<PAGE> 19
(c) Provided, however, in the event Purchaser
defaults under this Agreement or the Note evidencing the payment obligation to
Purchaser, Shareholders, Neese or Rice, this Covenant-Not-to-Compete shall be
void and of no further force or effect whatsoever.
11.2.2 Remedy. In the event of any violation of the
restrictive covenants, Purchaser shall be entitled to the following remedies,
which remedies shall be deemed to be cumulative and not exclusive. Any election
by Purchaser to pursue less than all such remedies shall not bar later
enforcement of any of the remaining remedies:
(a) Equitable relief, including temporary
restraining order, preliminary injunction and permanent injunction; and
(b) Liquidated damages equal to the net income
Seller derives in noncompliance with this noncompetition provision. Such
liquidated damages shall be due immediately upon the rendering of the prohibited
activity and shall bear interest at the rate of twelve percent (12%) per annum
thereafter.
Seller agrees that this liquidated damages clause is a reasonable
forecast of the harm to Purchaser of a breach of the noncompetition provision,
and that the actual harm would be very difficult to quantify accurately.
11.2.3 Reasonableness and Enforceability of Noncompete.
This covenant not to compete, including its scope, duration and extent, are
fair and reasonably necessary to protect Purchaser's legitimate protectible
interests and shall be enforceable notwithstanding any claim or cause of
action against Purchaser by Seller or the Shareholders, whether predicated on
this Agreement or otherwise. If a court of competent jurisdiction should
decline to enforce this covenant as written, it shall be modified to restrict
Seller to the maximum extent that the court shall find enforceable.
11.2.4 Noncompetition Agreement of Shareholders. Reference
is hereby made to the Employment and Noncompetition Agreements to be signed by
Neese and Rice which also contain appropriate covenants not to compete.
12. GENERAL.
12.1 Survival. The representations, warranties, covenants
and agreements set forth in this Agreement shall survive Closing.
12.2 Expenses. Except as otherwise provided herein, whether or
not the transactions contemplated by this agreement are consummated, each party
shall pay its own expenses and the fees and expenses of its counsel and
accountants and other experts.
-17-
<PAGE> 20
12.3 Assignment. No party may assign its rights under this
Agreement without the written consent of all other parties hereto.
Notwithstanding the previous sentence, Purchaser may assign its rights under
this Agreement to any entity which is directly or indirectly controlled by
Purchaser or T&W Financial Corporation, but such assignment shall not relieve
Purchaser of its obligations hereunder or under any of the documents delivered
to Seller, Shareholders or Rice at Closing.
12.4 Waivers. No action taken pursuant to this Agreement, 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 representation,
warranty, covenant or agreement contained in this Agreement. The waiver by any
party of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
12.5 Binding Effect; Benefits. This Agreement shall inure to
the benefit of the parties and shall be binding upon the parties and their
respective heirs, personal representatives, successors and permitted assigns.
12.6 Notices. All notices, requests, demands and other
communications which are required or permitted under this Agreement shall be in
writing and shall be deemed to have been given when delivered in person or three
(3) days after deposit in the United States mail, certified postage prepaid,
return receipt requested, addressed as follows:
If to Seller, Shareholders or Rice, to:
James Neese
7920 State Line Road, Suite 101
Prairie Village, KS 66208
Larry Rice
7920 State Line Road, Suite 101
Prairie Village, KS 66208
If to Purchaser, to:
T&W Funding Company VI, L.L.C.
P.O. Box 3028
Federal Way, WA 98063
Attn: Paul B. Luke
or to such other address as any party may designate by written notice to the
other parties.
12.7 Further Assurances. Seller and the Shareholders shall,
from time to time, at the request of the Purchaser, and without further
consideration, execute and deliver such other instruments and take such other
actions as may be required to
-18-
<PAGE> 21
confer to the Purchaser and its assignees the benefits contemplated by this
Agreement.
12.8 Entire Agreement. This Agreement (including its Exhibits
and Disclosure Schedules) contains the complete and final expression of the
agreement of the parties with respect to the subject matter of this Agreement
and, except as otherwise expressly stated in this Agreement, supersedes and
replaces any and all agreements, representations and understandings with respect
to the subject matter of this Agreement. This Agreement may not be amended,
modified, revoked or waived orally, but only by means of a written document
executed by the party against whom the amendment, modification or revocation is
sought to be enforced. No party is entering into this Agreement in reliance on
any oral or written promises, inducements, representations, understandings,
interpretations or agreements other than those contained in this Agreement.
12.9 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be a part
of this Agreement or to affect the meaning or interpretation of this Agreement.
12.10 Severability. The invalidity of all or any part of any
section of this Agreement shall not render invalid the remainder of this
Agreement or the remainder of such section. If any provision of this Agreement
is so broad as to be unenforceable, such provision shall be interpreted to be
only so broad as is enforceable.
12.11 Counterparts. This Agreement may be executed in any number
of counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
12.12 Governing Law. This Agreement is made in and shall be
governed and interpreted in accordance with the internal laws of the State of
Washington.
12.13 Jurisdiction and Venue. In the event of any litigation to
enforce the provisions of this Agreement or recover damages for the breach of
any provision of this Agreement, such litigation may be brought only in the
Superior Court of Washington for Pierce County or the United States District
Court for the Western District of Washington at Tacoma, Washington.
12.14 Gender and Number. Whenever appropriate to the meaning of
this Agreement, use of the singular shall be deemed to refer to the plural and
use of the plural to the singular, and pronouns of certain gender shall be
deemed to comprehend either or both of the genders.
-19-
<PAGE> 22
12.15 Time of Essence. Time is of the essence of this Agreement.
DATED as of June 2, 1997.
SELLER: COMMERCIAL CAPITAL CORPORATION
---------------------------------------
By: James Neese, President
SHAREHOLDERS:
---------------------------------------
James Neese
---------------------------------------
Larry Rice, Trustee of the Sharon
K. Rice Revocable Trust u/a/d
April 26, 1995
RICE:
---------------------------------------
Larry Rice
PURCHASER: T & W FUNDING COMPANY VI, L.L.C.
---------------------------------------
By Thomas W. Price, Member
GUARANTORS:
T & W FINANCIAL CORPORATION
---------------------------------------
By Thomas W. Price, President
-20-
<PAGE> 23
---------------------------------------
Michael A. Price
---------------------------------------
Thomas W. Price
---------------------------------------
Paul B. Luke
---------------------------------------
Kenneth W. McCarthy, Jr.
-21-
<PAGE> 24
SPOUSAL CONSENT
The undersigned spouses hereby consent to the execution of the foregoing
documents and the consummation of the foregoing transactions contemplated by
this Asset Purchase Agreement, and the undersigned spouses of the Guarantors
agree to make and enter into the deliver the Unconditional Guaranty described in
section 2.4(a) of the Asset Purchase Agreement.
SPOUSES:
---------------------------------------
Katherine M. Price
---------------------------------------
Patricia A. Price
---------------------------------------
Carol McCarthy
-22-
<PAGE> 25
EXHIBIT 1.1.1(a)
LIST OF OPERATING MACHINERY ASSETS, FURNITURE
FIXTURES, MACHINERY, EQUIPMENT, COMPUTERS, ETC.
<PAGE> 26
COMMERCIAL CAPITAL CORPORATION
5/30/97
Physical Inventory
Jim Neese Office Larry McMillan/Storage Room
1 Executive Chair 1 Executive Chair
2 Side Chairs 1 Wood Desk
1 Built-in Desk 3 Wood Bookcases
1 Credenza W/Bookcase
1 Computer Table Misc.
1 4 Drawer Lateral File
1 Table/2 Chair Kitchen Set
Hallway Lower Level 1 Mail Scale
1 Microwave
2 Drawer III 1 Refrigerator
3 Drawer III 1 Meridian Phone System/Voice Mail
4 Drawer IIII
5 Drawer III Darlene Lamb/Sales Support
Kendal and Cassy
Copy Room Lower Level 3 Side Chairs
2 Cannon AP 550 Typewriters
1 Computer Table 1 Brother WP 1700 Typewriter
1 Wood table on Rollers 3 built-in Workstations
1 Pitney Bowes 5600 Mail Machine 3 Side Drawers, 4 Overheads
1 Toshiba Model BD 9230 Copier 1 HP Desk Jet 540
1 486 Computer
1 LaserJet 2D HP
Larry Rice Office 1 486 Computer
1 HP 500 Printer
2 Side Chairs 1 PC 486
1 Leather Executive Chair 1 HP Office Fax
1 Two Drawer File Cabinet 1 HP Office Fax
1 Credenza/Desk
Mike Cohen Office Lower Level Front Office Lower Level
1 Executive Chair 1 486 PC
1 Side Chair 1 Built-in Workstation
1 Small Wood Desk 1 Wood Desk
1 Wood Computer Table 2 Side Chairs
1 1146 CM Typewriter
1 Metal Typewriter Table
<PAGE> 27
COMMERCIAL CAPITAL CORPORATION
5/30/97
Upper Level Offices Jim Bradford
Joe Flannery Office 1 Side Chair
1 Exec Chair
1 Executive Desk Wood 1 Lateral File 2 Drawer
1 Executive Chair
1 Credenza Mark Boylan
2 Side Chairs
1 PC 486 1 Workstation
1 PC Server 1 Executive Chair
1 HP LaserJet 1 Side Chair
1 Lateral 2 drawer file
Brenda
1 Executive Desk Wood Copy Room
1 486 PC 1 AB Dick Zerox 1065
1 TI Printer 1 Cannon 550 Typewriter
1 Sec Chair 1 Workstation
1 Side Chair
1 Fax Savin W/Desk Stand Conference Room
1 2 Drawer lateral file 9 Conference Chairs
1 Conference Table
Kitchen 1 486 PC
1 48" Round Table Renee Hayes Office
2 Side Chairs 1 Desk/Credenza
3 File Cabinets
Jim Loveland 1 File Server
1 Paymaster
1 Workstation
1 486 PC Workstation/Accounting
1 Sec Chair Built-In Workstation
1 HP Printer 1 486 PC
Carl Nicholson
1 Executive Desk/Credenza
1 486 PC
1 Executive Chair
2 Side Chairs
<PAGE> 28
EXHIBIT 1.1.1(d)
SELLER USES THE TRADE NAME "COMMERCIAL CAPITAL CORPORATION"
WHICH IS ITS CORPORATE NAME, BUT HAS NOT SEPARATELY REGISTERED ITS
NAME AS A TRADE NAME
<PAGE> 29
EXHIBIT 1.1.1(j)
LIST OF PERMITS, LICENSES AND GOVERNMENTAL APPROVALS
<PAGE> 30
License year September 30, 1997 Application No. 003304
Permit No. 0003429
NO REFUNDS ALLOWED
CITY OF PRAIRIE VILLAGE
[LOGO]
BUSINESS LICENSE
COMMERCIAL CAPITAL CORP. Business Location:
7920 STATE LINE RD 101 7920 STATE LINE RD 101
PRAIRIE VILLAGE, KS 66208-0000
This certifies that a license for conducting business in the City of
Prairie Village, Kansas, has been granted to the above named individual.
/s/ JOYCE ???? ????
- ------------------------------------- -----------------------------------
Licensee City Clerk
POST IN A CONSPICUOUS PLACE, NOT TRANSFERABLE.
IT IS THE RESPONSIBILITY OF LICENSEE TO RENEW LICENSE.
<PAGE> 31
EXHIBIT 1.1.1(k)
LIST OF CONTRACTS AND LEASES (INCLUDING RESIDUALS)
<PAGE> 32
COMMERCIAL CAPITAL CORPORATION
DIRECT FINANCE LEASES
6/2/97
<TABLE>
<CAPTION>
LEASE EQUIPMENT MATURITY
NUMBER CUSTOMER NAME START DATE TERM COST DATE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3-4001 King, Clairborne Forrest 5/20/93 18 $ 5,000.00 11/20/94
3-4511 Wyatt Investigations 5/2/94 7 $ 3,500.00 12/2/94
3723 Ables Excavating Company 6/3/92 36 $15,638.29 6/3/95
4263 Deer Creek Golf Club, Inc 10/27/93 12 $44,355.68 10/27/94
4306 Denture Care, Inc. 12/15/93 52 $34,055.00 4/15/98
4353 Luna, Gary DDS 1/31/94 36 $ 3,418.00 1/31/97
4359 Varigrafix of KC, Inc. 1/1/94 36 $ 2,499.99 1/1/97
4377 Leader Converting, Inc. 1/28/94 36 $ 5,800.00 1/28/97
4513 Updike Paving Corporation 9/22/95 36 $ 4,910.00 9/22/95
4533 Keystone Metals 8/12/94 24 $ 3,241.98 8/12/96
4574 Kimberly Services, Inc. 6/12/94 12 $ - 6/12/95
4741 Roberts Wood Products 8/31/94 18 $ 4,500.00 2/28/96
4766 Weld Racing, Inc. 9/19/94 36 $ 7,000.00 9/19/97
4781 Eagle Legal Services, Inc 10/17/94 36 $10,034.00 10/17/97
4797 Magneson, Veryll & Ruth 10/20/94 24 $ 7,000.00 10/20/96
4804 Al's Ag Repair Service 10/11/94 24 $ 2,262.00 10/11/96
4818 Del-Ray Manufacturing Inc 10/27/94 36 $ 3,500.00 10/27/97
4841 Wood Resources, Inc. L.C. 10/27/94 36 $15,225.00 10/27/97
4871 Integrated Medical Resour 12/22/94 36 $ 5,000.00 12/22/97
4872 Wilson Construction Co 11/16/94 36 $17,000.00 11/16/97
4894 Complete Concepts Minist 11/29/94 36 $ 2,015.82 11/29/97
4902 Cardinal Wire EDM 12/17/94 36 $ 9,325.00 12/17/97
4920 Countryside Family Dining 12/15/94 36 $ 2,200.00 12/15/97
4935 Bale Chevrolet, Inc. 12/19/94 25 $ 5,900.00 1/19/97
4942 Burch Quality Express Inc 12/28/94 36 $28,750.00 12/28/97
4978 K C Detailing 1/31/95 30 $ 6,501.36 7/31/97
5-4748 Conventional Machine Co 9/16/94 36 $ 2,400.00 9/16/97
5016 R.G. Ables Company 2/8/95 30 $ 8,950.00 8/8/97
5027 Homestead Mortgage Corp 2/21/95 30 $ 3,347.67 8/21/97
5037 Premier Automotive Equip 2/22/95 24 $17,000.00 2/22/97
5040 Mike's Auto Body 3/3/95 24 $ 2,380.20 3/3/97
5079 Magneson, Veryll 4/30/95 24 $ 3,000.00 4/30/97
5112 Chuck's Alignment 4/1/95 24 $ 2,763.68 4/1/97
5146 Muffler Shop, The 5/16/95 36 $ 3,523.94 5/16/98
5169 Donco Electric 4/25/95 30 $ 1,800.00 10/25/97
5187 Al's Ag Repair Service 6/20/95 36 $ 6,097.00 6/20/98
5194 Bee There Plumbing 5/15/95 24 $ 2,250.00 5/15/97
5200 Mr. Greatwrench 5/16/95 12 $ 1,600.00 5/16/96
5240 Charles Moore Concrete Constru 7/7/95 37 $17,250.00 8/7/98
5247 R.S. Tourtillott Company 6/12/95 30 $ 7,530.00 12/12/97
5257 Mobile Auto Mechanic 6/21/95 36 $ 8,543.43 6/21/98
5262-4 Southside Body Shop 8/10/95 24 $ 2,353.45 6/10/97
5263 Danny's S Curve Tires 6/27/95 36 $ 4,001.80 6/27/98
</TABLE>
<PAGE> 33
<TABLE>
<S> <C> <C> <C> <C> <C>
5288 Arnold, Robert 7/10/95 36 $ 7,453.25 7/10/98
5316 Gilmore Construction 8/7/95 36 $ 6,000.00 8/7/98
5322 Jimmerson, Henry C. 8/7/95 22 $ 1,895.00 6/7/97
5327 Allison, Earl 8/2/85 48 $ 9,395.00 8/2/99
5328 Rushing, Sidney 6/19/95 48 $24,500.00 6/19/99
5336 Saner Enterprises, Inc. 7/27/95 12 $ 6,000.00 7/27/96
5348 Jurgeson, Allen & Linda 8/19/95 36 $14,000.00 8/19/98
5349 Laurence Stalling Const 8/1/95 18 $ 8,313.00 2/1/97
5353 Raines, Michael P 8/23/95 36 $ 3,995.00 8/23/98
5363 Professional Plumbing 8/11/95 24 $ 1,445.00 8/11/97
5375 Shingler, Bradley & Amy 8/23/95 24 $ 2,500.00 8/23/97
5382 RCI Riley Construction, Inc. 8/23/95 12 $ 3,990.00 8/23/96
5391 Thorpe Landscape Management 8/29/95 24 $ 1,964.20 8/29/97
5394 Central Livestock Corporation 9/30/95 24 $ 9,753.84 9/30/97
5402 Poor Boy Garage 8/30/95 36 $ 8,145.00 8/30/98
5405 Prestige Carpet Service 9/12/95 24 $ 3,995.00 9/12/97
5413 Updike Paving Corporation 9/22/95 36 $ 5,241.44 9/22/98
5416 Magneson, Veryll 9/9/95 36 $ 6,500.00 9/9/98
5422 Concrete Unlimited 9/12/95 42 $22,500.00 3/12/99
5426 AFI MORTGAGE CORPORATION 12/11/95 11 $ 959.88 11/11/96
5428 Belton Brake 9/13/95 36 $ 4,000.00 9/13/98
5430 Heald Muffler 9/21/95 36 $ 4,550.00 9/21/98
5431 Rainbow Irrigation 9/20/95 24 $ 2,879.05 9/20/97
5437 Purinton House Construction 9/18/95 24 $ 1,045.00 9/18/97
5442 R & T Contractors 9/21/95 38 $ 3,295.00 9/21/98
5472 Charity-Mart 11/8/95 24 $ 4,379.21 11/8/97
5476 Premier Automoative Equip 10/4/95 36 $ 6,922.74 10/4/98
5479 Hoaglin Trucking 10/6/95 12 $ 501.72 10/6/96
5482 Updike Paving Corporation 11/2/95 36 $19,000.00 11/2/98
5497 Fritz Hauling 10/17/95 36 $ 6,395.00 10/17/98
5501 Simmons Auto Service 1/8/96 25 $14,623.00 2/8/98
5511 HECTOR'S GARAGE 11/1/95 36 $ 7,027.35 11/1/98
5523 Lawrence Auto Plaza Care Center 11/6/95 18 $ 1,439.74 5/6/97
5525 Eastside Auto & Tire 11/1/95 36 $ 4,903.56 11/1/98
5527 Victor D. Grapes 11/3/95 24 $ 1,336.74 11/3/97
5529 Jar Creative 11/9/95 36 $11,326.00 11/9/95
5535 R.S. Tourtillot Company 11/21/95 24 $ 3,540.29 11/21/97
5544 Humes Construction Co. 12/16/95 30 $ 6,500.00 6/16/98
5546 Custom Keystone Construction 11/22/95 36 $33,157.72 11/22/98
5562 Evergreen Dairy 1/4/96 36 $ 4,319.21 1/4/99
5573 Adkins Brothers Trucking 12/4/95 36 $20,000.00 12/4/98
5593 Diamond Enterprises, Inc. 12/11/95 24 $ 3,771.10 12/11/97
5595 Caroline Spainhour 12/13/95 36 $18,423.92 12/13/98
5602 W & L Excavating 12/18/95 36 $30,920.06 12/18/98
5621 Payless Boat & Auto Repair 1/13/96 30 $ 4,200.00 7/13/98
5622 Miller Group, Inc. The 1/15/96 12 $10,563.00 1/15/97
5634 East 23rd Body Shop 1/9/96 12 $ 3,200.00 1/9/97
5648 Saner Enterprises, Inc. 1/12/96 30 $ 9,600.00 7/12/98
5687 Lawn N Scapes 1/25/96 36 $ 9.500.00 1/25/99
5688 R. G. Ables Company 1/29/96 36 $12,000.00 1/29/99
5689 R. G. Ables Company 1/29/96 36 $13,253.00 1/29/99
</TABLE>
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C> <C>
5700 Lawn Pride 2/2/96 30 $ 6,236.68 8/2/98
5701 D&D AUTO SERVICE 2/2/96 24 $ 2,250.00 2/2/98
5703 Stevens Tree Service 2/19/96 36 $ 9,500.00 2/19/99
5720 Estell, Vernon 2/13/96 47 $20,000.00 1/13/00
5721 Class One Mobile Wash 1/16/96 24 $ 2,700.00 1/16/98
5726 Peuser Farms 8/7/96 24 $14,000.00 8/7/98
5732A EAC General Contracting 2/19/96 48 $12,000.00 2/19/00
5733 Estell, Vernon 2/19/96 48 $15,000.00 2/19/00
5748 Nevel's Tow 2/13/96 36 $ 4,118.00 2/13/99
5749 Charity-Mart 3/15/96 36 $ 5,310.00 3/15/99
5761 F & S Hauling, Inc. 2/5/96 24 $ 2,376.80 2/5/98
5795 Seriet's Auto Repair 3/12/96 36 $ 3,250.00 3/12/99
5802 William L. Wilson 3/12/96 12 $ 1,145.00 3/12/97
5817 Trimble Lawn & Landscape 2/25/96 36 $ 4,759.00 2/25/99
5825 Peterson Construction 3/22/96 18 $ 2,495.00 9/22/97
5835 Total Grounds Management 4/24/96 24 $ 3,397.85 4/24/98
5846 The Thread Box 4/26/96 60 $17,325.00 4/26/01
5852 A+ Lawn & Landscape 3/28/96 36 $ 3,675.00 3/28/99
5863 Scott Kreamer 5/29/96 36 $ 3,190.00 5/29/99
5869 Updike Paving Corporation 4/3/96 30 $20,000.00 10/3/98
5872 Laurence Stalling Construction 4/3/96 12 $13,873.00 4/3/97
5875 EAC General Contracting 4/4/96 36 $10,000.00 5/4/99
5876 Weld Racing, Inc. 4/4/96 36 $ 5,033.00 4/4/99
5891 Total Loss Control 4/10/96 24 $ 3,225.00 4/10/98
5896 Heartland Automotive Service, 4/12/96 36 $ 4,207.00 4/12/99
5903 West Properties of Bonner, Inc 5/15/96 36 $10,790.00 5/15/99
5916 Henry's Construction 4/22/96 36 $13,000.00 4/22/99
5919 Maness Engineering 4/22/96 36 $12,043.00 4/22/99
5943 Jani-King 6/26/96 24 $ 2,695.00 6/26/98
5955 K.C. Bonding 5/6/96 15 $ 1,450.00 8/6/97
5960A Jim Martin Construction 5/8/96 36 $16,370.00 5/8/99
5961 Reliable Roofing Company 5/10/96 12 $ 1,395.00 5/10/97
5971 Burnett Car Care 5/21/96 36 $ 4,500.00 5/21/99
5973 Benchmark Plumbing, Inc. 5/21/96 24 $ 3,036.00 5/21/98
5977A Rushing, Sidney 5/15/96 35 $ 4,439.00 4/15/99
5984 Wood Resources, Inc. L.C. 5/16/96 36 $27,674.69 5/16/99
5989 Fish TV Networks, Inc. 3/16/96 24 $ 1,803.65 3/16/98
6000 Stephen Johnson, Individual 5/22/96 36 $ 5,995.00 5/22/99
6008 The Shop 7/18/96 24 $ 4,550.00 7/18/98
6009 Cleland Hauling 5/24/96 36 $ 6,516.55 5/24/99
6011 AM Steel & Fab 5/31/96 36 $ 2,849.00 7/8/99
6019 Mays Machine Shop 5/30/96 36 $ 3,695.00 5/30/99
6031 Todd Stark & Brenda Craven 6/3/96 30 $ 5,320.00 12/3/98
6043 Lynn Matthews 6/6/96 30 $ 2,895.00 12/6/98
6046 Sawvell Construction Company 6/6/96 30 $ 3,639.95 12/6/98
6058 Ignition Interlock 6/12/96 24 $43,200.00 6/12/98
6062 Professional Equipment Movers, 6/13/96 36 $11,038.00 6/13/99
6067 Cahokia Quick Shop 6/18/96 36 $ 3,291.70 6/18/99
6069 Eagle Roofing 6/14/96 30 $ 5,175.80 12/14/98
6075 Wyatt Investigations 8/15/96 12 $ 1,950.00 8/15/97
6083 Lee's Auto Repair 6/21/96 36 $ 4,750.00 6/21/99
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C> <C>
6089 Scott Winchell 6/21/96 26 $ 1,614.70 8/21/98
6091 Kirkpatrick Construction 6/26/96 30 $ 3,500.00 12/26/98
6092 C & B Small Engine Clinic 6/21/96 36 $ 4,656.85 6/21/99
6094A Midwest Underground Utility, In 6/25/96 48 $32,924.67 6/25/00
6103 Opportunities Unlimited Publ. 7/10/96 12 $ 1,850.00 7/10/97
6103A Gary's Remodeling 6/27/96 24 $ 2,695.00 6/27/98
6106 Patrick Carroll 6/27/96 24 $ 1,595.00 6/27/98
6111 New Horizons Computer 7/1/96 30 $20,405.00 1/1/99
6113 Empire Drilling & Boring 6/28/96 36 $24,107.15 6/28/99
6114 Watts Construction 7/1/96 14 $ 6,500.00 9/1/97
6115 Kwik Kopy 8/1/96 36 $ 6,000.00 8/1/99
6120 Loan Star Mortgage Corporation 7/2/96 30 $ 3,341.25 1/2/99
6123 Arrowhead Gutering 7/8/96 36 $ 3,899.85 7/8/99
6124 Energy Builders 7/5/96 36 $ 3,725.00 7/5/99
6126A Ackerson, Robin & Thomas 9/1/96 30 $ - 3/1/99
6151 Larry Plumb Jr. 7/11/96 36 $ 3,995.00 7/11/99
6158 Caribou Enterprises 7/23/96 24 $ 9,464.25 7/23/98
6159 Staci Steadman 7/16/96 36 $ 5,396.25 7/16/99
6164 J.D. Colton Construction 7/18/96 36 $ 3,676.80 7/18/99
6165 Wes Debardelaben 7/18/96 18 $ 1,442.75 1/8/98
6168A DJ'S Kwik Kar 7/20/96 36 $ 6,750.00 7/20/99
6174 David Andrew Dozart 7/29/96 24 $ 2,195.00 7/29/98
6175 Bone Plumbing, Inc. 8/22/96 36 $13,700.00 8/22/99
6186 Milberger Pest Control, Inc. 8/15/96 12 $ 1,047.00 8/15/97
6189 Kissick Construction Co., Inc. 9/4/96 36 $ 9,086.00 9/4/99
6191 Bluebird Leasing, Inc. 7/30/96 20 $ 5,000.00 3/30/98
6194 Golden Corral 9/16/96 12 $ 1,518.00 9/16/97
6198 Hubbard's Commercial, Inc. 7/31/96 12 $ 3,495.00 7/31/97
6199 James L. Potter 8/22/96 48 $ 8,392.51 8/22/00
6202 Performance Cable 8/27/96 30 $10,700.00 2/27/99
6227 Total Grounds Management 8/9/96 30 $ 5,000.00 2/9/99
6230 Besco Electrical Construction 8/9/96 18 $ 1,518.00 2/9/98
6234 Digital Voice Communication 9/12/96 35 $ 4,000.00 8/12/99
6235 Custom Flatwork 8/12/96 24 $ 2,495.00 8/12/98
6239 Bee There Plumbing 9/27/96 10 $ 500.00 7/27/97
6240 The Rom Company 8/15/96 36 $ 6,995.00 8/15/99
6260 Total Grounds Management 10/15/96 26 $ 4,500.00 12/15/98
6261 Eagle Legal Services, Inc. 9/9/96 36 $ 8,496.00 9/9/99
6274 Updike Paving Corporation 8/23/96 34 $ 2,672.50 6/23/99
6280 Performance Cable 8/26/96 18 $ 2,344.70 2/26/98
6285 Carstar Automotive, Inc. 8/30/96 36 $ 7,895.00 8/30/99
6295 Keystone Metals 9/4/96 36 $ 8,635.71 9/4/99
6308 Watts Construction 10/15/96 36 $17,000.00 10/15/99
6331 Garcia's Arabians 9/9/96 36 $ 4,701.85 9/9/99
6332 Farmer Insurance Company, Inc. 9/26/96 12 $10,289.00 9/26/97
6334 Heartland Auto & Truck 10/1/96 24 $ 2,500.00 10/1/98
6337 Ro Lyn Repair 9/10/96 12 $ 1,777.00 9/10/97
6351 Wheatley Design & Illustr 9/17/96 36 $ 2,330.00 9/17/99
6353 Always limo, Inc. 9/18/96 24 $ 2,303.82 9/18/98
6361 Wood Resources, Inc. L.C. 9/19/96 30 $32,690.00 3/19/98
6268 Midwest Underground Utility, In 9/30/96 48 $67,496.58 9/30/00
</TABLE>
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C> <C>
6371 J and M Contracting, Inc. 9/27/96 36 $ 3,210.00 9/27/99
6373 Robert G. O'Dell 9/23/96 48 $23,500.00 9/23/00
6378 Debra Scott 4/7/97 25 $ 5,058.57 5/7/99
6379 Brinkoetter's Trucking 9/19/96 36 $ 6,995.00 9/19/99
6382 Solid Rock Services 9/27/96 39 $ 4,995.00 12/27/99
6384 Bob Schmidt Foundations 10/3/96 36 $20,748.05 10/3/99
6385 Gary Smith Trucking 11/3/96 12 $ 7,000.00 11/3/97
6390 Ro Lyn Repair 9/26/96 36 $ 3,895.00 9/26/99
6395 Paul Wallace 10/1/96 37 $ 6,311.80 11/1/99
6400 Local Exchange Company, LLC 10/2/96 36 $ 8,100.00 10/2/99
6402 Dennis M. Tschirhart, Inc. 10/2/96 28 $ 2,045.00 2/2/99
6410 Corpstein Farms 10/7/96 36 $21,000.00 10/7/99
6419 Paul Wallace 10/14/96 37 $ 6,995.00 11/14/99
6421 Valentine McCormick Ligibel, I 1/6/97 15 $87,467.28 4/6/98
6423 M & L Foundry Co. 11/14/96 12 $ 3,852.00 11/14/99
6439A Farmer Insurance Company, Inc. 11/1/96 12 $ 2,081.63 11/1/97
6441 Portable Welding 10/22/96 36 $ 3,350.00 10/22/99
6453 Brenton Financial Group, Inc. 11/7/96 24 $ - 11/7/98
6479 Metropolitan Marketing, Inc. 1/6/97 24 $ 2,114.20 1/6/99
6486 Dana's Tire & Auto 10/30/96 36 $ 4,000.00 10/30/99
6497 High Visibility Promotions 11/26/96 36 $11,220.00 11/26/99
6499 Watts Construction 11/5/96 36 $43,000.00 11/5/99
6505 WENDLAND PERFORMANCE 12/14/96 36 $ 3,469.37 12/14/99
6505A MPC Marketing, Inc. 4/2/97 24 $ 2,114.20 4/2/99
6516 Caribou Enterprises 11/19/96 24 $10,000.00 11/19/98
6518 Amazing Grace Pentacostal Chur 2/20/97 36 $ 2,213.00 2/20/00
6523 Southeast Carpet Cleaning, Inc. 1/6/97 24 $ 1,995.00 1/6/99
6524 BIG SOUTH MARKETING, INC. 3/19/97 24 $ 2,114.20 3/19/99
6525 MJM Marketing, Inc. 2/27/97 24 $ 2,114.20 2/27/99
6526 M & W Marketing, Inc. 1/3/97 24 $ 1,995.00 1/3/99
6527 Royal Marketing, Inc. 1/6/97 24 $ 1,995.00 1/6/99
6528 Superior Marketing, Inc. 2/27/97 24 $ 2,114.20 2/27/99
6538 Simmons Auto Service 11/13/96 25 $ 3,500.00 12/13/98
6551 Prarie View Lawn & Landscape 11/23/96 36 $ 7,098.16 11/23/99
6566 Staci Steadman 11/26/96 36 $ 4,000.00 11/26/99
6578 MTM Marketing 12/8/96 24 $ 2,124.20 12/8/98
6579 MTM Marketing 12/9/96 24 $ 1,995.00 12/9/98
6583 Laid Noller Motors, Inc. 12/12/96 36 $ 5,800.00 12/12/99
6593 Bobby Allen Trucking 12/10/96 24 $ 3,395.00 12/10/97
6594 Mary A. Hutson, Seamstress 12/10/96 12 $ 1,400.00 12/10/97
6596 East 23rd Body Shop 12/13/96 24 $ 5,800.00 12/13/98
6615 Vaughan Chris. 12/15/96 24 $ 2,134.82 12/15/98
6617 Liberal Chiropractic Center, I 12/17/96 36 $ 2,000.00 12/17/99
6622 Dana's Tire & Auto 12/19/96 24 $ 3,500.00 12/19/98
6630 Trussel Sarah 12/27/96 37 $ 8,995.00 1/27/00
6637 C & R Farms 12/3/96 30 $15,000.00 6/23/99
6641 J. Lyn's Creations 1/2/97 30 $ 2,400.00 7/2/99
6643 Darren Roberts 12/26/96 39 $ 6,895.00 3/26/00
6645 Bobby's Carpet Cleaning Janito 1/3/97 15 $ 1,645.00 4/3/98
6651 R & E Enterprises 1/2/97 36 $ 5,995.00 1/2/00
6660 Aaron's Auto Repair Service 1/8/97 36 $ 7,800.00 1/8/00
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C> <C> <C> <C>
6671 Autocraft, Inc. 1/29/97 48 $ 26,000.00 1/29/01
6674 Midwest Underground Utility, In 1/10/97 36 $ 10,000.00 1/10/00
6687 Colorado Interstate Gas Co. 1/24/97 36 $ 4,461.50 1/24/00
6688 Joe's Automotive Service 1/23/97 36 $ 4,227.12 11/23/00
6699 Watts Construction 1/28/97 31 $ 18,000.00 8/28/99
6700 J.D. Colton Construction 1/28/97 36 $ 5,950.00 1/28/00
6702 Fred's Tune Up 1/28/97 24 $ 3,900.00 1/28/99
6715 B & B Welding 1/31/97 30 $ 4,800.00 7/31/99
6716 KB Machine 2/1/97 60 $ 133,535.46 2/1/02
6729 Prescott TV Promotions, Inc. 2/10/97 36 $ 9,455.00 2/10/00
6738 Wild West Farms 6/15/97 48 $ 17,700.00 6/15/01
6740 Midwest Underground Utility, In 2/11/97 36 $ 12,177.50 2/11/00
6741 Midwest Underground Utility, In 2/11/97 36 $ 15,200.00 2/11/00
6743 The Auto Place 2/12/97 24 $ 2,075.00 2/12/99
6756 Caddco 3D 2/17/97 36 $ 20,196.84 2/17/00
6760 C & C Printing 1/17/97 36 $ 2,000.00 1/17/00
6775 Jonnie Bonnar 3/4/97 24 $ 1,772.10 3/4/99
6782 Blessed Designs, Inc. 2/27/97 18 $ 1,726.40 8/27/98
6788 Ratzlaff John & Betty, 2/28/97 24 $ 1,988.30 2/28/99
6789 Hickman Tow and Auto 3/10/97 48 $ 24,649.60 3/10/01
6790 A-1 Airport Shuttle 2/27/97 36 $ 4,803.75 2/27/00
6795 Hickman Tow and Auto 3/17/97 6 $ 1,785.23 9/17/97
6805 Corpstein Farms 3/6/97 36 $ 7,850.00 3/6/00
6810 CYR'S Auto Repair 3/5/97 24 $ 4,056.50 3/5/99
6814 R & S Farms, Inc. 3/7/97 24 $ 18,500.00 3/7/99
6815 Aaron's Auto Repair Service 3/24/97 36 $ 4,259.00 3/24/00
6819 MOBILE MECHANIC 3/15/97 48 $ 5,047.00 3/15/01
6820 Frank's Recycling 3/10/97 28 $ 6,948.50 7/10/99
6823 Transco 3/12/97 36 $ 3,202.50 3/12/00
6834 R.V. PRODUCTIONS, INC. 3/22/97 36 $ 14,095.15 3/22/00
6836 ARS Trucking 3/14/97 12 3/14/98
6840 Barry Johnson 3/14/97 25 $ 1,995.00 4/14/99
6845 Golden Sky Systems, Inc 4/22/97 24 $ 13,586.21 4/22/99
6846 Lamb, John W. 3/18/97 36 $ 5,295.00 3/18/00
6849 Larry Scarborough 3/19/97 24 $ 2,000.86 3/19/99
6852 Watts Construction 3/20/97 36 $ 21,808.50 3/20/00
6855 Merriman Trucking 3/25/97 36 $ 10,900.00 3/25/00
6864 Jim Martin Construction 3/24/97 24 $ 16,810.00 3/24/99
6873 Color-Auto Brokers 4/11/97 24 $ 14,000.00 4/11/99
6882 Consolidated Automotive, Inc. 3/31/97 36 $ 28,231.85 3/31/00
6884 R.6.S. Marketing, Inc. 4/4/97 24 $ 2,114.20 4/4/99
6884B BHB Horse Company 3/31/97 48 $ 5,000.00 3/31/01
6905 J C Transmission 4/14/97 24 $ 2,078.70 4/14/99
6906 GUDDE TRANSPORTATION, INC. 4/30/97 24 $ 3,200.00 4/30/99
6908 Imperial, Inc. 4/2/97 24 $ 2,114.20 4/2/99
6909 McClain Construction & Soil Co 4/7/97 48 $ 48,500.00 4/7/01
6912 Caribou Enterprises 4/8/97 24 $ 8,800.00 4/8/99
6919 Angie's Embroidery 4/10/97 24 $ 2,045.00 4/10/99
-------------
TOTAL ORIGINATIONS $2,537,663.15
</TABLE>
<PAGE> 38
Lease No. 2006870
EQUIPMENT
LESSOR LEASE LESSEE
NAME AND ADDRESS AGREEMENT NAME AND ADDRESS
(Complete Legal Names) (Complete Legal Names)
- --------------------------------------------------------------------------------
FIN: 481061503
Medicall Marketing, Inc. Commercial Capital Corporation
7920 State Line 7920 State Line
Prairie Village, KS 66208 Prairie Village, KS 66208
[ ] CORPORATION [ ] PARTNERSHIP
[ ] PROPRIETORSHIP
[ ] PROFESSIONAL ASSOCIATION
- --------------------------------------------------------------------------------
Supplier Street Address:
Name: Lizia Robinson City: State: Zip:
- --------------------------------------------------------------------------------
QTY. DESCRIPTION OF LEASED EQUIPMENT (INCLUDE MFG. & MODEL) SERIAL NO.
- --------------------------------------------------------------------------------
See Schedule "A" attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
LOCATION OF EQUIPMENT: STREET ADDRESS___________________________________________
STATE KS COUNTY Johnson CITY Prairie Village ZIP 66208 PHONE 913-341-0053
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT OF EACH PAYMENT ADVANCE PAYMENTS INITIAL CHECK WITH LEASE LEASE TERM
<S> <C> <C> <C>
Rental Payment $ 786.50 | First None Rental(s) in advance | Total Advance $ 0.00 Total No. of Rentals 36
-------- | ---- | ------- | ---- [ ]Annual
Sales/Use Tax $ Vehicle | Last None Rental(s) in advance | Lease Fee $ 0.00 | Concurrent Rentals Due on the [ ]Semi-Annual
-------- | ---- ------- | 15th [ ]Quarterly
Total Payment $ 786.50 | Initial Check $ 0.00 1st [ ] 10th [ ] 20th [ ] [X]Monthly
-------- -------
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF LEASE
1. LEASE. Lessor hereby leases to Lessee the personal property (the "Leased
Equipment") described above, and in any schedules and Supplements to be attached
to and become a part of this Lease. This Lease, consisting of the front and the
reverse side, correctly sets forth the entire agreement between Lessor and
Lessee with respect to the use, possession and lease of the Leased Equipment. No
agreements or understandings concerning the foregoing shall be binding on either
of the parties unless specifically set forth in this Lease. The term "Lessor"
shall include any assignee of the above-identified Lessor. THIS LEASE WILL NOT
BE BINDING ON LESSOR UNTIL ACCEPTED BELOW. By execution of this Lease, the
signer certifies that (s)he has read this Lease, INCLUDING THE REVERSE SIDE, AND
THAT (S)HE IS DULY AUTHORIZED TO EXECUTE THIS LEASE ON LESSEE'S BEHALF. LESSEE
APPOINTS LESSOR AS ATTORNEY-IN-FACT TO EXECUTE AND FILE UNIFORM COMMERCIAL CODE
FINANCING STATEMENTS OR AMENDMENTS WITH RESPECT TO ANY OR ALL OF THE LEASED
EQUIPMENT.
2. TERMS AND RENTAL. The term of this Lease with respect to the Leased Equipment
shall be as shown on the schedule set forth above, and shall commence on the
1st, 10th, or 20th day of the month nearest to the date on which the Leased
Equipment is delivered to and accepted by Lessee from the supplier or carrier,
or other date as may be selected by Lessor. It is expressly understood that at
all times the risk of damage or loss or destruction of the Leased Equipment
shall be borne by Lessee and not by Lessor. The rent for the Leased Equipment
shall be the amount stated above. If Lessee shall be in default of the payment
of any sum of money to be paid under this Lease, Lessee shall pay a late charge
equal to 10% of such unpaid amount due, plus any collection charges incurred by
use of an independent collection agency, in the event such payment, or any part
of the payment, remains unpaid for more than 10 days. Lessee shall pay Lessor
rent, without deduction or offset, in the amounts and at the times shown on the
schedule set forth above. Rent shall be payable at Lessor's office set forth
above, or at such other place or to such other person as Lessor may, from time
to time, designate in writing. Lessee's obligations under this Lease after the
acceptance of the Leased Equipment are not subject to cancellation, termination,
modification, repudiation, excuse, set-off, or substitution, and are irrevocable
and independent of Lessor's obligations.
3. WARRANTIES. To the extent allowed by law, LESSOR MAKES NO WARRANTIES, EXPRESS
OR IMPLIED, WITH RESPECT TO THE LEASED EQUIPMENT, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES WITH RESPECT TO THE MERCHANTABILITY OF, OR THE FITNESS OR SUITABILITY
OF THE LEASED EQUIPMENT FOR, ANY PURPOSE OR USE, OR ITS DURABILITY, OR WITH
RESPECT TO INFRINGEMENT OR THE LIKE, EXCEPT THAT (1) IF THE LEASED EQUIPMENT IS
NEW, ANY MANUFACTURER'S WARRANTY WILL BE EXERCISED FOR THE MUTUAL BENEFIT OF
LESSOR AND LESSEE AS THEIR INTERESTS APPEAR; AND (2) LESSOR MAKES A WARRANTY OF
DESCRIPTION AND A WARRANTY OF NON-INTERFERENCE WITH LESSEE'S ENJOYMENT OF ITS
LEASEHOLD INTEREST FROM ACTS OR OMISSIONS OF LESSOR. LESSEE ACKNOWLEDGES THAT
THE LEASED EQUIPMENT IS OF A TYPE, SIZE, DESIGN AND CAPACITY SELECTED SOLELY BY
LESSEE AS SUITABLE FOR ITS PURPOSE, AND THIS LEASE IS INTENDED TO QUALIFY AS A
FINANCE LEASE AS THAT TERM IS USED IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE.
LESSEE UNDERSTANDS AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALES PERSON OR
OTHER AGENT OF THE SUPPLIER IS LESSOR'S AGENT. NO SALES PERSON OR AGENT OF THE
SUPPLIER IS AUTHORIZED TO WAIVE OR ALTER ANY TERMS OR CONDITIONS OF THIS LEASE,
AND NO REPRESENTATION AS TO THE EQUIPMENT OR ANY OTHER MATTER BY THE SUPPLIER
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR ANY OTHER OBLIGATION UNDER
THIS LEASE.
4. ADDITIONAL PROVISIONS:
Cost of Collections. In the event of default, you agree to pay all costs of
collection including reasonable attorney's fees.
See reverse side for additional terms and conditions which are a part
of this lease, INCLUDING CLAUSES 5, 15, AND 19, WHICH PROHIBIT ANY TRANSFER
OF LESSEE'S INTEREST UNDER THIS LEASE AND MAKE TRANSFER AN EVENT OF DEFAULT.
- --------------------------------------------------------------------------------
UNCONDITIONAL GUARANTY
FOR VALUE RECEIVED, and in consideration of and as an inducement to Lessor to
enter into this lease, the undersigned "Guarantors," whether one or more,
jointly or severally, unconditionally, irrevocably and absolutely guarantee
payment by Lessee of all monies due or to become due under this Lease and any
renewals of this Lease. The provisions on the reverse side of this form
designated as "Additional Guaranty Provisions" are incorporated as reference as
if they were fully set out at this point.
[SIG] Date 3/26/97
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
[SIG] Date 3/26/97
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
Date
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
Date
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
[SIG]
- --------------------------------------------------------------------------------
Witness Signature
DARLENE LAMB
- --------------------------------------------------------------------------------
Name of Witness (Please Print)
[Street address]
- --------------------------------------------------------------------------------
Street Address State
[City, State, Zip code]
- --------------------------------------------------------------------------------
THIS LEASE AND THE OTHER EVIDENCES OF THIS OBLIGATION ARE THE FINAL EXPRESSION
OF THE PARTIES' AGREEMENT AND CANNOT BE CANCELLED, RESCINDED, TERMINATED OR
MODIFIED AFTER ACCEPTANCE OF THE LEASED EQUIPMENT BY LESSEE EXCEPT BY A WRITING
SIGNED BY LESSOR AND LESSEE, NOR CAN THEY BE CONTRADICTED BY EVIDENCE OF ANY
PRIOR OR CONTEMPORANEOUS ORAL AGREEMENT. THE PARTIES AFFIRM THAT NO UNWRITTEN
ORAL AGREEMENT BETWEEN THEM EXISTS. ANY ADDITIONAL NONSTANDARD TERMS ARE
INCLUDED IN A SEPARATE RIDER ATTACHED TO THE LEASE.
The undersigned Lessee agrees to all terms and conditions set forth in this
lease and on the reverse side.
LESSEE: Commercial Capital Corporation
-------------------------------------------------------------------------
(Print Complete Legal Name)
SIGNED [SIG]
-------------------------------------------------------------------------
(Authorized Signature)
DATE 3/26/97 TITLE President
---------------------------------------------------------------------------
SIGNED
-------------------------------------------------------------------------
(Authorized Signature)
DATE TITLE
---------------------------------------------------------------------------
ACCEPTANCE BY LESSOR
LESSOR: Medicall Marketing, Inc.
-------------------------------------------------------------------------
(Print Complete Legal Name)
SIGNED [SIG]
-------------------------------------------------------------------------
(Authorized Signature)
DATE 3-26-97 TITLE VP
---------------------------------------------------------------------------
LEASE ORIGINAL
<PAGE> 39
SCHEDULE "A"
ATTACHED TO AND MADE A PART OF EQUIPMENT
LEASE #3006871
<TABLE>
<CAPTION>
Quantity Description Serial Number
- -------------------------------------------------------------------------------
<S> <C> <C>
1.00 1994 Lexus 4 door jt8uf11e7r0197339
</TABLE>
LESSEE: Commercial Capital Corporation
BY: /s/ [SIG]
---------------------------------------------------------------------------
<PAGE> 40
Lease NO. 3006871
EQUIPMENT
LESSOR LEASE LESSEE
NAME AND ADDRESS AGREEMENT NAME AND ADDRESS
(Complete Legal Names) (Complete Legal Names)
- --------------------------------------------------------------------------------
FIN: 481061503
Medicall Marketing, Inc. Commercial Capital Corporation
7920 State Line 7920 State Line
Prairie Village, KS 66208 Prairie Village, KS 66208
[ ] CORPORATION [ ] PARTNERSHIP
[ ] PROPRIETORSHIP
[ ] PROFESSIONAL ASSOCIATION
- --------------------------------------------------------------------------------
Supplier Street Address:
Name: Toyota Motor Credit City: State: Zip:
- --------------------------------------------------------------------------------
QTY. DESCRIPTION OF LEASED EQUIPMENT (INCLUDE MFG. & MODEL) SERIAL NO.
- --------------------------------------------------------------------------------
See Schedule "A" attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
LOCATION OF EQUIPMENT: STREET ADDRESS___________________________________________
STATE KS COUNTY Johnson CITY Prairie Village ZIP 66208 PHONE 913-341-0053
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT OF EACH PAYMENT ADVANCE PAYMENTS INITIAL CHECK WITH LEASE LEASE TERM
<S> <C> <C> <C>
Rental Payment $ 853.76 | First None Rental(s) in advance | Total Advance $ 0.00 Total No. of Rentals 36
-------- | ---- | ------- | ---- [ ]Annual
Sales/Use Tax $ Vehicle | Last None Rental(s) in advance | Lease Fee $ 0.00 | Concurrent Rentals Due on the [ ]Semi-Annual
-------- | ---- ------- | 15th [ ]Quarterly
Total Payment $ 853.76 | Initial Check $ 0.00 1st [ ] 10th [ ] 20th [ ] [ ]Monthly
-------- -------
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF LEASE
1. LEASE. Lessor hereby leases to Lessee the personal property (the "Leased
Equipment") described above, and in any schedules and Supplements to be attached
to and become a part of this Lease. This Lease, consisting of the front and the
reverse side, correctly sets forth the entire agreement between Lessor and
Lessee with respect to the use, possession and lease of the Leased Equipment. No
agreements or understandings concerning the foregoing shall be binding on either
of the parties unless specifically set forth in this Lease. The term "Lessor"
shall include any assignee of the above-identified Lessor. THIS LEASE WILL NOT
BE BINDING ON LESSOR UNTIL ACCEPTED BELOW. By execution of this Lease, the
signer certifies that (s)he has read this Lease, INCLUDING THE REVERSE SIDE, AND
THAT (S)HE IS DULY AUTHORIZED TO EXECUTE THIS LEASE ON LESSEE'S BEHALF. LESSEE
APPOINTS LESSOR AS ATTORNEY-IN-FACT TO EXECUTE AND FILE UNIFORM COMMERCIAL CODE
FINANCING STATEMENTS OR AMENDMENTS WITH RESPECT TO ANY OR ALL OF THE LEASED
EQUIPMENT.
2. TERMS AND RENTAL. The term of this Lease with respect to the Leased Equipment
shall be as shown on the schedule set forth above, and shall commence on the
1st, 10th, or 20th day of the month nearest to the date on which the Leased
Equipment is delivered to and accepted by Lessee from the supplier or carrier,
or other date as may be selected by Lessor. It is expressly understood that at
all times the risk of damage or loss or destruction of the Leased Equipment
shall be borne by Lessee and not by Lessor. The rent for the Leased Equipment
shall be the amount stated above. If Lessee shall be in default of the payment
of any sum of money to be paid under this Lease, Lessee shall pay a late charge
equal to 10% of such unpaid amount due, plus any collection charges incurred by
use of an independent collection agency, in the event such payment, or any part
of the payment, remains unpaid for more than 10 days. Lessee shall pay Lessor
rent, without deduction or offset, in the amounts and at the times shown on the
schedule set forth above. Rent shall be payable at Lessor's office set forth
above, or at such other place or to such other person as Lessor may, from time
to time, designate in writing. Lessee's obligations under this Lease after the
acceptance of the Leased Equipment are not subject to cancellation, termination,
modification, repudiation, excuse, set-off, or substitution, and are irrevocable
and independent of Lessor's obligations.
3. WARRANTIES. To the extent allowed by law, LESSOR MAKES NO WARRANTIES, EXPRESS
OR IMPLIED, WITH RESPECT TO THE LEASED EQUIPMENT, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES WITH RESPECT TO THE MERCHANTABILITY OF, OR THE FITNESS OR SUITABILITY
OF THE LEASED EQUIPMENT FOR, ANY PURPOSE OR USE, OR ITS DURABILITY, OR WITH
RESPECT TO INFRINGEMENT OR THE LIKE, EXCEPT THAT (1) IF THE LEASED EQUIPMENT IS
NEW, ANY MANUFACTURER'S WARRANTY WILL BE EXERCISED FOR THE MUTUAL BENEFIT OF
LESSOR AND LESSEE AS THEIR INTERESTS APPEAR; AND (2) LESSOR MAKES A WARRANTY OF
DESCRIPTION AND A WARRANTY OF NON-INTERFERENCE WITH LESSEE'S ENJOYMENT OF ITS
LEASEHOLD INTEREST FROM ACTS OR OMISSIONS OF LESSOR. LESSEE ACKNOWLEDGES THAT
THE LEASED EQUIPMENT IS OF A TYPE, SIZE, DESIGN AND CAPACITY SELECTED SOLELY BY
LESSEE AS SUITABLE FOR ITS PURPOSE, AND THIS LEASE IS INTENDED TO QUALIFY AS A
FINANCE LEASE AS THAT TERM IS USED IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE.
LESSEE UNDERSTANDS AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALES PERSON OR
OTHER AGENT OF THE SUPPLIER IS LESSOR'S AGENT. NO SALES PERSON OR AGENT OF THE
SUPPLIER IS AUTHORIZED TO WAIVE OR ALTER ANY TERMS OR CONDITIONS OF THIS LEASE,
AND NO REPRESENTATION AS TO THE EQUIPMENT OR ANY OTHER MATTER BY THE SUPPLIER
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR ANY OTHER OBLIGATION UNDER
THIS LEASE.
4. ADDITIONAL PROVISIONS:
Cost of Collections. In the event of default, you agree to pay all costs of
collection including reasonable attorney's fees.
See reverse side for additional terms and conditions which are a part
of this lease, INCLUDING CLAUSES 5, 15, AND 19, WHICH PROHIBIT ANY TRANSFER
OF LESSEE'S INTEREST UNDER THIS LEASE AND MAKE TRANSFER AN EVENT OF DEFAULT.
- --------------------------------------------------------------------------------
UNCONDITIONAL GUARANTY
FOR VALUE RECEIVED, and in consideration of and as an inducement to Lessor to
enter into this lease, the undersigned "Guarantors," whether one or more,
jointly or severally, unconditionally, irrevocably and absolutely guarantee
payment by Lessee of all monies due or to become due under this Lease and any
renewals of this Lease. The provisions on the reverse side of this form
designated as "Additional Guaranty Provisions" are incorporated as reference as
if they were fully set out at this point.
[SIG] Date 3/26/97
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
[SIG] Date 3/26/97
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
Date
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
Date
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
[SIG]
- --------------------------------------------------------------------------------
Witness Signature
DARLENE LAMB
- --------------------------------------------------------------------------------
Name of Witness (Please Print)
[Street Address]
- --------------------------------------------------------------------------------
Street Address State
[City, State, Zip Code]
- --------------------------------------------------------------------------------
THIS LEASE AND THE OTHER EVIDENCES OF THIS OBLIGATION ARE THE FINAL EXPRESSION
OF THE PARTIES' AGREEMENT AND CANNOT BE CANCELLED, RESCINDED, TERMINATED OR
MODIFIED AFTER ACCEPTANCE OF THE LEASED EQUIPMENT BY LESSEE EXCEPT BY A WRITING
SIGNED BY LESSOR AND LESSEE, NOR CAN THEY BE CONTRADICTED BY EVIDENCE OF ANY
PRIOR OR CONTEMPORANEOUS ORAL AGREEMENT. THE PARTIES AFFIRM THAT NO UNWRITTEN
ORAL AGREEMENT BETWEEN THEM EXISTS. ANY ADDITIONAL NONSTANDARD TERMS ARE
INCLUDED IN A SEPARATE RIDER ATTACHED TO THE LEASE.
The undersigned Lessee agrees to all terms and conditions set forth in this
lease and on the reverse side.
LESSEE: Commercial Capital Corporation
-------------------------------------------------------------------------
(Print Complete Legal Name)
SIGNED [SIG]
-------------------------------------------------------------------------
(Authorized Signature)
DATE 3/26/97 TITLE President
---------------------------------------------------------------------------
SIGNED
-------------------------------------------------------------------------
(Authorized Signature)
DATE TITLE
---------------------------------------------------------------------------
ACCEPTANCE BY LESSOR
LESSOR: Medicall Marketing, Inc.
-------------------------------------------------------------------------
(Print Complete Legal Name)
SIGNED [SIG]
-------------------------------------------------------------------------
(Authorized Signature)
DATE 3-26-97 TITLE VP
---------------------------------------------------------------------------
LEASE ORIGINAL
<PAGE> 41
SCHEDULE "A"
ATTACHED TO AND MADE A PART OF EQUIPMENT
LEASE #2006870
<TABLE>
<CAPTION>
Quantity Description Serial Number
- -------------------------------------------------------------------------------
<S> <C> <C>
1.00 1995 ACURA LEGEND JH4KA7668SC01257
0
</TABLE>
LESSEE: Commercial Capital Corporation
BY: /s/ [SIG]
---------------------------------------------------------------------------
<PAGE> 42
EXHIBIT 1.1.2
LIST OF EXCLUDED ASSETS
<TABLE>
<S> <C>
Notes receivable $ 15,000
Neese and Rice property receivable $ 9,350
Lake home/condo $ 51,650
Airplane $ 24,900
Receivable from Rohlfing $ 30,000
Lease receivable from RR $ 13,220
Receivable from J&L-Pinnacle $ 20,420
--------
TOTAL: $164,540
</TABLE>
<PAGE> 43
EXHIBIT 1.2
LIST OF ASSUMED LIABILITIES
All liabilities of the corporation as of May 31, 1997 except the following:
1. Airplane debt $ 9,900.00
2. Advance payable to Jim Neese $32,000.00
----------
$41,900.00
<PAGE> 44
EXHIBIT 1.3
FORM OF EMPLOYMENT AND NONCOMPETITION AGREEMENTS
<PAGE> 45
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AGREEMENT is entered into effective as of June 2, 1997,
between LARRY RICE (herein referred to as "Employee") and T & W FINANCIAL
CORPORATION, a Washington corporation (herein referred to as "T&W").
In consideration of the mutual covenants herein contained, the parties
agree as follows:
1. EMPLOYMENT.
T&W employs Employee and Employee accepts employment effective as of the
effective date of this Agreement upon the following terms and conditions.
2. TERM OF EMPLOYMENT.
Employment under this Agreement shall be for a period of six (6) years
commencing on the effective date of this Agreement and terminating on the
earlier to occur of the following:
(a) June 1, 2003;
(b) Employee's death;
(c) at the option of T&W upon thirty (30) days prior written notice to
Employee in the event of the inability of Employee to perform his
duties hereunder by reason of injury or illness incapacitating
Employee for a continuous period exceeding one hundred eighty (180)
days;
(d) upon the termination of Employee's employment by the Board of
Directors of T&W for cause in accordance with Section 10.1; or
(e) upon Employee voluntarily terminating employment in accordance with
Section 10.2.
At the expiration of the initial term of this Agreement, this Agreement
shall be automatically renewed for two (2) succeeding terms of two (2) years
each, unless either party
Employment and
Noncompetition Agreement Page 1
<PAGE> 46
shall, at least sixty (60) days prior to the expiration of the initial term, or
any extended term, give written notice of that party's intention not to renew
this Agreement.
2.2 T&W's Personnel Policies. T&W has implemented and adopted a Policy
and Procedure Manual which contains general policies regarding dress and
grooming, attendance and work rules and regulations. Employee acknowledges that
he has received a copy of T&W's Policy and Procedure Manual and agrees to follow
all rules therein pertaining to Employee's employment at T&W. HOWEVER, THE
POLICY AND PROCEDURE MANUAL MAY BE MODIFIED BY T&W AT ANY TIME WITHOUT NOTICE
AND ANYTHING CONTAINED IN THE MANUAL, OR ANY MODIFICATION TO THE MANUAL, SHALL
NOT CONSTITUTE A MODIFICATION OF THIS AGREEMENT. In the event of a conflict
between this Agreement and the Policy and Procedure Manual, this Agreement
controls.
3. DUTIES AND EXTENT OF SERVICES.
3.1 Employee's principal duties on behalf of T&W at the effective date
of this Agreement shall be to perform sales and marketing services at T&W's
Prairie Village location.
3.2 Employee will devote substantially his entire time and attention to
the business of T&W, and shall not, during such employment, engage in any other
business activity which interferes with Employee's duties and responsibilities
under this Agreement. Employee shall not directly or indirectly engage or
participate in any activities at any time during the term of this Agreement in
conflict with the best interest of T&W.
4. COMPENSATION.
In addition to other benefits referred to herein, T&W shall pay Employee
for all services rendered by Employee under this Agreement a salary of
$14,583.33 per month. Employee's salary shall be paid in semi-monthly
installments on the 15th and last day of each month, commencing on June 15, 1997
and shall be subject to normal payroll withholding. Unless changed by agreement
of the parties, the annual salary to Employee shall remain the same as provided
herein. Employee's annual salary shall be subject to annual review and may be
increased but shall not be decreased.
Employment and
Noncompetition Agreement Page 2
<PAGE> 47
5. STOCK OPTIONS.
In consideration for entering into this Agreement, and in the event that
T&W completes an initial public offering of its common stock, T&W shall grant
Employee an option to purchase shares of common stock of T&W in an amount equal
to one percent (1%) of the issued and outstanding shares of stock in T&W as of
the effective date of the initial public offering at a per share price equal to
the initial public offering price. Under the terms of such option, the option
shall vest ratably over a five-year period (i.e., at the rate of twenty percent
(20%) per year), so that the option shall be fully exercisable five (5) years
from the date of the grant. The other terms and conditions of the option shall
be set forth in a Stock Option Plan to be adopted by T&W prior to the completion
of the initial public offering.
6. ADDITIONAL BENEFITS.
T&W agrees at all times during Employee's employment to provide and
maintain for Employee, and Employee shall be entitled to participate in, all
fringe benefits in effect which are available for salaried employees of the T&W
or as introduced by T&W during Employee's employment. To the extent that it has
the right to do so with its other salaried employees, T&W reserves the right to
modify, suspend or discontinue any or all of such benefits at any time. In
addition to the compensation provided in Section 4, Employee shall have the
following additional benefits during the term herein.
6.1 QUARTERLY BONUS. In addition to the salary described above, Employee
shall be entitled to receive a bonus through participation in T&W's return on
equity ("ROE") incentive program (the "ROE Program"). Employee shall receive
twenty-five percent (25%) of any ROE in excess of twenty-five percent (25%) on
an annual pre-tax basis relative to beginning acquisition equity of
$_____________ . The operation of the ROE Program is illustrated on the attached
Exhibit "A." The bonus shall be paid to Employee every April 30, July 30,
October 30, and January 30 during the term of this Agreement. The bonus payable
on July 30, 1997 shall be calculated for the initial period beginning January 1,
1997, but prorated as of June 1, 1997. In the event that a major
recapitalization of T&W occurs, the ROE Program will be restructured to produce
a basically equivalent incentive bonus program.
Employment and
Noncompetition Agreement Page 3
<PAGE> 48
6.2 EXPENSES. T&W will reimburse Employee for or pay for Employee all
reasonable and necessary business related expenses incurred by him in carrying
out his duties and responsibilities under this Agreement. The Employee shall
present to T&W from time to time an itemized account of such expenses in such
form as may be required by T&W.
6.3 CLUB DUES. T&W will reimburse Employee for or pay for Employee
social or athletic club dues as it relates to business purposes of T&W.
7. NONCOMPETITION/NONDISCLOSURE.
As a condition of employment with T&W, and in consideration of continuing
employment, the compensation of Employee by T&W during the term of this
Agreement, the use and enjoyment by Employee of T&W's facilities and equipment,
the ongoing disclosure to Employee of T&W's confidential and proprietary
information, the opportunity for Employee to serve T&W's customers, and the
mutual covenants contained herein, T&W and Employee recognize and agree as
follows:
(a) Confidential Information. Employee recognizes and acknowledges
that during the course of his employment hereunder, he will have access to
certain information not generally known to the public, relating to products,
sales, services or business of T&W, which may include without limitation data,
programs, customer or contact lists, contact with T&W's customers, acquisition
of information as to the nature and character of the business and the names and
requirements of the customers, prospects or projections, techniques, processes,
research , work in process, intellectual property, including but not limited to
any patents, trademarks, service marks, copyrights, ideas, creations, and
properties invented, created, written, developed, furnished, produced, or
disclosed by Employee, in the course of rendering services to T&W except for
items in the public domain or items obtained by Employee from third parties not
affiliated with T&W (collectively the "Confidential Information").
(b) Possession. Employee agrees that upon request by T&W, and in
any event upon termination of employment, except for items in the public domain
or items obtained by Employee from third parties not affiliated with T&W,
Employee shall turn over to T&W all documents, notes, papers, data, files,
customer lists, office supplies or other materials or work product in Employee's
possession or under his control which were created pursuant to,
Employment and
Noncompetition Agreement Page 4
<PAGE> 49
or connected with or derived from Employee's services to T&W, or which are
related in any manner to T&W's business activities, whether or not such
materials are at the date of this Agreement in Employee's possession.
(c) Non-disclosure Of Confidential Information. Employee agrees
that for and during the entire time he is employed by T&W, any Confidential
Information shall be considered and kept as private and privileged records of
T&W and will not be divulged to any person or entity. Further, upon termination
of this Agreement for any reason, Employee agrees that he will continue to treat
as private and privileged any Confidential Information and will not release any
such Confidential Information to any person or entity, either by statement,
disposition, or as a witness, except upon the issuance of a proper subpoena from
a court of competent jurisdiction, and T&W shall be entitled to an injunction by
any competent court to enjoin and restrain the unauthorized disclosure of such
information. Employee hereby agrees to notify T&W of any request for such
information, whether by subpoena or otherwise.
(d) Covenant Not To Divulge Confidential Information. Employee
further recognizes and acknowledges that because the goodwill of T&W's business
is a valuable asset, and because the solicitation of T&W's customers by Employee
after Employee has ceased to be employed by or associated with T&W will cause
irreparable harm to the goodwill of T&W, T&W would not offer employment to
Employee unless Employee assures that such solicitation would not occur.
Employee therefore agrees and covenants that during Employee's employment by T&W
and for a period of thirty-six (36) months after termination of such employment
for any reason, Employee shall not disclose any Confidential Information about
the business of T&W as presently conducted, or as it may evolve in the ordinary
course of business between the date of this Agreement and the expiration of this
covenant.
(e) Non-Competition Agreement. Employee hereby agrees that,
during the term of employment with T&W and for a period of thirty-six (36)
months thereafter, Employee shall not, directly or indirectly, provide any
competitor or potential competitor of T&W doing or planning to do business in
the same business as T&W with any information relating in any way to T&W's
Confidential Information. Employee agrees that he shall not, whether as an
employee, agent, proprietor, partner, officer, director, member, shareholder,
independent contractor, or in any other capacity whatsoever, and in any fashion
in which he is
Employment and
Noncompetition Agreement Page 5
<PAGE> 50
beneficially interested, render any services or engage in any activities in the
United States and Canada in the business of equipment leasing and related
financial services, or in any business then competitive with the business of
T&W, or any of its affiliated companies (collectively, the "Business"), during
the term of employment with T&W and for a period of thirty-six (36) months after
Employee leaves T&W's employment for any reason. Ownership of a state chartered
or national bank is not prohibited. The period of time during which Employee is
prohibited from engaging in certain activities pursuant to the terms of this
section shall be extended by the length of time during which any such party is
in breach of the terms of this section. Provided, however, if T&W defaults in
payment of the Note evidencing T&W payment obligations to Seller, Shareholders
or Employee given as part of the consideration under that certain Asset Purchase
Agreement dated as of June 2, 1997 between T&W as "Purchaser" and Commercial
Capital Corporation as "Seller," and at that time, Employee is no longer
employed by T&W, then this Covenant Not-to-Compete shall be void and of no force
or effect whatsoever.
(f) Because of the difficulty in determining the magnitude of
damages or potential damages to T&W in the event of solicitation of an existing
customer of T&W, or competition in violation of this Agreement, Employee will
pay to T&W liquidated damages equal to the net income Employee derives in
noncompliance with this noncompetition provision. Such liquidated damages shall
be due immediately upon the rendering of the prohibited activity or services and
shall bear interest at the rate of twelve percent (12%) per annum thereafter.
8. REASONABLENESS OF RESTRICTIONS.
8.1 T&W and Employee agree and stipulate that the agreements and
covenants contained in this Agreement, including the covenant not to divulge
Confidential Information, is fair and reasonable for the protection of T&W's
Confidential Information, goodwill and other protectable interests, in light of
all the facts and circumstances of the relationship between Employee and T&W. In
the event a court of competent jurisdiction should decline to enforce any
provision of this Agreement, such provision shall be deemed to be modified or
eliminated as required by the court's order, but all remaining provisions shall
remain in full force and effect.
8.2 Employee further acknowledges, agrees and stipulates that, in the
event of the termination of employment with T&W,
Employment and
Noncompetition Agreement Page 6
<PAGE> 51
Employee's experience and capabilities are such that Employee can obtain
employment in business activities which are of a different and non-competing
nature with his activities as an employee of T&W, and that the enforcement of a
remedy hereunder by way of injunction shall not prevent Employee from earning a
reasonable livelihood.
9. INJUNCTIVE RELIEF.
Employee acknowledges that disclosure of any Confidential Information or
breach or threatened breach of any of the covenants or other agreements
contained herein would give rise to irreparable injury to T&W or customers of
T&W, which injury would be inadequately compensable in monetary damages.
Accordingly, T&W may seek and obtain injunctive relief from the breach or
threatened breach of any provision, requirement, or covenant of this Agreement,
in addition to and not in limitation of any other legal remedies which may be
available. Employee further acknowledges, agrees and stipulates that the
covenants and agreements contained herein are necessary for the protection of
T&W's legitimate business interests and are reasonable in scope and content. Any
breach by Employee of this Agreement (specifically including the covenant not to
compete) may cause irreparable injury to T&W. Upon breach or threatened breach,
T&W may obtain temporary restraining orders, injunctions, or other equitable
relief from a court in addition to, and not in lieu of, damages and any other
available remedy.
10. TERMINATION.
10.1 Termination by T&W for Cause. Without limiting in any way other
provisions of this Agreement, Employee may be terminated for cause upon ten (10)
days' prior written notice. In such event, Employee shall be entitled to
compensation only to the date of such termination. For purposes of this
Agreement, cause is defined as:
(a) Conviction of Employee for any felony involving moral
turpitude, or the charging of Employee with any felony
involving moral turpitude which results in a suspended
sentence or deferred prosecution;
(b) Fraud, embezzlement or conversion of T&W's property;
(c) Employee's sexual harassment of T&W's employees if admitted by
Employee in writing or determined by
Employment and
Noncompetition Agreement Page 7
<PAGE> 52
arbitration as provided below;
(d) Engaging in competition with T&W during the period of
Employee's employment with T&W;
(e) Material breach of this Agreement by Employee, if Employee
fails to cease and desist from such conduct within the ten
(10) day notice period provided above; or
(f) Divulging T&W trade secrets or other breach of confidentiality.
In the event T&W terminates Employee's employment for cause as provided
for in this Section 10, and Employee disagrees with the T&W's determination that
just cause for termination exists, then the Employee and T&W agree to seek a
fair and prompt negotiated resolution. However, if this is not successful, the
dispute shall be resolved by binding arbitration in accordance with arbitration
procedures agreed to by Employee and T&W or, if they are unable to agree, by a
court of competent jurisdiction.
10.2 Termination By Employee Without Cause. Employee may terminate
his employment by giving at least ninety (90) days' written notice to T&W.
10.3 Termination By Employee With Cause. In the event that T&W defaults
in any of its obligations to Employee under this Employment and Noncompetition
Agreement, and T&W fails to cure such default within ten (10) days after
receiving written notice thereof, Employee may terminate his employment and seek
any damages available to Employee at law or in equity as a result of such breach
with it being specifically understood and agreed that Employee shall be relieved
from the non-competition provisions hereof.
11. MISCELLANEOUS.
11.1 Assignment. This Agreement shall not be assignable by Employee.
11.2 Amendment And/or Modification. Neither this Agreement nor any term
or provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by the parties hereto.
Employment and
Noncompetition Agreement Page 8
<PAGE> 53
11.3 Binding Effect. Subject to the restrictions on assignment described
above, this Agreement shall be binding upon and inure to the benefit of the
respective parties, their successors and assigns and Employee's heirs and
personal representative.
11.4 Section Headings. The section headings are for convenience only
and in no way define, limit, extend or interpret the scope of this Agreement or
of any particular paragraph hereof.
11.5 Interpretation And Fair Construction Of Contract. This Agreement
has been reviewed and approved by each of the parties. Both T&W and Employee
have received independent legal advice in connection with the negotiation,
execution and performance of their respective obligations under this Agreement.
In the event a court of competent jurisdiction determines that any provision of
this Agreement is ambiguous, the language in all parts of this Agreement shall
be construed as a whole according to its fair meaning and not strictly construed
for nor against either party.
11.6 Validity. If any term of this Agreement shall be determined by a
court of competent jurisdiction to be invalid, illegal, or unenforceable, in
whole or in part, the validity of any of the other terms of this Agreement shall
not, in any way, be affected thereby.
11.7 Variations In Pronouns. All pronouns include the masculine,
feminine, neuter, singular and plural as the identification of persons, places
or entities and the context may require.
11.8 Waiver Or Breach. Either party's failure to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred, in any one or more instances,
shall not be construed to be a waiver or relinquishment of any such option or
right, or of any other covenants or agreements, but the same shall be and remain
in full force and effect.
11.9 Notices. To be effective, any notice hereunder shall be in writing,
delivered in person or mailed by certified or registered mail, postage prepaid,
to the appropriate party or parties at the addresses set forth below their
signature hereto, or to such other address as the parties may hereinafter
designate.
Employment and
Noncompetition Agreement Page 9
<PAGE> 54
11.10 Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the entire subject matter hereof,
and there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied herein. Any and all prior discussions, negotiations,
commitments and understandings relating to the subject matter hereof are merged
herein. There are no conditions precedent to the effectiveness of this Agreement
other than as stated herein, and there are no related collateral agreement
existing between the parties that are not referenced herein.
11.11 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Washington, regardless of
the fact that Employee is now a resident of a different state. Venue of any
dispute involving the interpretation or enforcement of this Agreement shall be
in Johnson County, Kansas.
EMPLOYEE:
----------------------------------------
Larry Rice
Address:
--------------------------------
--------------------------------
T&W:
T & W FINANCIAL CORPORATION
By:
-------------------------------------
Thomas W. Price, President
Address: P.O. Box 3028
Federal Way, WA 98063
Employment and
Noncompetition Agreement Page 10
<PAGE> 55
EXHIBIT 2.3
FORM OF PROMISSORY NOTE
<PAGE> 56
PROMISSORY NOTE
$ Tacoma, Washington
----------------------
June 2, 1997
1. Promise To Pay. FOR VALUE RECEIVED, T&W FUNDING COMPANY VI,
L.L.C., a Delaware limited liability company (hereinafter "Maker") promises to
pay to COMMERCIAL CAPITAL CORPORATION, a Kansas corporation (the "Holder") or
order at ______________________________________________, Kansas, _____________,
or at such other place as may be designated by the Holder hereof from time to
time, the principal sum of ______________________________________________
00/100 DOLLARS ($____________________ ), with interest from ________________,
1997, on the terms and conditions set forth herein.
Maker and Holder acknowledge and agree that the principal amount of
this Promissory Note, as finally adjusted, shall equal the deferred portion of
the purchase price set forth in the Asset Purchase Agreement dated as of June 2,
1997 entered into between Maker and Holder (the "Agreement"). The principal
amount of the Promissory Note set forth above is temporary only and is based on
the unaudited financial statements of Commercial Capital Corporation as of April
30, 1997. As soon as practicable, postclosing adjustments shall be made to the
purchase price under the Agreement in order to reflect the change in the total
shareholders' equity of Commercial Capital Corporation from April 30, 1997 to
the actual closing date of the Agreement. The principal amount of this
Promissory Note shall then be adjusted accordingly.
2. Interest Rate. The rate of interest on the unpaid principal
balance of this Promissory Note shall be eight percent (8%).
3. Payment. Maker shall make forty (40) equal quarterly payments
of ______________________________________ _________________________/100
($_______________________) commencing July 1, 1997 and continuing on the 1st day
of each calendar quarter thereafter. Maker agrees to pay interest on the
declining principal balance at the rate set forth in Paragraph 2 hereof, which
interest shall be deducted from each quarterly installment and the balance
applied in reduction of principal. On the one-year anniversary date of the
effective date of T&W Financial Corporation's initial public offering, Maker
shall make an additional payment to Holder equal to fifteen percent (15%) of the
original purchase price as set forth in the Agreement. The parties shall then
prepare a new amortization schedule in order to reflect the additional principal
Promissory Note Page 1
<PAGE> 57
payment.
4. Late Charge. If any quarterly payment is not made within
fifteen (15) days of the date it is due, Holder may assess a late charge equal
to FIVE HUNDRED AND 00/100 DOLLARS ($500) to defray the expenses incident to
such delay. Payment of the late charge shall be a condition to curing any
default. This provision for a late charge is not permission to make a late
payment.
5. Prepayment. This Promissory Note may be prepaid either in
whole or in part at any time without penalty.
6. Default-Interest. This Promissory Note shall bear interest at
the rate of twelve percent (12%) per annum thirty (30) days after any
installment called for herein is not paid when due or after maturity.
7. Acceleration. In the event any payments required by this
Promissory Note are not paid when due, the whole sum of both principal and
interest shall become due and payable at once without further notice at the
option of Holder. In the event of the death of Neese or Rice, a portion of the
principal balance and interest shall become due and payable at once without
further notice at the option of the holder as determined below:
a. Death of Neese. Payable to or for the benefit of the
estate of Neese: One-half of the amounts payable to
Commercial Capital Corporation and all of the amounts
payable to Neese.
b. Death of Rice. Payable to or for the benefit of the
estate of Rice: One-half of the amounts payable to
Commercial Capital Corporation and all of the amounts
payable to Rice.
8. Attorneys' Fees. In the event this Promissory Note is placed
in the hands of an attorney for collection or if suit shall be brought to
collect any of the principal or interest of this Promissory Note, Maker shall
pay reasonable attorneys' fees in addition to all costs of collection and
expenses of suit.
9. Waiver of Presentment. Presentation for payment, notice of
dishonor, protest, and notice of protest are hereby waived.
Promissory Note Page 2
<PAGE> 58
10. Nonwaiver. Failure to exercise any right or option of Holder
shall not constitute a waiver of the right to exercise such right or option if
Maker is in default hereunder.
11. Security of Promissory Note. This Promissory Note shall be
secured by an Unconditional Guaranty executed by T & W Financial Corporation,
Michael A. Price and Katherine M. Price, husband and wife, Thomas W. Price and
Patricia A. Price, husband and wife, Kenneth W. McCarthy, Jr. and Carol L.
McCarthy, husband and wife and Paul B. Luke. Reference is made to such
Unconditional Guaranty for further rights of Holder.
12. Collection Expenses. Maker agrees to reimburse Holder on
demand for all legal fees and other costs and expenses incurred in collecting or
enforcing this Note, together with interest at the default rate specified in
paragraph 6 above. Without limitation such shall include fees, costs and
expenses incurred with or without suit and in any appeal, any proceedings under
any present or future Federal Bankruptcy Act or state receivership, in any post
judgment collection proceedings. Payment of such fees, costs, expenses and
interest shall be a condition precedent to the curing of any default or the
satisfaction of this Promissory Note.
13. Governing Law, Venue and Jurisdiction. This Note shall be
construed, enforced and otherwise governed by the laws of the State of Kansas.
In the event any action shall be brought by any party to this Promissory Note,
such action shall be brought in the District Court of the State of Kansas for
Johnson County and all parties consent to the jurisdiction of such court as to
all such actions.
14. Notices. All notices, demands, requests, consents, approvals,
and other instruments required or permitted to be given pursuant to the terms of
this Promissory Note shall be in writing and shall be deemed to have been
properly given if sent by registered or certified mail, postage prepaid, return
receipt requested, to the addresses set forth below:
(a)To Maker: T&W Funding Company VI, L.L.C.
c/o Michael A. Price
P.O. Box 3028
Federal Way, WA 98063
(b)To Holder: Commercial Capital Corporation
c/o James Neese
7920 State Line Rd., Ste. 101
Prairie Village, KS 66208
Promissory Note Page 3
<PAGE> 59
Provided, however, that such address may be changed upon five (5) days, written
notice thereof similarly given to the other party. Such notice, demand,
request, consent, approval and other instrument shall have been deemed to have
been served on the third (3rd) day following the date of mailing.
MAKER:
T & W FUNDING COMPANY VI, L. L. C.
-----------------------------------------
By: Michael A. Price, Member
Promissory Note Page 4
<PAGE> 60
EXHIBIT 2.4(a)
FORM OF UNCONDITIONAL GUARANTY
<PAGE> 61
UNCONDITIONAL GUARANTY
This Unconditional Guaranty is made and entered into as of June 2, 1997
by MICHAEL A. PRICE and KATHERINE M. PRICE, husband and wife, THOMAS W. PRICE
and PATRICIA A. PRICE, husband and wife, KENNETH W. McCARTHY, JR. And CAROL L.
McCARTHY, husband and wife, PAUL B. LUKE and T & W FINANCIAL CORPORATION (all
collectively referred to as "Guarantor") in favor of COMMERCIAL CAPITAL
CORPORATION, JAMES NEESE and LARRY RICE, individually (collectively referred to
as "Seller").
BACKGROUND
Commercial Capital Corporation, as Seller, has entered into an Asset
Purchase Agreement (the "Agreement"), Promissory Note (the "Note") and Security
Agreement ("Security Agreement") all dated as of June 2, 1997 (the "Agreements")
with T & W FUNDING COMPANY VI, L.L.C. (the "Purchaser"). Guarantor has a
financial interest in Purchaser, and it is to Guarantor's benefit that Seller
enter into the Agreements with Purchaser. Guarantor acknowledges that Seller
would be unwilling to enter into the Agreements without the following
unconditional guaranty, and that Seller is relying upon Guarantor's guaranty in
entering in the Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Seller to enter into the Agreement,
and for other good and valuable consideration, the parties agree as follows:
1. Guarantor unconditionally guarantees the timely, faithful and full
performance by Purchaser of all terms and conditions of the Agreement, Note and
Security Agreement. In the event of default by Purchaser, or failure to
faithfully perform any of the terms or conditions required of Purchaser under
the Agreements, or in the event of failure of Purchaser to make any or all
payments of money required of it under the Agreements, Guarantor unconditionally
promises to pay Seller, in lawful money
Unconditional Guaranty Page I
<PAGE> 62
of the United States, all sums at any time due and payable under the Agreements,
plus costs of collection, including reasonable attorneys fees. The obligations
of each of the undersigned individuals signing as Guarantor shall be joint and
several.
2. The obligations of Guarantor hereunder are independent of the
obligations of Purchaser under the Agreement, and a separate action or actions
may be brought against Guarantor, whether action is brought against Purchaser or
whether Purchaser be joined in any action or actions, the liability of Guarantor
hereunder being primary. Guarantor hereby waives the benefit of any suretyship
defenses affecting its liability hereunder or by enforcement thereof.
3. Guarantor authorizes Seller, without notice or demand, and without
affecting Guarantor's liability hereunder, from time to time to extend,
accelerate, or otherwise change the payment terms, or other terms, of the
Agreements or any part thereof.
4. Guarantor waives any defense arising by reason of any defense of
Purchaser, or by reason of the cessation, from any cause whatsoever, or the
liability of Purchaser under the Agreement. Guarantor waives any and all demands
for performance, notices of nonperformance or default, and notices of
cancellation or forfeiture. Seller may apply all proceeds received from
Purchaser, or others, to such part of Purchaser's indebtedness as Seller may
deem appropriate without consulting Guarantor and without prejudice to or in any
way limiting or lessening the liability of Guarantor under this Guaranty.
5. This instrument constitutes the entire agreement between Seller and
Guarantor. No oral or written representation not contained herein shall in any
way affect this Guaranty, which shall not be modified except by the parties in
writing. Waiver by Seller of any provision hereof in one instance shall not
constitute a waiver as to any other instance.
6. This Guaranty shall be governed by the internal laws of the State
of Kansas without regard to choice of law principles.
7. Guarantor and Seller irrevocably submit to the jurisdiction of the
Johnson County District, State of Kansas in any action or proceeding arising out
of or relating to this Guaranty, and agree that all claims in respect of such
action or proceeding shall be heard and determined only in Johnson County
District Court, State of Kansas.
8. The undersigned individuals warrant and represent that
Unconditional Guaranty Page 2
<PAGE> 63
they are financially interested in Purchaser.
DATED as of the day and year first
written above.
GUARANTOR:
- ----------------------------------- -------------------------------------
Michael A. Price Katherine M. Price
- ----------------------------------- -------------------------------------
Thomas W. Price Patricia A. Price
- ----------------------------------- -------------------------------------
Kenneth W. McCarthy, Jr. Carol L. McCarthy
- -----------------------------------
Paul B. Luke
T & W FINANCIAL CORPORATION
- -----------------------------------
By: Thomas W. Price, President
Unconditional Guaranty
Page 3
<PAGE> 64
EXHIBIT 2.4(b)
FORM OF SECURITY AGREEMENT
<PAGE> 65
SECURITY AGREEMENT
THE UNDERSIGNED, T&W FUNDING COMPANY VI, L.L.C., a Delaware limited
liability company, (hereinafter called "Debtor"), with its principal place of
business being 6416 Pacific Highway East, Tacoma, Washington 98424, hereby
grants COMMERCIAL CAPITAL CORPORATION, JAMES NEESE and LARRY RICE, individually,
at ___________________________________, __________________, _______,
(hereinafter collectively referred to as "Secured Party"), a security interest
in the personal property described on the attached Exhibit A, together with all
increases therein, all added and substituted parts and equipment, tools, parts,
accessories, supplies and improvements therefor, all property of a similar
nature hereafter acquired by Debtor in any of the categories herein described,
together with all cash and non-cash proceeds of all such property. All of said
property is hereinafter referred to as the "Property."
This Security Agreement is effective as of January 1, 1997 and is given
to secure the payment and performance of all indebtedness and obligations of
Debtor to Secured Party presently existing and hereafter arising, direct or
indirect, and interest thereon. Regardless of the adequacy of any security which
the Secured Party may at any time hold hereunder, and regardless of the adequacy
of any other security which Secured Party may obtain at any of its offices from
Debtor in connection with any other transactions, any deposits or other moneys
owing from Secured Party at any of its offices to Debtor shall (as collateral in
the possession of Secured Party) constitute additional security for, and may be
set off against, obligations secured hereby even though said obligations may not
then be due. When more than one person is the Debtor they shall be jointly and
severally liable.
DEBTOR HEREBY REPRESENTS, COVENANTS AND AGREES WITH SECURED PARTY AS FOLLOWS:
1. USE OF PROPERTY: Debtor agrees to comply with any governmental
regulation affecting the use of the property and will not waste, injure nor
destroy the property, nor use nor permit the use of the property in any unlawful
manner. Debtor represents and agrees that the primary use of the property is and
will be for business use.
2. DEBTOR AND COLLATERAL LOCATION: The address appearing next to
Debtor's signature below is the address of Debtor. Debtor will give Secured
Party prior written notice of any change in Debtor's chief executive office and
of any change in collateral location.
Security Agreement Page 1
<PAGE> 66
3. FIXTURES: If any of the property is to be or has been attached to
real estate, the legal description of the real estate is attached hereto, marked
Exhibit "B", and by this reference incorporated herein.
4. OWNERSHIP AND LIENS: Debtor owns the property and the same is free
and clear of all security interests and encumbrances of every nature except
those of the Seller disclosed in the Asset Purchase Agreement of even date
herewith. Debtor will not create nor permit the existence of any lien or
security interest other than that created hereby on the property without the
written consent of Secured Party. Any certificate of title now or hereafter
existing on any of the property will be delivered to Secured Party and will
recite the interest of Secured Party.
5. TAXES: Debtor will pay before delinquency all taxes or other
governmental charges that are or may become a lien or charge on the property and
will pay any tax which may be levied on any obligation secured hereby.
6. REPAIRS AND INSPECTION: Debtor will keep the property in good
repair. Secured Party may inspect the property at reasonable times and intervals
and may for this purpose enter the premises upon which the property is located.
7. EXPENSES INCURRED BY SECURED PARTY: Secured Party is not required
to, but may at its option, pay any tax or other charge or expense payable by
Debtor and any filing or recording fees and any amounts so paid shall be
repayable by Debtor upon demand. Debtor will also repay upon demand all of
Secured Party's expenses incurred in collecting, insuring, conserving or
protecting the collateral or in any inventories, audits, inspections or other
examination by Secured Party in respect of the collateral. All such sums shall
bear interests at the rate of 12% per annum from the date of payment by the
Secured Party until repaid by Debtor and such sums and interest thereon shall be
secured hereby. The rights granted by this paragraph are not a waiver of any
other rights of Secured Party arising from breach of any of Debtor's covenants.
8. WAIVERS: This Security Agreement shall not be qualified or
supplemented by course of dealing. No waiver or modification by Secured Party of
any of the terms or conditions hereof shall be effective unless in writing
signed by Secured Party. No waiver nor indulgence by Secured Party as to any
required performance by Debtor shall constitute a waiver as to any subsequent
required performance or other obligations of Debtor hereunder. Debtor
Security Agreement Page 2
<PAGE> 67
hereby waives any counter claims or defense hereunder against any assignee for
value.
9. DEFAULT: Time is of the essence in this Security Agreement, and in
any of the following events, hereinafter called "Events of Default," to-wit:
a. Any failure to pay when due the full amount of any payment of
principal, interest, taxes, insurance premiums or other charges which are or may
be secured hereby; or
b. Any failure to perform as required by any covenant or
agreement herein; or
c. The falsity of any representation by Debtor herein or in any
credit application or financial statement given by Debtor to Secured Party as a
basis for any extension of credit secured hereby; or
d. If the property should be seized or levied upon under any
legal or governmental process against Debtor or against the property; or
e. If Debtor becomes insolvent or is the subject of a petition
in bankruptcy either voluntary or involuntary, or in any other proceeding under
the federal bankruptcy laws; or makes an assignment for the benefit of
creditors; or if Debtor is named in or the property is subjected to a suit for
the appointment of a receiver; or
f. Loss, substantial damage to, or destruction of any portion of
the property; or
g. Entry of any judgment against Debtor; or
h. Dissolution or liquidation of Debtor.
Then and in any of such events of default, the entire amount of
indebtedness secured hereby shall then or at any time thereafter, at the option
of Secured Party, become immediately due and payable without notice or demand,
and Secured Party shall have an immediate right to pursue the remedies set forth
in this Security Agreement.
10. REMEDIES: In the event of a default hereunder, Secured Party
shall have all remedies provided by law; and without limiting the generality of
the foregoing, shall be entitled as follows:
Security Agreement Page 3
<PAGE> 68
a. Debtor agrees to put Secured Party in possession of the
property on demand; and
b. Secured Party is authorized to enter any premises where the
property is situated and take possession of said property without notice or
demand and without legal proceedings; and to give direct notice to all
advertisers of the exercise of the rights under this Security Agreement by
Second Party; and
c. At the request of Secured Party, Debtor will assemble the
property and make it available to Secured Party at a place designated by Secured
Party which is reasonably convenient to both parties; and
d. Debtor agrees that a period of thirty (30) days from the
time notice is sent, by first-class mail or otherwise, shall be a reasonable
period of notification of a sale or other disposition of the property; and
e. Debtor agrees that any notice or other communication by
Secured Party to Debtor shall be sent to the address of the debtor stated
herein; and
f. Debtor agrees to pay on demand the amount of all expenses
reasonably incurred by Secured Party in protecting or realizing on the property.
In the event that this Security Agreement or any obligation secured by it is
referred to an attorney for protecting or defending the priority of Secured
Party's interest or for collection or realization procedures, Debtor agrees to
pay a reasonable attorney's fee, including fees incurred in both trial and
appellate courts, or fees incurred without suit, and expenses of title search
and all court costs and costs of public officials. The sums agreed to be paid in
this subparagraph shall be secured hereby; and
g. If Secured Party disposes of the property, Debtor agrees
to pay any deficiency remaining after application of the net proceeds to any
indebtedness secured hereby.
11. INSURANCE: Debtor will keep the property continuously insured by
an insurer approved by Secured Party against fire, theft and other hazards
designated at any time by Secured Party, in an amount equal to the full
insurable value thereof or to all sums secured hereby, with such form of loss
payable clause as designated by and in favor of Secured Party, and will deliver
the policies and receipts showing payment of premiums to the Secured Party. In
the event of loss, Secured Party shall have full power to collect any and all
insurance upon the property and to apply the same at its option to any
obligation secured hereby, whether
Security Agreement Page 4
<PAGE> 69
or not matured, or to the restoration or repair of the property. Secured Party
shall have no liability whatsoever for any loss that may occur by reason of the
omission or lack of coverage of any such insurance.
12. REMOVAL OR SALE: Without the prior written consent of Secured
Party, Debtor will not remove the property from the State of Kansas, and Debtor
will not sell nor lease the property or any interest therein.
13. APPLICABLE LAW: This security agreement shall be governed by the
laws of the State of Kansas.
DATED as of the day and year first written above.
T & W FUNDING COMPANY VI, L.L.C.
By:
-----------------------------
Michael A. Price, Member
Address:
7920 State Line, Ste. 101
Prairie Village, KS 66208
Security Agreement Page 5
<PAGE> 70
EXHIBIT 4.4
FORM OF ASSIGNMENT, ASSUMPTION AND/OR CONSENT
<PAGE> 71
ASSIGNMENT OF LEASE
The undersigned as "Assignor" does hereby assign and transfer unto
________________________________, a _____________________ corporation, as
"Assignee", all of Assignor's right, title and interest as Lessee in, under and
to that certain _______________ made and entered into __________________,
19___ by and between _____________________, as Lessor, and __________________,
as Lessee, Lease No. _____, a copy of which is attached hereto.
Dated and effective this _____ day of _______________, 19 ___.
-------------------------------------
By:
-------------------------------------
President
"Assignor"
CONSENT
The undersigned hereby consents to the above and foregoing Assignment of
Lease.
-------------------------------------
By:
----------------------------------
Title:
----------------------------
<PAGE> 72
EXHIBIT 4.3
LIENS, ENCUMBRANCES AND CHARGES
Bank of Blue Valley
Heritage Bank
Nodaway Bank & Trust
First Community Bank
Wellsville State Bank
<PAGE> 73
EXHIBIT 4.4
REAL AND PERSONAL PROPERTY LEASES
<PAGE> 74
<TABLE>
<S> <C>
Real Estate Board of Kansas City, Missouri This is a legally binding contract. If not understood,
Approved by Legal Counsel seek competent advice.
</TABLE>
[REALTOR LOGO]
COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
THIS LEASE is made this 1st day of November, 1996, between
James R. Neese and Teri Neese, LESSOR, and
Commercial Capital Corporation
Broker Services
7920 State Line Suite 200
Prairie Village, KS 66208, LESSEE.
LESSOR hereby leases to LESSEE, and LESSEE hereby leases from LESSOR,
the following described premises, hereinafter referred to as "the premises," in
the City of Prairie Village, County of Johnson, State of Kansas, to wit; Office
space in a commercial building located at 7920 State Line Suite 200 Prairie
Village, KS as highlighted on attached exhibit "A"
to be used only for Business Purposes only for a term of Five (5) years and 0
months, beginning on the 1st day of November, 1996, and ending on the 31st day
of October, 2001 for which LESSEE agrees to pay to LESSOR a total of
Eighty-four Thousand & 00/100 DOLLARS ($84,000.00), as rent, in monthly
installments, each due and payable on the first day of each and every month of
the term hereof, in advance, as follows:
$1400.00 Monthly payable on or before the first day of each month
at 7920 State Line Suite 101
or at such other place as LESSOR may designate from time to time in writing.
<PAGE> 75
IT IS ALSO AGREED, AS FOLLOWS, THAT:
1. POSSESSION AT BEGINNING OF TERM: LESSOR shall use due diligence to
give possession as nearly as possible at the beginning of the term of this
lease, and rent shall abate pro rate for the period of any delay in so doing.
LESSEE shall make no other claim against LESSOR for any such delay.
2. INSURANCE: LESSEE shall comply with all insurance regulations so the
lowest fire, lightning, explosion, extended coverage and liability insurance
rates may be obtained; and nothing shall be done or kept in or on the premises
by LESSEE which will cause an increase in the premium for any of such insurance
on the premises or on any building of which the premises are a part or on any
contents located therein, over the rate usually obtained for the proper use of
the premises permitted by this lease or which will cause cancellation of any
such insurance.
If during the term of this lease the rate for fire and what is commonly
known as extended coverage insurance should be changed so as to cause an
increase in premium, then LESSEE shall pay, as additional rent, the amount of
such increase, which amount shall be payable within fifteen days from the date
of LESSOR'S notice of an amount so due hereunder, should LESSEE occupy less
than the whole of the property insured, LESSEE'S obligation hereunder shall be
limited to a pro rata portion of such increase based on the area of the leased
premises to the total rentable space in the said property of which the leased
premises are a part.
3. INDEMNITY AND PUBLIC LIABILITY: LESSEE covenants at all times to
save LESSOR harmless from all loss, liability, cost, or damages that may occur
or be claimed with respect to any person or persons, corporation, property, or
chattels on or about the leased premises or to the property itself resulting
from any act done or omission by or through the LESSEE, its agents, employees,
invitees, or any person on the premises by reason of the LESSEE'S use or
occupancy or resulting from LESSEE'S non-??? or possession of said property and
any and all loss, cost, liability, or expense resulting therefrom; and at all
times to maintain said premises in a safe and careful manner. LESSEE further
covenants and agrees to maintain at all times, during the term of this lease,
comprehensive public liability insurance in a responsible insurance company,
licensed to do business in the state in which the premises are located and
satisfactory to LESSOR, properly protecting and indemnifying LESSOR in an
amount of not less than _____________________ DOLLARS for injury to or death of
any one person, ________________________ DOLLARS for injury to or death of any
two or more persons arising out of any one occurrence, and not less than
______________________ DOLLARS for property damage. LESSEE shall furnish LESSOR
with a certificate or certificates of insurance, covering such insurance so
maintained by LESSEE.
4. LESSEE shall not assign, transfer, or encumber this lease and shall
not sub-lease the premises or any part thereof or allow any other person to be
in possession thereof without the prior written consent of LESSOR.
5. SIGNS AND ADVERTISEMENTS: LESSEE shall not put upon nor permit to be
put upon any part of the premises, any signs, billboards or advertisements
whatever, without written consent of LESSOR.
6. ACCEPTANCE, MAINTENANCE, AND REPAIR: LESSEE has inspected and knows
the condition of the premises and accepts the same in their present condition
(subject to ordinary wear, tear, and deterioration in the event the term
commences after the date hereof and to the rights of present or former occupant
or occupants, if any, to remove movable property.)
LESSEE shall take good care of the premises and the equipment and
fixtures therein (including heating and air conditioning equipment) and shall
keep the same in good working order and condition, including particularly
protecting water pipes, heating and air conditioning equipment, plumbing,
fixtures, appliances, and sprinkler system from becoming frozen, and shall keep
the premises and the approaches, sidewalks, and the alleys adjacent thereto, if
any, clean and sightly and free from ice and snow (including policing the
grounds if they are included in the leased premises). At the expiration of the
term, LESSEE shall surrender the prem. broom clean, in as good condition as the
reasonable use thereof will permit. All damage or injury to the leased premises
not caused by fire or other casualty, as set forth in Sec. 9 hereof, and all
damage to glass shall be promptly repaired by the LESSEE.
7. LESSOR'S RIGHT OF ENTRY: LESSOR or LESSOR'S agent may enter the
premises at reasonable hours to examine same and to do anything LESSOR may be
required to do hereunder or which LESSOR may deem necessary for the good of the
premises or any building of which they are a part; and, during the last sixty
days of this lease, LESSOR may display a "For Rent" sign on, and show the
premises.
8. MAINTENANCE AND REPAIR BY LESSOR: LESSOR shall keep in repair,
ordinary wear and tear excepted, the roof and exterior walls (exclusive of
inside surfaces), gutters and downspouts of the premises in any building of
which they are a part, except as to damage arising from the negligence of the
LESSEE, but nothing herein shall be construed as requiring LESSOR to repair any
front or other part installed by the LESSEE or glass in windows or doors.
LESSOR shall be under no obligation and shall not be liable for any failure to
make any such repairs until and unless LESSEE notifies LESSOR, in writing, of
the necessity therefor, in which event LESSOR shall have a reasonable time
thereafter to make such repairs. LESSOR reserves the right to the exclusive use
of the roof and exterior walls which LESSOR is so obligated to repair.
9. DAMAGE BY CASUALTY: In case, during the term created or previous
thereto, the premises hereby let, or the building of which said premises are a
part, shall be destroyed or shall be so damaged by fire or other casualty, as
to become untenantable, then in such event, at the option of the LESSOR, the
term hereby created shall cease, and this lease shall become null and void from
the date of such damage or destruction and the LESSEE shall immediately
surrender said premises and all interest therein to LESSOR, and LESSEE shall
pay rent within said term only to the time of such surrender; provided,
however, that LESSOR shall exercise such option to so terminate this lease by
notice in writing delivered to LESSEE within thirty days after such damage or
destruction. In
<PAGE> 76
case LESSOR shall not so elect to terminate this lease, in such event, this
lease shall continue in full force and effect and the LESSOR shall repair the
leased premises with all reasonable promptitude, placing the same in as good a
condition as they were at the time of the damage or destruction, and for that
purpose may enter said premises and rent shall abate in proportion to the
extent and duration of untenantability. In either event LESSEE shall remove all
rubbish, debris, merchandise, furniture, equipment and other of its personal
property, within five days after the request of the LESSOR. If the leased
premises shall be but slightly injured by fire or the elements, so as not to
render the same untenantable and unfit for occupancy, then the LESSOR shall
repair the same with all reasonable promptitude, and in that case the rent
shall not abate. No compensation or claim shall be made by or allowed to the
LESSEE by reason of any inconvenience or annoyance arising from the necessity
of repairing any portion of the building or the leased premises, however the
necessity may occur.
10. PERSONAL PROPERTY: LESSOR shall not be liable for any loss or
damage to any merchandise or personal property in or about the premises,
regardless of the cause of such loss or damage.
11. ALTERATIONS: LESSEE shall not make any alterations or additions
in or to the premises, without the prior written consent of LESSOR.
12. UTILITIES AND SERVICES: LESSEE shall furnish and pay for all
electricity, gas, water, fuel, and any services or utilities used in or assessed
against the premises, unless otherwise herein expressly provided.
13. PUBLIC REQUIREMENTS: LESSEE shall comply with all laws, orders,
ordinances and other public requirements now or hereafter affecting the
premises or the use thereof, and save LESSOR harmless from expense or damage
resulting from failure to do so.
14. FIXTURES: All buildings, repairs, alterations, additions,
improvements, installations, equipment and fixtures, by whomsoever installed or
erected (except such business trade fixtures belonging to LESSEE as can be
removed without damage to or leaving incomplete the premises or building) shall
belong to LESSOR and remain on and be surrendered with the premises as a part
thereof, at the expiration of this lease or any extension thereof.
15. INCREASE IN TAXES: In the event that the real estate taxes, both
general and special, payable with respect to the leased premises during any
lease year shall be greater than the amount of such taxes due and payable
during the calendar year of 1996, whether by reason of an increase in tax rate
or an increase in the assessed valuation or otherwise, LESSEE shall pay to
LESSOR the full amount of such increase as additional rent within thirty days
after notice that the same is due. Should LESSEE occupy less than the whole of
the property against which such taxes are assessed, LESSEE'S obligation
hereunder shall be limited to a pro rata portion of such increased tax based on
the area of the leased premises to the total rentable space in the property so
assessed and of which the premises are a part.
16. EMINENT DOMAIN: If the premises or any substantial part thereof
shall be taken by any competent authority under the power of eminent domain or
be acquired for any public or quasi-public use or purpose, the term of this
lease shall cease and terminate upon the date when the possession of said
premises or the part thereof so taken shall be required for such use or purpose
and without apportionment of the award, and LESSEE shall have no claim against
LESSOR for the value of any unexpired term of this lease. If any condemnation
proceeding shall be instituted in which it is sought to take or damage any
part of LESSOR's building or the land under it or if the grade of any street or
alley adjacent to the building is changed by any competent authority and such
change of grade makes it necessary or desirable to remodel the building to
conform to the changed grade, LESSOR shall have the right to cancel this lease
after having given written notice of cancellation to LESSEE not less than
ninety (90) days prior to the date of cancellation designated in the notice. In
either of said events rent at the then current rate shall be apportioned as of
the date of the termination. No money or other consideration shall be payable
by the LESSOR to the LESSEE for the right of cancellation ????? LESSEE shall
have no right to share in the condemnation award or in any judgment for damages
caused by the taking or the change of grade. Nothing in this paragraph shall
preclude an award being made to LESSEE for loss of business or depreciation to
and cost of removal of equipment or fixtures.
17. SUBROGATION: As part of the consideration for this lease, each of
the parties hereto does hereby release the other party hereto from all liability
for damage due to any act or neglect of the other party (except as hereinafter
provided) occasioned to property owned by said parties which is or might be
incident to or the result of a fire or any other casualty against loss for which
either of the parties is now carrying or hereafter may carry insurance;
provided, however, that the releases herein contained shall not apply to any
loss or damage occasioned by the willful, wanton, or premeditated negligence of
either of the parties hereto, and the parties hereto further covenant that any
insurance that they obtain on their respective properties shall contain an
appropriate provision whereby the insurance company, or companies, consent to
the mutual release of liability contained in this paragraph.
18. DEFAULT: If default is made in the payment of any installment of
rent on the due date thereof, or if LESSEE shall default in the performance of
any other agreement (other than payment of rent) and such default (other than
payment of rent) continues for ten days after written notice thereof, or if the
premises be vacated or abandoned in violation of the terms hereof, then in any
such event that this lease shall terminate, at the option of the LESSOR, and
LESSOR may re-enter the premises and take possession thereof, with or without
force or legal process and without notice or demand, the service of notice,
demand or legal process being hereby expressly waived, and upon such entry, as
aforesaid, this lease shall terminate and the LESSOR may exclude LESSEE from the
premises, changing the lock on the door or doors if deemed necessary, without
being liable to LESSEE for any damages or for prosecution therefor, LESSOR's
rights in such event may be enforced by action in unlawful detainer or other
proper legal action, and the LESSEE expressly agrees, notwithstanding
termination of this lease and re-entry by the LESSOR that the LESSEE shall
remain liable for a sum equal to the entire rent payable to the end of the term
hereof and shall pay any loss or deficiency sustained by the
<PAGE> 77
LESSOR on account of the premises being let for the remainder of the original
term for a less sum than before. LESSOR, as agent for LESSEE without notice,
may re-let the leased premises or any part thereof for the remainder of the
term or for any longer or shorter period as opportunity may offer, and at such
rental as may be obtained, and LESSEE agrees to pay the difference between a
sum equal to the amount of rent payable during the residue of the term and the
net rent actually received by the LESSOR during the term after deducting all
expenses of every kind for repairs, recovering possession and re-letting the
same, which difference shall accrue and be payable monthly.
All property of the LESSEE which is now or may hereafter be at any
time during the term of this lease in or upon said premises, whether exempt
from execution or not, shall be bound by and subject to a lien for the payment
of the rent herein reserved, and for any damages arising from any breach by the
LESSEE of any of the covenants or agreements of this lease to be performed by
LESSEE. In the event of default by LESSEE in the payment of rent or otherwise,
LESSOR may foreclose such lien and take possession of said property or any part
or parts thereof and sell or cause the same to be sold, at such place as LESSOR
may elect, at public or private sale, with or without notice, to the highest
bidder for cash, and apply the proceeds of said sale to pay the costs of taking
possession of and selling said property, and then toward the debt and/or
damages as aforesaid. Any excess of the proceeds of said sale over said costs,
debt, and/or damages shall be paid to LESSEE. Any such sale shall bar any right
of redemption by LESSEE.
19. WAIVER: The rights and remedies of the LESSOR under this lease, as
well as those provided or accorded by law, shall be cumulative, and none shall
be exclusive of any other rights or remedies hereunder or allowed by law. A
waiver by LESSOR of any breach or breaches default or defaults, of LESSEE
hereunder shall not be deemed or construed to be a continuing waiver of such
breach or default nor as a waiver of or permission, expressed or implied, for
any subsequent breach or default, and it is agreed that the acceptance by LESSOR
of any installment of rent subsequently to the date the same should have been
paid hereunder, shall in no manner alter or affect the covenant and obligation
of LESSEE to pay subsequent installments of rent promptly upon the due date
thereof. No receipt of money by LESSOR after the termination in any way of this
lease shall reinstate, continue or extend the term above demised.
20.
In the event of any extension or renewal of this lease or the term
thereof, LESSOR agrees at the time thereof to pay REALTOR a commission of
21. NOTICES: Any notice hereunder shall be sufficient if sent by
registered or certified mail, addressed to LESSEE at the premises, and to
LESSOR where rent is payable.
22. SUBORDINATION: In the event LESSOR holds title to said premises by
virtue of a lease, then this sublease is and shall remain subject to all of the
terms and conditions of such underlying lease, so far as shall be applicable to
the premises herein leased. This lease shall also be subject and subordinate
in law and equity to any existing or future mortgage placed by LESSOR upon the
issued premises or the building of which the leased premises form a part.
23. SUCCESSORS: The provisions, covenants and conditions of this lease
shall bind and inure to the benefit of the legal representatives, heirs,
successors and assigns of each of the parties hereto, except that no assignment
or subletting by LESSEE without the written consent of LESSOR, shall vest any
right in the assignee or sublessee of the LESSEE.
24. QUIET POSSESSION: LESSOR agrees that so long as LESSEE fully
complies with all of the terms, covenants and conditions here contained on
LESSEE'S part to be kept and performed, LESSEE shall and may peaceably and
quietly have, hold and enjoy the said premises for the term aforesaid, it being
expressly understood and agreed that, however, the aforesaid covenant of quiet
enjoyment shall be binding upon the LESSOR only so long as LESSOR remains the
owner in fee or leasehold of the leased premises, anything to the contrary in
this instrument notwithstanding. LESSOR, however, covenants and represents that
LESSOR has full right, title, power and authority to make, execute and deliver
this lease.
<PAGE> 78
25. BANKRUPTCY: Neither this lease nor any interest therein nor any
estate hereby created shall pass to any trustee or receiver in bankruptcy or to
any other receiver or assignee for the benefit of creditors or otherwise by
operation of law during the term of this lease or any renewal thereof.
26. ENTIRE AGREEMENT: This lease contains the entire agreement
between the parties, and no modification of this lease shall be binding upon
the parties unless evidenced by an agreement in writing signed by the LESSOR
and the LESSEE after the date hereof. If there is more than one LESSEE named
herein, the provisions of this lease shall be applicable to and binding upon
such LESSEES, jointly and severally.
IN WITNESS WHEREOF, the parties have signed triplicate copies hereof.
James R. Neese Commercial Capital Corporation
- -------------------------------
[SIG] Larry E. Rice, Vice President
- ------------------------------- -----------------------------
[SIG]
- ------------------------------- -----------------------------
Lessor Lessee
Copyright [date] - Real Estate Board of Kansas City, Missouri Page 5
<PAGE> 79
<TABLE>
<S> <C>
Real Estate Board of Kansas City, Missouri This is a legally binding contract. If not understood,
Approved by Legal Counsel seek competent advice.
</TABLE>
[REALTOR LOGO]
COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
THIS LEASE is made this 1st day of November, 1996, between
James R. Neese and Teri Neese, LESSOR, and
Commercial Capital Corporation
7920 State Line Suite 101
Prairie Village, KS 66208, LESSEE.
LESSOR hereby leases to LESSEE, and LESSEE hereby leases from LESSOR,
the following described premises, hereinafter referred to as "the premises," in
the City of Prairie Village, County of Johnson, State of Kansas, to wit; Office
space in a Commercial Building located at 7920 State Line Road Prairie Village,
Kansas, as highlighted on attached exhibit "A".
to be used only for Business Purposes Only for a term of Five (5) years and 0
months, beginning on the 1st day of November, 1996 and ending on the 31st day
of October, 2001 for which LESSEE agrees to pay to LESSOR a total of
Ninety-seven thousand two hundred DOLLARS ($97,200.00), as rent, in monthly
installments, each due and payable on the first day of each and every month of
the term hereof, in advance, as follows:
$1620 Monthly payable on or before the first day of each month.
at 7920 State Line Suite 101
or at such other place as LESSOR may designate from time to time in writing.
<PAGE> 80
IT IS ALSO AGREED, AS FOLLOWS, THAT:
1. POSSESSION AT BEGINNING OF TERM: LESSOR shall use due diligence to
give possession as nearly as possible at the beginning of the term of this
lease, and rent shall abate pro rate for the period of any delay in so doing.
LESSEE shall make no other claim against LESSOR for any such delay.
2. INSURANCE: LESSEE shall comply with all insurance regulations so the
lowest fire, lightning, explosion, extended coverage and liability insurance
rates may be obtained; and nothing shall be done or kept in or on the premises
by LESSEE which will cause an increase in the premium for any of such insurance
on the premises or on any building of which the premises are a part or on any
contents located therein, over the rate usually obtained for the proper use of
the premises permitted by this lease or which will cause cancellation of any
such insurance.
If during the term of this lease the rate for fire and what is commonly
known as extended coverage insurance should be changed so as to cause an
increase in premium, then LESSEE shall pay, as additional rent, the amount of
such increase, which amount shall be payable within fifteen days from the date
of LESSOR'S notice of an amount so due hereunder, should LESSEE occupy less
than the whole of the property insured, LESSEE'S obligation hereunder shall be
limited to a pro rata portion of such increase based on the area of the leased
premises to the total rentable space in the said property of which the leased
premises are a part.
3. INDEMNITY AND PUBLIC LIABILITY: LESSEE covenants at all times to
save LESSOR harmless from all loss, liability, cost, or damages that may occur
or be claimed with respect to any person or persons, corporation, property, or
chattels on or about the leased premises or to the property itself resulting
from any act done or omission by or through the LESSEE, its agents, employees,
invitees, or any person on the premises by reason of the LESSEE'S use or
occupancy or resulting from LESSEE'S non-??? or possession of said property and
any and all loss, cost, liability, or expense resulting therefrom; and at all
times to maintain said premises in a safe and careful manner. LESSEE further
covenants and agrees to maintain at all times, during the term of this lease,
comprehensive public liability insurance in a responsible insurance company,
licensed to do business in the state in which the premises are located and
satisfactory to LESSOR, properly protecting and indemnifying LESSOR in an
amount of not less than _____________________ DOLLARS for injury to or death of
any one person, ________________________ DOLLARS for injury to or death of any
two or more persons arising out of any one occurrence, and not less than _______
_____________ DOLLARS for property damage. LESSEE shall furnish LESSOR with a
certificate or certificates of insurance, covering such insurance so maintained
by LESSEE.
4. LESSEE shall not assign, transfer, or encumber this lease and shall
not sub-lease the premises or any part thereof or allow any other person to be
in possession thereof without the prior written consent of LESSOR.
5. SIGNS AND ADVERTISEMENTS: LESSEE shall not put upon nor permit to be
put upon any part of the premises, any signs, billboards or advertisements
whatever, without written consent of LESSOR.
6. ACCEPTANCE, MAINTENANCE, AND REPAIR: LESSEE has inspected and knows
the condition of the premises and accepts the same in their present condition
(subject to ordinary wear, tear, and deterioration in the event the term
commences after the date hereof and to the rights of present or former occupant
or occupants, if any, to remove movable property.)
LESSEE shall take good care of the premises and the equipment and
fixtures therein (including heating and air conditioning equipment) and shall
keep the same in good working order and condition, including particularly
protecting water pipes, heating and air conditioning equipment, plumbing,
fixtures, appliances, and sprinkler system from becoming frozen, and shall keep
the premises and the approaches, sidewalks, and the alleys adjacent thereto, if
any, clean and sightly and free from ice and snow (including policing the
grounds if they are included in the leased premises). At the expiration of the
term, LESSEE shall surrender the prem. broom clean, in as good condition as the
reasonable use thereof will permit. All damage or injury to the leased premises
not caused by fire or other casualty, as set forth in Sec. 9 hereof, and all
damage to glass shall be promptly repaired by the LESSEE.
7. LESSOR'S RIGHT OF ENTRY: LESSOR or LESSOR'S agent may enter the
premises at reasonable hours to examine same and to do anything LESSOR may be
required to do hereunder or which LESSOR may deem necessary for the good of the
premises or any building of which they are a part; and, during the last sixty
days of this lease, LESSOR may display a "For Rent" sign on, and show the
premises.
8. MAINTENANCE AND REPAIR BY LESSOR: LESSOR shall keep in repair,
ordinary wear and tear excepted, the roof and exterior walls (exclusive of
inside surfaces), gutters and downspouts of the premises in any building of
which they are a part, except as to damage arising from the negligence of the
LESSEE, but nothing herein shall be construed as requiring LESSOR to repair any
front or other part installed by the LESSEE or glass in windows or doors.
LESSOR shall be under no obligation and shall not be liable for any failure to
make any such repairs until and unless LESSEE notifies LESSOR, in writing, of
the necessity therefor, in which event LESSOR shall have a reasonable time
thereafter to make such repairs. LESSOR reserves the right to the exclusive use
of the roof and exterior walls which LESSOR is so obligated to repair.
9. DAMAGE BY CASUALTY: In case, during the term created or previous
thereto, the premises hereby let, or the building of which said premises are a
part, shall be destroyed or shall be so damaged by fire or other casualty, as
to become untenantable, then in such event, at the option of the LESSOR, the
term hereby created shall cease, and this lease shall become null and void from
the date of such damage or destruction and the LESSEE shall immediately
surrender said premises and all interest therein to LESSOR, and LESSEE shall
pay rent within said term only to the time of such surrender; provided,
however, that LESSOR shall exercise such option to so terminate this lease by
notice in writing delivered to LESSEE within thirty days after such damage or
destruction. In
<PAGE> 81
case LESSOR shall not so elect to terminate this lease, in such event, this
lease shall continue in full force and effect and the LESSOR shall repair the
leased premises with all reasonable promptitude, placing the same in as good a
condition as they were at the time of the damage or destruction, and for that
purpose may enter said premises and rent shall abate in proportion to the
extent and duration of untenantability. In either event LESSEE shall remove all
rubbish, debris, merchandise, furniture, equipment and other of its personal
property, within five days after the request of the LESSOR. If the leased
premises shall be but slightly injured by fire or the elements, so as not to
render the same untenantable and unfit for occupancy, then the LESSOR shall
repair the same with all reasonable promptitude, and in that case the rent
shall not abate. No compensation or claim shall be made by or allowed to the
LESSEE by reason of any inconvenience or annoyance arising from the necessity
of repairing any portion of the building or the leased premises, however the
necessity may occur.
10. PERSONAL PROPERTY: LESSOR shall not be liable for any loss or
damage to any merchandise or personal property in or about the premises,
regardless of the cause of such loss or damage.
11. ALTERATIONS: LESSEE shall not make any alterations or additions
in or to the premises, without the prior written consent of LESSOR.
12. UTILITIES AND SERVICES: LESSEE shall furnish and pay for all
electricity, gas, water, fuel, and any services or utilities used in or assessed
against the premises, unless otherwise herein expressly provided.
13. PUBLIC REQUIREMENTS: LESSEE shall comply with all laws, orders,
ordinances and other public requirements now or hereafter affecting the
premises or the use thereof, and save LESSOR harmless from expense or damage
resulting from failure to do so.
14. FIXTURES: All buildings, repairs, alterations, additions,
improvements, installations, equipment and fixtures, by whomsoever installed or
erected (except such business trade fixtures belonging to LESSEE as can be
removed without damage to or leaving incomplete the premises or building) shall
belong to LESSOR and remain on and be surrendered with the premises as a part
thereof, at the expiration of this lease or any extension thereof.
15. INCREASE IN TAXES: In the event that the real estate taxes, both
general and special, payable with respect to the leased premises during any
lease year shall be greater than the amount of such taxes due and payable
during the calendar year of 1996, whether by reason of an increase in tax rate
or an increase in the assessed valuation or otherwise, LESSEE shall pay to
LESSOR the full amount of such increase as additional rent within thirty days
after notice that the same is due. Should LESSEE occupy less than the whole of
the property against which such taxes are assessed, LESSEE'S obligation
hereunder shall be limited to a pro rata portion of such increased tax based on
the area of the leased premises to the total rentable space in the property so
assessed and of which the premises are a part.
16. EMINENT DOMAIN: If the premises or any substantial part thereof
shall be taken by any competent authority under the power of eminent domain or
be acquired for any public or quasi-public use or purpose, the term of this
lease shall cease and terminate upon the date when the possession of said
premises or the part thereof so taken shall be required for such use or purpose
and without apportionment of the award, and LESSEE shall have no claim against
LESSOR for the value of any unexpired term of this lease. If any condemnation
proceeding shall be instituted in which it is sought to take or damage any
part of LESSOR's building or the land under it or if the grade of any street or
alley adjacent to the building is changed by any competent authority and such
change of grade makes it necessary or desirable to remodel the building to
conform to the changed grade, LESSOR shall have the right to cancel this lease
after having given written notice of cancellation to LESSEE not less than
ninety (90) days prior to the date of cancellation designated in the notice. In
either of said events rent at the then current rate shall be apportioned as of
the date of the termination. No money or other consideration shall be payable
by the LESSOR to the LESSEE for the right of cancellation ????? LESSEE shall
have no right to share in the condemnation award or in any judgment for damages
caused by the taking or the change of grade. Nothing in this paragraph shall
preclude an award being made to LESSEE for loss of business or depreciation to
and cost of removal of equipment or fixtures.
17. SUBROGATION: As part of the consideration for this lease, each of
the parties hereto does hereby release the other party hereto from all liability
for damage due to any act or neglect of the other party (except as hereinafter
provided) occasioned to property owned by said parties which is or might be
incident to or the result of a fire or any other casualty against loss for which
either of the parties is now carrying or hereafter may carry insurance;
provided, however, that the releases herein contained shall not apply to any
loss or damage occasioned by the willful, wanton, or premeditated negligence of
either of the parties hereto, and the parties hereto further covenant that any
insurance that they obtain on their respective properties shall contain an
appropriate provision whereby the insurance company, or companies, consent to
the mutual release of liability contained in this paragraph.
18. DEFAULT: If default is made in the payment of any installment of
rent on the due date thereof, or if LESSEE shall default in the performance of
any other agreement (other than payment of rent) and such default (other than
payment of rent) continues for ten days after written notice thereof, or if the
premises be vacated or abandoned in violation of the terms hereof, then in any
such event that this lease shall terminate, at the option of the LESSOR, and
LESSOR may re-enter the premises and take possession thereof, with or without
force or legal process and without notice or demand, the service of notice,
demand or legal process being hereby expressly waived, and upon such entry, as
aforesaid, this lease shall terminate and the LESSOR may exclude LESSEE from the
premises, changing the lock on the door or doors if deemed necessary, without
being liable to LESSEE for any damages or for prosecution therefor, LESSOR's
rights in such event may be enforced by action in unlawful detainer or other
proper legal action, and the LESSEE expressly agrees, notwithstanding
termination of this lease and re-entry by the LESSOR that the LESSEE shall
remain liable for a sum equal to the entire rent payable to the end of the term
hereof and shall pay any loss or deficiency sustained by the
<PAGE> 82
LESSOR on account of the premises being let for the remainder of the original
term for a less sum than before. LESSOR, as agent for LESSEE without notice,
may re-let the leased premises or any part thereof for the remainder of the
term or for any longer or shorter period as opportunity may offer, and at such
rental as may be obtained, and LESSEE agrees to pay the difference between a
sum equal to the amount of rent payable during the residue of the term and the
net rent actually received by the LESSOR during the term after deducting all
expenses of every kind for repairs, recovering possession and re-letting the
same, which difference shall accrue and be payable monthly.
All property of the LESSEE which is now or may hereafter be at any
time during the term of this lease in or upon said premises, whether exempt
from execution or not, shall be bound by and subject to a lien for the payment
of the rent herein reserved, and for any damages arising from any breach by the
LESSEE of any of the covenants or agreements of this lease to be performed by
LESSEE. In the event of default by LESSEE in the payment of rent or otherwise,
LESSOR may foreclose such lien and take possession of said property or any part
or parts thereof and sell or cause the same to be sold, at such place as LESSOR
may elect, at public or private sale, with or without notice, to the highest
bidder for cash, and apply the proceeds of said sale to pay the costs of taking
possession of and selling said property, and then toward the debt and/or
damages as aforesaid. Any excess of the proceeds of said sale over said costs,
debt, and/or damages shall be paid to LESSEE. Any such sale shall bar any right
of redemption by LESSEE.
19. WAIVER: The rights and remedies of the LESSOR under this lease, as
well as those provided or accorded by law, shall be cumulative, and none shall
be exclusive of any other rights or remedies hereunder or allowed by law. A
waiver by LESSOR of any breach or breaches, default or defaults, of LESSEE
hereunder shall not be deemed or construed to be a continuing waiver of such
breach or default nor as a waiver of or permission, expressed or implied, for
any subsequent breach or default, and it is agreed that the acceptance by LESSOR
of any installment of rent subsequently to the date the same should have been
paid hereunder, shall in no manner alter or affect the covenant and obligation
of LESSEE to pay subsequent installments of rent promptly upon the due date
thereof. No receipt of money by LESSOR after the termination in any way of this
lease shall reinstate, continue or extend the term above demised.
20.
In the event of any extension or renewal of this lease or the term
thereof, LESSOR agrees at the time thereof to pay REALTOR a commission of
21. NOTICES: Any notice hereunder shall be sufficient if sent by
registered or certified mail, addressed to LESSEE at the premises, and to
LESSOR where rent is payable.
22. SUBORDINATION: In the event LESSOR holds title to said premises by
virtue of a lease, then this sublease is and shall remain subject to all of the
terms and conditions of such underlying lease, so far as shall be applicable to
the premises herein leased. This lease shall also be subject and subordinate
in law and equity to any existing or future mortgage placed by LESSOR upon the
issued premises or the building of which the leased premises form a part.
23. SUCCESSORS: The provisions, covenants and conditions of this lease
shall bind and inure to the benefit of the legal representatives, heirs,
successors and assigns of each of the parties hereto, except that no assignment
or subletting by LESSEE without the written consent of LESSOR, shall vest any
right in the assignee or sublessee of the LESSEE.
24. QUIET POSSESSION: LESSOR agrees that so long as LESSEE fully
complies with all of the terms, covenants and conditions here contained on
LESSEE'S part to be kept and performed, LESSEE shall and may peaceably and
quietly have, hold and enjoy the said premises for the term aforesaid, it being
expressly understood and agreed that, however, the aforesaid covenant of quiet
enjoyment shall be binding upon the LESSOR only so long as LESSOR remains the
owner in fee or leasehold of the leased premises, anything to the contrary in
this instrument notwithstanding. LESSOR, however, covenants and represents that
LESSOR has full right, title, power and authority to make, execute and deliver
this lease.
<PAGE> 83
25. BANKRUPTCY: Neither this lease nor any interest therein nor any
estate hereby created shall pass to any trustee or receiver in bankruptcy or to
any other receiver or assignee for the benefit of creditors or otherwise by
operation of law during the term of this lease or any renewal thereof.
26. ENTIRE AGREEMENT: This lease contains the entire agreement
between the parties, and no modification of this lease shall be binding upon
the parties unless evidenced by an agreement in writing signed by the LESSOR
and the LESSEE after the date hereof. If there is more than one LESSEE named
herein, the provisions of this lease shall be applicable to and binding upon
such LESSEES, jointly and severally.
IN WITNESS WHEREOF, the parties have signed triplicate copies hereof.
James R. Neese Commercial Capital Corporation
- -------------------------------
[SIG] [SIG]
- ------------------------------- -----------------------------
Larry E. Rice, Vice President
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Lessor Lessee
Copyright [date] - Real Estate Board of Kansas City, Missouri Page 5
<PAGE> 84
EXHIBIT "A" FLOOR PLAN
<PAGE> 85
EXHIBIT 4.5
CONTRACTS, AGREEMENTS AND COMMITMENTS
-------------------------------------
See Schedule 1.1.1(k)
<PAGE> 86
Lease No. 2006870
EQUIPMENT
LESSOR LEASE LESSEE
NAME AND ADDRESS AGREEMENT NAME AND ADDRESS
(Complete Legal Names) (Complete Legal Names)
- --------------------------------------------------------------------------------
FIN: 481061503
Medicall Marketing, Inc. Commercial Capital Corporation
7920 State Line 7920 State Line
Prairie Village, KS 66208 Prairie Village, KS 66208
[ ] CORPORATION [ ] PARTNERSHIP
[ ] PROPRIETORSHIP
[ ] PROFESSIONAL ASSOCIATION
- --------------------------------------------------------------------------------
Supplier Street Address:
Name: Lizia Robinson City: State: Zip:
- --------------------------------------------------------------------------------
QTY. DESCRIPTION OF LEASED EQUIPMENT (INCLUDE MFG. & MODEL) SERIAL NO.
- --------------------------------------------------------------------------------
See Schedule "A" attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
LOCATION OF EQUIPMENT: STREET ADDRESS___________________________________________
STATE KS COUNTY Johnson CITY Prairie Village ZIP 66208 PHONE 913-341-0053
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT OF EACH PAYMENT ADVANCE PAYMENTS INITIAL CHECK WITH LEASE LEASE TERM
<S> <C> <C> <C>
Rental Payment $ 786.50 | First None Rental(s) in advance | Total Advance $ 0.00 Total No. of Rentals 36
-------- | ---- | ------- | ---- [ ]Annual
Sales/Use Tax $ Vehicle | Last None Rental(s) in advance | Lease Fee $ 0.00 | Concurrent Rentals Due on the [ ]Semi-Annual
-------- | ---- ------- | 15th [ ]Quarterly
Total Payment $ 786.50 | Initial Check $ 0.00 1st [ ] 10th [ ] 20th [ ] [X]Monthly
-------- -------
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF LEASE
1. LEASE. Lessor hereby leases to Lessee the personal property (the "Leased
Equipment") described above, and in any schedules and Supplements to be attached
to and become a part of this Lease. This Lease, consisting of the front and the
reverse side, correctly sets forth the entire agreement between Lessor and
Lessee with respect to the use, possession and lease of the Leased Equipment. No
agreements or understandings concerning the foregoing shall be binding on either
of the parties unless specifically set forth in this Lease. The term "Lessor"
shall include any assignee of the above-identified Lessor. THIS LEASE WILL NOT
BE BINDING ON LESSOR UNTIL ACCEPTED BELOW. By execution of this Lease, the
signer certifies that (s)he has read this Lease, INCLUDING THE REVERSE SIDE, AND
THAT (S)HE IS DULY AUTHORIZED TO EXECUTE THIS LEASE ON LESSEE'S BEHALF. LESSEE
APPOINTS LESSOR AS ATTORNEY-IN-FACT TO EXECUTE AND FILE UNIFORM COMMERCIAL CODE
FINANCING STATEMENTS OR AMENDMENTS WITH RESPECT TO ANY OR ALL OF THE LEASED
EQUIPMENT.
2. TERMS AND RENTAL. The term of this Lease with respect to the Leased Equipment
shall be as shown on the schedule set forth above, and shall commence on the
1st, 10th, or 20th day of the month nearest to the date on which the Leased
Equipment is delivered to and accepted by Lessee from the supplier or carrier,
or other date as may be selected by Lessor. It is expressly understood that at
all times the risk of damage or loss or destruction of the Leased Equipment
shall be borne by Lessee and not by Lessor. The rent for the Leased Equipment
shall be the amount stated above. If Lessee shall be in default of the payment
of any sum of money to be paid under this Lease, Lessee shall pay a late charge
equal to 10% of such unpaid amount due, plus any collection charges incurred by
use of an independent collection agency, in the event such payment, or any part
of the payment, remains unpaid for more than 10 days. Lessee shall pay Lessor
rent, without deduction or offset, in the amounts and at the times shown on the
schedule set forth above. Rent shall be payable at Lessor's office set forth
above, or at such other place or to such other person as Lessor may, from time
to time, designate in writing. Lessee's obligations under this Lease after the
acceptance of the Leased Equipment are not subject to cancellation, termination,
modification, repudiation, excuse, set-off, or substitution, and are irrevocable
and independent of Lessor's obligations.
3. WARRANTIES. To the extent allowed by law, LESSOR MAKES NO WARRANTIES, EXPRESS
OR IMPLIED, WITH RESPECT TO THE LEASED EQUIPMENT, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES WITH RESPECT TO THE MERCHANTABILITY OF, OR THE FITNESS OR SUITABILITY
OF THE LEASED EQUIPMENT FOR, ANY PURPOSE OR USE, OR ITS DURABILITY, OR WITH
RESPECT TO INFRINGEMENT OR THE LIKE, EXCEPT THAT (1) IF THE LEASED EQUIPMENT IS
NEW, ANY MANUFACTURER'S WARRANTY WILL BE EXERCISED FOR THE MUTUAL BENEFIT OF
LESSOR AND LESSEE AS THEIR INTERESTS APPEAR; AND (2) LESSOR MAKES A WARRANTY OF
DESCRIPTION AND A WARRANTY OF NON-INTERFERENCE WITH LESSEE'S ENJOYMENT OF ITS
LEASEHOLD INTEREST FROM ACTS OR OMISSIONS OF LESSOR. LESSEE ACKNOWLEDGES THAT
THE LEASED EQUIPMENT IS OF A TYPE, SIZE, DESIGN AND CAPACITY SELECTED SOLELY BY
LESSEE AS SUITABLE FOR ITS PURPOSE, AND THIS LEASE IS INTENDED TO QUALIFY AS A
FINANCE LEASE AS THAT TERM IS USED IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE.
LESSEE UNDERSTANDS AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALES PERSON OR
OTHER AGENT OF THE SUPPLIER IS LESSOR'S AGENT. NO SALES PERSON OR AGENT OF THE
SUPPLIER IS AUTHORIZED TO WAIVE OR ALTER ANY TERMS OR CONDITIONS OF THIS LEASE,
AND NO REPRESENTATION AS TO THE EQUIPMENT OR ANY OTHER MATTER BY THE SUPPLIER
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR ANY OTHER OBLIGATION UNDER
THIS LEASE.
4. ADDITIONAL PROVISIONS:
Cost of Collections. In the event of default, you agree to pay all costs of
collection including reasonable attorney's fees.
See reverse side for additional terms and conditions which are a part
of this lease, INCLUDING CLAUSES 5, 15, AND 19, WHICH PROHIBIT ANY TRANSFER
OF LESSEE'S INTEREST UNDER THIS LEASE AND MAKE TRANSFER AN EVENT OF DEFAULT.
- --------------------------------------------------------------------------------
UNCONDITIONAL GUARANTY
FOR VALUE RECEIVED, and in consideration of and as an inducement to Lessor to
enter into this lease, the undersigned "Guarantors," whether one or more,
jointly or severally, unconditionally, irrevocably and absolutely guarantee
payment by Lessee of all monies due or to become due under this Lease and any
renewals of this Lease. The provisions on the reverse side of this form
designated as "Additional Guaranty Provisions" are incorporated as reference as
if they were fully set out at this point.
[SIG] Date 3/26/97
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
[SIG] Date 3/26/97
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
Date
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
Date
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
[SIG]
- --------------------------------------------------------------------------------
Witness Signature
DARLENE LAMB
- --------------------------------------------------------------------------------
Name of Witness (Please Print)
[Street address]
- --------------------------------------------------------------------------------
Street Address State
[City, State, Zip code]
- --------------------------------------------------------------------------------
THIS LEASE AND THE OTHER EVIDENCES OF THIS OBLIGATION ARE THE FINAL EXPRESSION
OF THE PARTIES' AGREEMENT AND CANNOT BE CANCELLED, RESCINDED, TERMINATED OR
MODIFIED AFTER ACCEPTANCE OF THE LEASED EQUIPMENT BY LESSEE EXCEPT BY A WRITING
SIGNED BY LESSOR AND LESSEE, NOR CAN THEY BE CONTRADICTED BY EVIDENCE OF ANY
PRIOR OR CONTEMPORANEOUS ORAL AGREEMENT. THE PARTIES AFFIRM THAT NO UNWRITTEN
ORAL AGREEMENT BETWEEN THEM EXISTS. ANY ADDITIONAL NONSTANDARD TERMS ARE
INCLUDED IN A SEPARATE RIDER ATTACHED TO THE LEASE.
The undersigned Lessee agrees to all terms and conditions set forth in this
lease and on the reverse side.
LESSEE: Commercial Capital Corporation
-------------------------------------------------------------------------
(Print Complete Legal Name)
SIGNED [SIG]
-------------------------------------------------------------------------
(Authorized Signature)
DATE 3/26/97 TITLE President
---------------------------------------------------------------------------
SIGNED
-------------------------------------------------------------------------
(Authorized Signature)
DATE TITLE
---------------------------------------------------------------------------
ACCEPTANCE BY LESSOR
LESSOR: Medicall Marketing, Inc.
-------------------------------------------------------------------------
(Print Complete Legal Name)
SIGNED [SIG]
-------------------------------------------------------------------------
(Authorized Signature)
DATE 3-26-97 TITLE VP
---------------------------------------------------------------------------
LEASE ORIGINAL
<PAGE> 87
Lease No. 3006871
EQUIPMENT
LESSOR LEASE LESSEE
NAME AND ADDRESS AGREEMENT NAME AND ADDRESS
(Complete Legal Names) (Complete Legal Names)
- --------------------------------------------------------------------------------
FIN: 481061503
Medicall Marketing, Inc. Commercial Capital Corporation
7920 State Line 7920 State Line
Prairie Village, KS 66208 Prairie Village, KS 66208
[ ] CORPORATION [ ] PARTNERSHIP
[ ] PROPRIETORSHIP
[ ] PROFESSIONAL ASSOCIATION
- --------------------------------------------------------------------------------
Supplier Street Address:
Name: Toyota Motor Credit City: State: Zip:
- --------------------------------------------------------------------------------
QTY. DESCRIPTION OF LEASED EQUIPMENT (INCLUDE MFG. & MODEL) SERIAL NO.
- --------------------------------------------------------------------------------
See Schedule "A" attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
LOCATION OF EQUIPMENT: STREET ADDRESS___________________________________________
STATE KS COUNTY Johnson CITY Prairie Village ZIP 66208 PHONE 913-341-0053
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT OF EACH PAYMENT ADVANCE PAYMENTS INITIAL CHECK WITH LEASE LEASE TERM
<S> <C> <C> <C>
Rental Payment $ 853.76 | First None Rental(s) in advance | Total Advance $ 0.00 Total No. of Rentals 36
-------- | ---- | ------- | ---- [ ]Annual
Sales/Use Tax $ Vehicle | Last None Rental(s) in advance | Lease Fee $ 0.00 | Concurrent Rentals Due on the [ ]Semi-Annual
-------- | ---- ------- | 15th [ ]Quarterly
Total Payment $ 853.76 | Initial Check $ 0.00 1st [ ] 10th [ ] 20th [ ] [ ]Monthly
-------- -------
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF LEASE
1. LEASE. Lessor hereby leases to Lessee the personal property (the "Leased
Equipment") described above, and in any schedules and Supplements to be attached
to and become a part of this Lease. This Lease, consisting of the front and the
reverse side, correctly sets forth the entire agreement between Lessor and
Lessee with respect to the use, possession and lease of the Leased Equipment. No
agreements or understandings concerning the foregoing shall be binding on
either of the parties unless specifically set forth in this Lease. The term
"Lessor" shall include any assignee of the above-identified Lessor. THIS LEASE
WILL NOT BE BINDING ON LESSOR UNTIL ACCEPTED BELOW. By execution of this Lease,
the signer certifies that (s)he has read this Lease, INCLUDING THE REVERSE SIDE,
AND THAT (S)HE IS DULY AUTHORIZED TO EXECUTE THIS LEASE ON LESSEE'S BEHALF.
LESSEE APPOINTS LESSOR AS ATTORNEY-IN-FACT TO EXECUTE AND FILE UNIFORM
COMMERCIAL CODE FINANCING STATEMENTS OR AMENDMENTS WITH RESPECT TO ANY OR ALL OF
THE LEASED EQUIPMENT.
2. TERMS AND RENTAL. The term of this Lease with respect to the Leased Equipment
shall be as shown on the schedule set forth above, and shall commence on the
1st, 10th, or 20th day of the month nearest to the date on which the Leased
Equipment is delivered to and accepted by Lessee from the supplier or carrier,
or other date as may be selected by Lessor. It is expressly understood that at
all times the risk of damage or loss or destruction of the Leased Equipment
shall be borne by Lessee and not by Lessor. The rent for the Leased Equipment
shall be the amount stated above. If Lessee shall be in default of the payment
of any sum of money to be paid under this Lease, Lessee shall pay a late charge
equal to 10% of such unpaid amount due, plus any collection charges incurred by
use of an independent collection agency, in the event such payment, or any part
of the payment, remains unpaid for more than 10 days. Lessee shall pay Lessor
rent, without deduction or offset, in the amounts and at the times shown on the
schedule set forth above. Rent shall be payable at Lessor's office set forth
above, or at such other place or to such other person as Lessor may, from time
to time, designate in writing. Lessee's obligations under this Lease after the
acceptance of the Leased Equipment are not subject to cancellation, termination,
modification, repudiation, excuse, set-off, or substitution, and are irrevocable
and independent of Lessor's obligations.
3. WARRANTIES. To the extent allowed by law, LESSOR MAKES NO WARRANTIES, EXPRESS
OR IMPLIED, WITH RESPECT TO THE LEASED EQUIPMENT, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES WITH RESPECT TO THE MERCHANTABILITY OF, OR THE FITNESS OR SUITABILITY
OF THE LEASED EQUIPMENT FOR, ANY PURPOSE OR USE, OR ITS DURABILITY, OR WITH
RESPECT TO INFRINGEMENT OR THE LIKE, EXCEPT THAT (1) IF THE LEASED EQUIPMENT IS
NEW, ANY MANUFACTURER'S WARRANTY WILL BE EXERCISED FOR THE MUTUAL BENEFIT OF
LESSOR AND LESSEE AS THEIR INTERESTS APPEAR; AND (2) LESSOR MAKES A WARRANTY OF
DESCRIPTION AND A WARRANTY OF NON-INTERFERENCE WITH LESSEE'S ENJOYMENT OF ITS
LEASEHOLD INTEREST FROM ACTS OR OMISSIONS OF LESSOR. LESSEE ACKNOWLEDGES THAT
THE LEASED EQUIPMENT IS OF A TYPE, SIZE, DESIGN AND CAPACITY SELECTED SOLELY BY
LESSEE AS SUITABLE FOR ITS PURPOSE, AND THIS LEASE IS INTENDED TO QUALIFY AS A
FINANCE LEASE AS THAT TERM IS USED IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE.
LESSEE UNDERSTANDS AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALES PERSON OR
OTHER AGENT OF THE SUPPLIER IS LESSOR'S AGENT. NO SALES PERSON OR AGENT OF THE
SUPPLIER IS AUTHORIZED TO WAIVE OR ALTER ANY TERMS OR CONDITIONS OF THIS LEASE,
AND NO REPRESENTATION AS TO THE EQUIPMENT OR ANY OTHER MATTER BY THE SUPPLIER
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR ANY OTHER OBLIGATION UNDER
THIS LEASE.
4. ADDITIONAL PROVISIONS:
Cost of Collections. In the event of default, you agree to pay all costs of
collection including reasonable attorney's fees.
See reverse side for additional terms and conditions which are a part
of this lease, INCLUDING CLAUSES 5, 15, AND 19, WHICH PROHIBIT ANY TRANSFER
OF LESSEE'S INTEREST UNDER THIS LEASE AND MAKE TRANSFER AN EVENT OF DEFAULT.
- --------------------------------------------------------------------------------
UNCONDITIONAL GUARANTY
FOR VALUE RECEIVED, and in consideration of and as an inducement to Lessor to
enter into this lease, the undersigned "Guarantors," whether one or more,
jointly or severally, unconditionally, irrevocably and absolutely guarantee
payment by Lessee of all monies due or to become due under this Lease and any
renewals of this Lease. The provisions on the reverse side of this form
designated as "Additional Guaranty Provisions" are incorporated as reference as
if they were fully set out at this point.
[SIG] Date 3/26/97
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
[SIG] Date 3/26/97
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
Date
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
Date
- --------------------------------------------------------------------------------
Guarantor's Signature (An Individual)
[SIG]
- --------------------------------------------------------------------------------
Witness Signature
DARLENE LAMB
- --------------------------------------------------------------------------------
Name of Witness (Please Print)
[Street Address]
- --------------------------------------------------------------------------------
Street Address State
[City, State, Zip Code]
- --------------------------------------------------------------------------------
THIS LEASE AND THE OTHER EVIDENCES OF THIS OBLIGATION ARE THE FINAL EXPRESSION
OF THE PARTIES' AGREEMENT AND CANNOT BE CANCELLED, RESCINDED, TERMINATED OR
MODIFIED AFTER ACCEPTANCE OF THE LEASED EQUIPMENT BY LESSEE EXCEPT BY A WRITING
SIGNED BY LESSOR AND LESSEE, NOR CAN THEY BE CONTRADICTED BY EVIDENCE OF ANY
PRIOR OR CONTEMPORANEOUS ORAL AGREEMENT. THE PARTIES AFFIRM THAT NO UNWRITTEN
ORAL AGREEMENT BETWEEN THEM EXISTS. ANY ADDITIONAL NONSTANDARD TERMS ARE
INCLUDED IN A SEPARATE RIDER ATTACHED TO THE LEASE.
The undersigned Lessee agrees to all terms and conditions set forth in this
lease and on the reverse side.
LESSEE: Commercial Capital Corporation
-------------------------------------------------------------------------
(Print Complete Legal Name)
SIGNED [SIG]
-------------------------------------------------------------------------
(Authorized Signature)
DATE 3/26/97 TITLE President
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SIGNED
-------------------------------------------------------------------------
(Authorized Signature)
DATE TITLE
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ACCEPTANCE BY LESSOR
LESSOR: Medicall Marketing, Inc.
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(Print Complete Legal Name)
SIGNED [SIG]
-------------------------------------------------------------------------
(Authorized Signature)
DATE 3-26-97 TITLE VP
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LEASE ORIGINAL
<PAGE> 88
Real Estate Board This is a legally
of Kansas City, Missouri binding contract.
Approved by Legal Counsel If not understood,
seek competent advice.
[REALTOR LOGO]
COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
THIS LEASE is made this 1st day of November, 1996, between
James R. Neese and Teri Neese, LESSOR, and
Commercial Capital Corporation
7920 State Line Suite 101
Prairie Village, KS 66208, LESSEE.
LESSOR hereby leases to LESSEE, and LESSEE hereby leases from LESSOR,
the following described premises, hereinafter referred to as "the premises," in
the City of Prairie Village, County of Johnson, State of Kansas, to wit; Office
Space in a Commercial Building located at 7920 State Line Road Prairie Village,
Kansas, as highlighted on attached exhibit "A".
to be used only for Business Purposes Only for a term of Five (5) years and 0
months, beginning on the 1st day of November, 1996, and ending on the 31st day
of October, 2001 for which LESSEE agrees to pay to LESSOR a total of
Ninety-seven thousand two hundred DOLLARS ($97,200.00), as rent, in monthly
installments, each due and payable on the first day of each and every month of
the term hereof, in advance, as follows:
$1620.00 Monthly payable on or before the first day of each month.
at 7920 State Line Suite 101
or at such other place as LESSOR may designate from time to time in writing.
<PAGE> 89
Real Estate Board This is a legally
of Kansas City, Missouri binding contract.
approved by Legal Counsel If not understood,
seek competent advice.
[REALTOR LOGO]
COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
THIS LEASE is made this 1st day of November, 1996, between
James R. Neese and Teri Neese, LESSOR, and
Commercial Capital Corporation
Broker Services
7920 State Line Suite 200
Prairie Village, KS 66208, LESSEE.
LESSOR hereby leases to LESSEE, and LESSEE hereby leases from LESSOR,
the following described premises, hereinafter referred to as "the premises," in
the City of Prairie Village, County of Johnson, State of Kansas, to wit; Office
Space in a Commercial Building located at 7920 State Line Suite 200 Prairie
Village, KS as highlighted on attached exhibit "A"
to be used only for Business Purposes Only for a term of Five (5) years and 0
months, beginning of the 1st day of November, 1996, and ending on the 31st day
of October, 2001 for which LESSEE agrees to pay to LESSOR a total of
Eighty-four Thousand & 00/100 DOLLARS ($84,000.00), as rent, in monthly
installments, each due and payable on the first day of each and every month of
the term hereof, in advance, as follows:
$1400.00 Monthly payable on or before the first day of each month.
at 7920 State Line Suite 101
or at such other place as LESSOR may designate from time to time in writing.
<PAGE> 90
EXHIBIT 4.8
FINANCIAL STATEMENTS
--------------------
<PAGE> 91
EXHIBIT 4.9
LITIGATION
LOMA VISTA ASSEMBLY OF GOD CHURCH V. COMMERCIAL CAPITAL CORPORATION.
Loma Vista Assembly of God Church has sued Commercial Capital Corporation, Case
No. CV96-20553 filed in the Circuit Court of Jackson County, Missouri on
September 3, 1996, for damages allegedly sustained as a result of Commercial
Capital Corporation leasing an automobile to the church which automobile had
been wrecked and repaired prior to the parties entering into the lease
agreement. On May 6, 1997, the parties agreed to settle this case on the basis
following:
(a) Payment by Commercial Capital Corporation to Loma Vista
Assembly of God in the amount of $30,000.00
(b) Return of the leased vehicle to Commercial Capital Corporation
subject to existing lease obligation which has been assigned to
a local bank.
Settlement documents are being prepared.
<PAGE> 92
PROMISSORY NOTE
$____________ Tacoma, Washington
June 2, 1997
1. Promise To Pay. FOR VALUE RECEIVED, T&W FUNDING COMPANY VI, L.L.C., a
Delaware limited liability company (hereinafter "Maker") promises to pay to
COMMERCIAL CAPITAL CORPORATION, a Kansas corporation (the "Holder") or order at
______________________________ ________________, Kansas, ____________, or at
such other place as may be designated by the Holder hereof from time to time,
the principal sum of ________________________ 00/100 DOLLARS ($_______), with
interest from ___________, 1997, on the terms and conditions set forth herein.
Maker and Holder acknowledge and agree that the principal amount of this
Promissory Note, as finally adjusted, shall equal the deferred portion of the
purchase price set forth in the Asset Purchase Agreement dated as of June 2,
1997 entered into between Maker and Holder (the "Agreement"). The principal
amount of the Promissory Note set forth above is temporary only and is based on
the unaudited financial statements of Commercial Capital Corporation as of April
30, 1997. As soon as practicable, post-closing adjustments shall be made to the
purchase price under the Agreement in order to reflect the change in the total
shareholders' equity of Commercial Capital Corporation from April 30, 1997 to
the actual closing date of the Agreement. The principal amount of this
Promissory Note shall then be adjusted accordingly.
2. Interest Rate. The rate of interest on the unpaid principal balance of
this Promissory Note shall be eight percent (8%).
3. Payment. Maker shall make forty (40) equal quarterly payments of
_______________________/100 ($_______) commencing July 1, 1997 and continuing on
the 1st day of each calendar quarter thereafter. Maker agrees to pay interest on
the declining principal balance at the rate set forth in Paragraph 2 hereof,
which interest shall be deducted from each quarterly installment and the balance
applied in reduction of principal. On the one-year anniversary date of the
effective date of T&W Financial Corporation's initial public offering, Maker
shall make an additional payment to Holder equal to fifteen percent (15%) of the
original purchase price as set forth in the Agreement. The parties shall then
prepare a new amortization schedule in order to reflect the additional principal
Promissory Note Page 1
<PAGE> 93
payment.
4. Late Charge. If any quarterly payment is not made within fifteen (15)
days of the date it is due, Holder may assess a late charge equal to FIVE
HUNDRED AND 00/100 DOLLARS ($500) to defray the expenses incident to such delay.
Payment of the late charge shall be a condition to curing any default. This
provision for a late charge is not permission to make a late payment.
5. Prepayment. This Promissory Note may be prepaid either in whole or in
part at any time without penalty.
6. Default Interest. This Promissory Note shall bear interest at the rate
of twelve percent (12%) per annum thirty (30) days after any installment called
for herein is not paid when due or after maturity.
7. Acceleration. In the event any payments required by this Promissory
Note are not paid when due, the whole sum of both principal and interest shall
become due and payable at once without further notice at the option of Holder.
In the event of the death of Neese or Rice, a portion of the principal balance
and interest shall become due and payable at once without further notice at the
option of the holder as determined below:
a. Death of Neese. Payable to or for the benefit of the estate of
Neese: One-half of the amounts payable to Commercial Capital
Corporation and all of the amounts payable to Neese.
b. Death of Rice. Payable to or for the benefit of the estate of
Rice: One-half of the amounts payable to Commercial Capital
Corporation and all of the amounts payable to Rice.
8. Attorneys' Fees. In the event this Promissory Note is placed in the
hands of an attorney for collection or if suit shall be brought to collect any
of the principal or interest of this Promissory Note, Maker shall pay reasonable
attorneys' fees in addition to all costs of collection and expenses of suit.
9. Waiver of Presentment. Presentation for payment, notice of dishonor,
protest, and notice of protest are hereby waived.
Promissory Note Page 2
<PAGE> 94
10. Nonwaiver. Failure to exercise any right or option of Holder shall not
constitute a waiver of the right to exercise such right or option if Maker is in
default hereunder.
11. Security of Promissory Note. This Promissory Note shall be secured by
an Unconditional Guaranty executed by T & W Financial Corporation, Michael A.
Price and Katherine M. Price, husband and wife, Thomas W. Price and Patricia A.
Price, husband and wife, Kenneth W. McCarthy, Jr. and Carol L. McCarthy, husband
and wife and Paul B. Luke. Reference is made to such Unconditional Guaranty for
further rights of Holder.
12. Collection Expenses. Maker agrees to reimburse Holder on demand for
all legal fees and other costs and expenses incurred in collecting or enforcing
this Note, together with interest at the default rate specified in paragraph 6
above. Without limitation such shall include fees, costs and expenses incurred
with or without suit and in any appeal, any proceedings under any present or
future Federal Bankruptcy Act or state receivership, in any post judgment
collection proceedings. Payment of such fees, costs, expenses and interest shall
be a condition precedent to the curing of any default or the satisfaction of
this Promissory Note.
13. Governing Law, Venue and Jurisdiction. This Note shall be construed,
enforced and otherwise governed by the laws of the State of Kansas. In the event
any action shall be brought by any party to this Promissory Note, such action
shall be brought in the District Court of the State of Kansas for Johnson County
and all parties consent to the jurisdiction of such court as to all such
actions.
14. Notices. All notices, demands, requests, consents, approvals, and
other instruments required or permitted to be given pursuant to the terms of
this Promissory Note shall be in writing and shall be deemed to have been
properly given if sent by registered or certified mail, postage prepaid, return
receipt requested, to the addresses set forth below:
(a) To Maker: T&W Funding Company VI, L.L.C.
c/o Michael A. Price
P.O. Box 3028
Federal Way, WA 98063
(b) To Holder: Commercial Capital Corporation
c/o James Neese
7920 State Line Rd., Ste. 101
Prairie Village, KS 66208
Promissory Note Page 3
<PAGE> 95
Provided, however, that such address may be changed upon five (5) days' written
notice thereof similarly given to the other party. Such notice, demand, request,
consent, approval, and other instrument shall have been deemed to have been
served on the third (3rd) day following the date of mailing.
MAKER:
T & W FUNDING COMPANY VI, L.L.C.
________________________________________
By: Michael A. Price, Member
Promissory Note Page 4
<PAGE> 96
UNCONDITIONAL GUARANTY
This Unconditional Guaranty is made and entered into as of June 2, 1997 by
MICHAEL A. PRICE and KATHERINE M. PRICE, husband and wife, THOMAS W. PRICE and
PATRICIA A. PRICE, husband and wife, KENNETH W. McCARTHY, JR. And CAROL L.
McCARTHY, husband and wife, PAUL B. LUKE and T & W FINANCIAL CORPORATION (all
collectively referred to as "Guarantor") in favor of COMMERCIAL CAPITAL
CORPORATION, JAMES NEESE and LARRY RICE, individually (collectively referred to
as "Seller").
BACKGROUND
Commercial Capital Corporation, as Seller, has entered into an Asset
Purchase Agreement (the "Agreement"), Promissory Notes (the "Notes") and
Security Agreement ("Security Agreement") all dated as of June 2, 1997 (the
"Agreements") with T & W FUNDING COMPANY VI, L.L.C. (the "Purchaser"). Guarantor
has a financial interest in Purchaser, and it is to Guarantor's benefit that
Seller enter into the Agreements with Purchaser. Guarantor acknowledges that
Seller would be unwilling to enter into the Agreements without the following
unconditional guaranty, and that Seller is relying upon Guarantor's guaranty in
entering in the Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Seller to enter into the Agreement, and
for other good and valuable consideration, the parties agree as follows:
1. Guarantor unconditionally guarantees the timely, faithful and full
performance by Purchaser of all terms and conditions of the Agreement, Notes and
Security Agreement. In the event of default by Purchaser, or failure to
faithfully perform any of the terms or conditions required of Purchaser under
the Agreements, or in the event of failure of Purchaser to make any or all
payments of money required of it under the Agreements, Guarantor unconditionally
promises to pay Seller, in lawful money
Unconditional Guaranty Page 1
<PAGE> 97
of the United States, all sums at any time due and payable under the Agreements,
plus costs of collection, including reasonable attorneys fees. The obligations
of each of the undersigned individuals signing as Guarantor shall be joint and
several.
2. The obligations of Guarantor hereunder are independent of the
obligations of Purchaser under the Agreement, and a separate action or actions
may be brought against Guarantor, whether action is brought against Purchaser or
whether Purchaser be joined in any action or actions, the liability of Guarantor
hereunder being primary. Guarantor hereby waives the benefit of any suretyship
defenses affecting its liability hereunder or by enforcement thereof.
3. Guarantor authorizes Seller, without notice or demand, and without
affecting Guarantor's liability hereunder, from time to time to extend,
accelerate, or otherwise change the payment terms, or other terms, of the
Agreements or any part thereof.
4. Guarantor waives any defense arising by reason of any defense of
Purchaser, or by reason of the cessation, from any cause whatsoever, or the
liability of Purchaser under the Agreement. Guarantor waives any and all demands
for performance, notices of nonperformance or default, and notices of
cancellation or forfeiture. Seller may apply all proceeds received from
Purchaser, or others, to such part of Purchaser's indebtedness as Seller may
deem appropriate without consulting Guarantor and without prejudice to or in any
way limiting or lessening the liability of Guarantor under this Guaranty.
5. This instrument constitutes the entire agreement between Seller and
Guarantor. No oral or written representation not contained herein shall in any
way affect this Guaranty, which shall not be modified except by the parties in
writing. Waiver by Seller of any provision hereof in one instance shall not
constitute a waiver as to any other instance.
6. This Guaranty shall be governed by the internal laws of the State of
Kansas without regard to choice of law principles.
7. Guarantor and Seller irrevocably submit to the jurisdiction of the
Johnson County District, State of Kansas in any action or proceeding arising out
of or relating to this Guaranty, and agree that all claims in respect of such
action or proceeding shall be heard and determined only in Johnson County
District Court, State of Kansas.
8. The undersigned individuals warrant and represent that
Unconditional Guaranty Page 2
<PAGE> 98
they are financially interested in Purchaser.
DATED as of the day and year first written above.
GUARANTOR:
______________________________ ______________________________
Michael A. Price Katherine M. Price
______________________________ ______________________________
Thomas W. Price Patricia A. Price
______________________________ ______________________________
Kenneth W. McCarthy, Jr. Carol L. McCarthy
______________________________
Paul B. Luke
T & W FINANCIAL CORPORATION
______________________________
By: Thomas W. Price, President
Unconditional Guaranty Page 3
<PAGE> 99
SECURITY AGREEMENT
THE UNDERSIGNED, T&W FUNDING COMPANY VI, L.L.C., a Delaware limited
liability company, (hereinafter called "Debtor"), with its principal place of
business being 6416 Pacific Highway East, Tacoma, Washington 98424, hereby
grants COMMERCIAL CAPITAL CORPORATION, JAMES NEESE and LARRY RICE, individually,
at ________________________, _____________, ________, (hereinafter collectively
referred to as "Secured Party"), a security interest in the personal property
described on the attached Exhibit A, together with all increases therein, all
added and substituted parts and equipment, tools, parts, accessories, supplies
and improvements therefor, all property of a similar nature hereafter acquired
by Debtor in any of the categories herein described, together with all cash and
non-cash proceeds of all such property. All of said property is hereinafter
referred to as the "Property."
This Security Agreement is effective as of January 1, 1997 and is given to
secure the payment and performance of all indebtedness and obligations of Debtor
to Secured Party presently existing and hereafter arising, direct or indirect,
and interest thereon. Regardless of the adequacy of any security which the
Secured Party may at any time hold hereunder, and regardless of the adequacy of
any other security which Secured Party may obtain at any of its offices from
Debtor in connection with any other transactions, any deposits or other moneys
owing from Secured Party at any of its offices to Debtor shall (as collateral in
the possession of Secured Party) constitute additional security for, and may be
set off against, obligations secured hereby even though said obligations may not
then be due. When more than one person is the Debtor they shall be jointly and
severally liable.
DEBTOR HEREBY REPRESENTS, COVENANTS AND AGREES WITH SECURED PARTY AS FOLLOWS:
1. USE OF PROPERTY: Debtor agrees to comply with any governmental
regulation affecting the use of the property and will not waste, injure nor
destroy the property, nor use nor permit the use of the property in any unlawful
manner. Debtor represents and agrees that the primary use of the property is and
will be for business use.
2. DEBTOR AND COLLATERAL LOCATION: The address appearing next to Debtor's
signature below is the address of Debtor. Debtor will give Secured Party prior
written notice of any change in Debtor's chief executive office and of any
change in collateral location.
Security Agreement Page 1
<PAGE> 100
3. FIXTURES: If any of the property is to be or has been attached to real
estate, the legal description of the real estate is attached hereto, marked
Exhibit "B", and by this reference incorporated herein.
4. OWNERSHIP AND LIENS: Debtor owns the property and the same is free and
clear of all security interests and encumbrances of every nature except those of
the Seller disclosed in the Asset Purchase Agreement of even date herewith.
Debtor will not create nor permit the existence of any lien or security interest
other than that created hereby on the property without the written consent of
Secured Party. Any certificate of title now or hereafter existing on any of the
property will be delivered to Secured Party and will recite the interest of
Secured Party.
5. TAXES: Debtor will pay before delinquency all taxes or other
governmental charges that are or may become a lien or charge on the property and
will pay any tax which may be levied on any obligation secured hereby.
6. REPAIRS AND INSPECTION: Debtor will keep the property in good repair.
Secured Party may inspect the property at reasonable times and intervals and may
for this purpose enter the premises upon which the property is located.
7. EXPENSES INCURRED BY SECURED PARTY: Secured Party is not required to,
but may at its option, pay any tax or other charge or expense payable by Debtor
and any filing or recording fees and any amounts so paid shall be repayable by
Debtor upon demand. Debtor will also repay upon demand all of Secured Party's
expenses incurred in collecting, insuring, conserving or protecting the
collateral or in any inventories, audits, inspections or other examination by
Secured Party in respect of the collateral. All such sums shall bear interests
at the rate of 12% per annum from the date of payment by the Secured Party until
repaid by Debtor and such sums and interest thereon shall be secured hereby. The
rights granted by this paragraph are not a waiver of any other rights of Secured
Party arising from breach of any of Debtor's covenants.
8. WAIVERS: This Security Agreement shall not be qualified or supplemented
by course of dealing. No waiver or modification by Secured Party of any of the
terms or conditions hereof shall be effective unless in writing signed by
Secured Party. No waiver nor indulgence by Secured Party as to any required
performance by Debtor shall constitute a waiver as to any subsequent required
performance or other obligations of Debtor hereunder. Debtor
Security Agreement Page 2
<PAGE> 101
hereby waives any counter claims or defense hereunder against any assignee for
value.
9. DEFAULT: Time is of the essence in this Security Agreement, and in any
of the following events, hereinafter called "Events of Default," to-wit:
a. Any failure to pay when due the full amount of any payment of
principal, interest, taxes, insurance premiums or other charges which are or may
be secured hereby; or
b. Any failure to perform as required by any covenant or agreement
herein; or
c. The falsity of any representation by Debtor herein or in any
credit application or financial statement given by Debtor to Secured Party as a
basis for any extension of credit secured hereby; or
d. If the property should be seized or levied upon under any legal
or governmental process against Debtor or against the property; or
e. If Debtor becomes insolvent or is the subject of a petition in
bankruptcy either voluntary or involuntary, or in any other proceeding under the
federal bankruptcy laws; or makes an assignment for the benefit of creditors; or
if Debtor is named in or the property is subjected to a suit for the appointment
of a receiver; or
f. Loss, substantial damage to, or destruction of any portion of the
property; or
g. Entry of any judgment against Debtor; or
h. Dissolution or liquidation of Debtor.
Then and in any of such events of default, the entire amount of
indebtedness secured hereby shall then or at any time thereafter, at the option
of Secured Party, become immediately due and payable without notice or demand,
and Secured Party shall have an immediate right to pursue the remedies set forth
in this Security Agreement.
10. REMEDIES: In the event of a default hereunder, Secured Party shall
have all remedies provided by law; and without limiting the generality of the
foregoing, shall be entitled as follows:
Security Agreement Page 3
<PAGE> 102
a. Debtor agrees to put Secured Party in possession of the property
on demand; and
b. Secured Party is authorized to enter any premises where the
property is situated and take possession of said property without notice or
demand and without legal proceedings; and to give direct notice to all
advertisers of the exercise of the rights under this Security Agreement by
Second Party; and
c. At the request of Secured Party, Debtor will assemble the
property and make it available to Secured Party at a place designated by Secured
Party which is reasonably convenient to both parties; and
d. Debtor agrees that a period of thirty (30) days from the time
notice is sent, by first-class mail or otherwise, shall be a reasonable period
of notification of a sale or other disposition of the property; and
e. Debtor agrees that any notice or other communication by Secured
Party to Debtor shall be sent to the address of the debtor stated herein; and
f. Debtor agrees to pay on demand the amount of all expenses
reasonably incurred by Secured Party in protecting or realizing on the property.
In the event that this Security Agreement or any obligation secured by it is
referred to an attorney for protecting or defending the priority of Secured
Party's interest or for collection or realization procedures, Debtor agrees to
pay a reasonable attorney's fee, including fees incurred in both trial and
appellate courts, or fees incurred without suit, and expenses of title search
and all court costs and costs of public officials. The sums agreed to be paid in
this subparagraph shall be secured hereby; and
9. If Secured Party disposes of the property, Debtor agrees to pay any
deficiency remaining after application of the net proceeds to any indebtedness
secured hereby.
11. INSURANCE: Debtor will keep the property continuously insured by an
insurer approved by Secured Party against fire, theft and other hazards
designated at any time by Secured Party, in an amount equal to the full
insurable value thereof or to all sums secured hereby, with such form of loss
payable clause as designated by and in favor of Secured Party, and will deliver
the policies and receipts showing payment of premiums to the Secured Party. In
the event of loss, Secured Party shall have full power to collect any and all
insurance upon the property and to apply the same at its option to any
obligation secured hereby, whether
Security Agreement Page 4
<PAGE> 103
Secured Party, Debtor will not remove the property from the State of Kansas, and
Debtor will not sell nor lease the property or any interest therein.
13. APPLICABLE LAW: This security agreement shall be governed by the laws
of the State of Kansas.
DATED as of the day and year first written above.
T & W FUNDING COMPANY VI, L.L.C.
By:______________________________
Michael A. Price, Member
Address:
7920 State Line, Ste. 101
Prairie Village, KS 66208
Security Agreement Page 5
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COMMERCIAL CAPITAL CORPORATION
5/30/97
Physical Inventory
<TABLE>
<CAPTION>
<S> <C>
Jim Neese Office Larry McMillan/Storage Room
1 Executive Chair 1 Executive Chair
2 Side Chairs 1 Wood Desk
1 Built-in Desk 3 Wood Bookcases
1 Credenza W/Bookcase
1 Computer Table Misc.
1 4 Drawer Lateral File
1 Table/2 Chair Kitchen Set
Hallway Lower Level 1 Mail Scale
1 Microwave
2 Drawer 111 1 Refrigerator
3 Drawer 111 1 Meridian Phone System/Voice Mail
4 Drawer 1111
5 Drawer 111 Darlene Lamb/Sales Support
Kendal and Cassy
Copy Room Lower Level 3 Side Chairs
2 Cannon AP 550 Typewriters
1 Computer Table 1 Brother WP 1700 Typewriter
1 Wood table on Rollers 3 Built-In Workstations
1 Pitney Bowes 5600 Mail Machine 3 Side Drawers, 4 Overheads
1 Toshiba Model BD 92930 Copier 1 HP Desk Jet 540
1 486 Computer
1 LaserJet 2D HP
Larry Rice Office 1 486 Computer
1 HP 500 Printer
2 Side Chairs 1 PC 486
1 Leather Executive Chair 1 HP Office Fox
1 Two Drawer File Cabinet 1 HP Office Fax
1 Credenza / Desk
Mike Cohen Office Lower Level Front Office Lower Level
1 Executive Chair 1 486 PC
1 Side Chair 1 Built-in Workstation
1 Small Wood Desk 1 Wood Desk
1 Wood Computer Table 2 Side Chairs
1 1146 CM Typewriter
1 Metal Typewriter Table
</TABLE>
<PAGE> 105
COMMERCIAL CAPITAL CORPORATION
5/30/97
<TABLE>
<CAPTION>
<S> <C>
Upper Level Offices Jim Bradford
Joe Flannery Office 1 Side Chair
1 Exec Chair
1 Executive Desk Wood 1 Lateral File 2 Drawer
1 Executive Chair
1 Credenza Mark Boylan
2 Side Chairs
1 PC 486 1 Workstation
1 PC Server 1 Executive Chair
1 HP LaserJet 1 Side Chair
1 Lateral 2 drawer file
Brenda
1 Executive Desk Wood Copy Room
1 486 PC 1 AB Dick Zerox 1065
1 TI Printer 1 Cannon 550 Typewriter
1 Sec Chair 1 Workstation
1 Side Chair
1 Fax Savin W/Desk Stand Conference Room
1 2 Drawer lateral file 9 Conference Chairs
1 Conference Table
Kitchen 1 486 PC
1 48" Round Table Renee Hayes Office
2 Side Chairs 1 Desk/Credenza
3 File Cabinets
Jim Loveland 1 File Server
1 Paymaster
1 Workstation
1 486 PC Workstation /Accounting
1 Sec Chair Built-In Workstation
1 HP Printer 1 486 PC
Carl Nicholson
1 Executive Desk/Credenza
1 486 PC
1 Executive Chair
2 Side Chairs
</TABLE>
<PAGE> 106
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AGREEMENT is entered into effective as of June 2, 1997, between JAMES
NEESE (herein referred to as "Employee") and T & W FINANCIAL CORPORATION, a
Washington corporation (herein referred to as "T&W").
In consideration of the mutual covenants herein contained, the parties
agree as follows:
1. EMPLOYMENT.
T&W employs Employee and Employee accepts employment effective as of the
effective date of this Agreement upon the following terms and conditions.
2. TERM OF EMPLOYMENT.
Employment under this Agreement shall be for a period of six (6) years
commencing on the effective date of this Agreement and terminating on the
earlier to occur of the following:
(a) June 1, 2003;
(b) Employee's death;
(c) at the option of T&W upon thirty (30) days prior written notice to
Employee in the event of the inability of Employee to perform his
duties hereunder by reason of injury or illness incapacitating
Employee for a continuous period exceeding one hundred eighty (180)
days;
(d) upon the termination of Employee's employment by the Board of
Directors of T&W for cause in accordance with Section 10.1; or
(e) upon Employee voluntarily terminating employment in accordance with
Section 10.2.
At the expiration of the initial term of this Agreement, this Agreement
shall be automatically renewed for two (2) succeeding terms of two (2) years
each, unless either party
Employment and
Noncompetition Agreement Page l
<PAGE> 107
shall, at least sixty (60) days prior to the expiration of the initial term, or
any extended term, give written notice of that party's intention not to renew
this Agreement.
2.2 T&W's Personnel Policies. T&W has implemented and adopted a Policy and
Procedure Manual which contains general policies regarding dress and grooming,
attendance and work rules and regulations. Employee acknowledges that he has
received a copy of T&W's Policy and Procedure Manual and agrees to follow all
rules therein pertaining to Employee's employment at T&W. HOWEVER, THE POLICY
AND PROCEDURE MANUAL MAY BE MODIFIED BY T&W AT ANY TIME WITHOUT NOTICE AND
ANYTHING CONTAINED IN THE MANUAL, OR ANY MODIFICATION TO THE MANUAL, SHALL NOT
CONSTITUTE A MODIFICATION OF THIS AGREEMENT. In the event of a conflict between
this Agreement and the Policy and Procedure Manual, this Agreement controls.
3. DUTIES AND EXTENT OF SERVICES.
3.1 Employee's principal duties on behalf of T&W at the effective date of
this Agreement shall be to perform sales and marketing services at T&W's Prairie
Village location.
3.2 Employee will devote substantially his entire time and attention to
the business of T&W, and shall not, during such employment, engage in any other
business activity which interferes with Employee's duties and responsibilities
under this Agreement. Employee shall not directly or indirectly engage or
participate in any activities at any time during the term of this Agreement in
conflict with the best interest of T&W.
4. COMPENSATION.
In addition to other benefits referred to herein, T&W shall pay Employee
for all services rendered by Employee under this Agreement a salary of
$14,583.33 per month. Employee's salary shall be paid in semi-monthly
installments on the 15th and last day of each month, commencing on June 15, 1997
and shall be subject to normal payroll withholding. Unless changed by agreement
of the parties, the annual salary to Employee shall remain the same as provided
herein. Employee's annual salary shall be subject to annual review and may be
increased but shall not be decreased.
Employment and
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<PAGE> 108
5. STOCK OPTIONS.
In consideration for entering into this Agreement, and in the event that
T&W completes an initial public offering of its common stock, T&W shall grant
Employee an option to purchase shares of common stock of T&W in an amount equal
to one percent (1%) of the issued and outstanding shares of stock in T&W as of
the effective date of the initial public offering at a per share price equal to
the initial public offering price. Under the terms of such option, the option
shall vest ratably over a five-year period (i.e., at the rate of twenty percent
(20%) per year), so that the option shall be fully exercisable five (5) years
from the date of the grant. The other terms and conditions of the option shall
be set forth in a Stock Option Plan to be adopted by T&W prior to the completion
of the initial public offering.
6. ADDITIONAL BENEFITS.
T&W agrees at all times during Employee's employment to provide and
maintain for Employee, and Employee shall be entitled to participate in, all
fringe benefits in effect which are available for salaried employees of the T&W
or as introduced by T&W during Employee's employment. To the extent that it has
the right to do so with its other salaried employees, T&W reserves the right to
modify, suspend or discontinue any or all of such benefits at any time. In
addition to the compensation provided in Section 4, Employee shall have the
following additional benefits during the term herein.
6.1 QUARTERLY BONUS. In addition to the salary described above, Employee
shall be entitled to receive a bonus through participation in T&W's return on
equity ("ROE") incentive program (the "ROE Program"). Employee shall receive
twenty-five percent (25%) of any ROE in excess of twenty-five percent (25%) on
an annual pre-tax basis relative to beginning acquisition equity of $__________.
The operation of the ROE Program is illustrated on the attached Exhibit "A." The
bonus shall be paid to Employee every April 30, July 30, October 30, and January
30 during the term of this Agreement. The bonus payable on July 30, 1997 shall
be calculated for the initial period beginning January 1, 1997, but prorated as
of June 1, 1997. In the event that a major recapitalization of T&W occurs, the
ROE Program will be restructured to produce a basically equivalent incentive
bonus program.
Employment and
Noncompetition Agreement Page 3
<PAGE> 109
6.2 EXPENSES. T&W will reimburse Employee for or pay for Employee all
reasonable and necessary business related expenses incurred by him in carrying
out his duties and responsibilities under this Agreement. The Employee shall
present to T&W from time to time an itemized account of such expenses in such
form as may be required by T&W.
6.3 CLUB DUES. T&W will reimburse Employee for or pay for Employee
social or athletic club dues as it relates to business purposes of T&W.
7. NONCOMPETITION/NONDISCLOSURE.
As a condition of employment with T&W, and in consideration of
continuing employment, the compensation of Employee by T&W during the term of
this Agreement, the use and enjoyment by Employee of T&W's facilities and
equipment, the ongoing disclosure to Employee of T&W's confidential and
proprietary information, the opportunity for Employee to serve T&W's customers,
and the mutual covenants contained herein, T&W and Employee recognize and agree
as follows:
(a) Confidential Information. Employee recognizes and
acknowledges that during the course of his employment hereunder, he will have
access to certain information not generally known to the public, relating to
products, sales, services or business of T&W, which may include without
limitation data, programs, customer or contact lists, contact with T&W's
customers, acquisition of information as to the nature and character of the
business and the names and requirements of the customers, prospects or
projections, techniques, processes, research, work in process, intellectual
property, including but not limited to any patents, trademarks, service marks,
copyrights, ideas, creations, and properties invented, created, written,
developed, furnished, produced, or disclosed by Employee, in the course of
rendering services to T&W except for items in the public domain or items
obtained by Employee from third parties not affiliated with T&W (collectively
the "Confidential Information").
(b) Possession. Employee agrees that upon request by T&W, and in
any event upon termination of employment, except for items in the public domain
or items obtained by Employee from third parties not affiliated with T&W,
Employee shall turn over to T&W all documents, notes, papers, data, files,
customer lists, office supplies or other materials or work product in Employee's
possession or under his control which were created pursuant to,
Employment and
Noncompetition Agreement Page 4
<PAGE> 110
or connected with or derived from Employee's services to T&W, or which are
related in any manner to T&W's business activities, whether or not such
materials are at the date of this Agreement in Employee's possession.
(c) Non-Disclosure of Confidential Information. Employee agrees
that for and during the entire time he is employed by T&W, any Confidential
Information shall be considered and kept as private and privileged records of
T&W and will not be divulged to any person or entity. Further, upon termination
of this Agreement for any reason, Employee agrees that he will continue to treat
as private and privileged any Confidential Information and will not release any
such Confidential Information to any person or entity, either by statement,
disposition, or as a witness, except upon the issuance of a proper subpoena from
a court of competent jurisdiction, and T&W shall be entitled to an injunction by
any competent court to enjoin and restrain the unauthorized disclosure of such
information. Employee hereby agrees to notify T&W of any request for such
information, whether by subpoena or otherwise.
(d) Covenant Not to Divulge Confidential Information. Employee
further recognizes and acknowledges that because the goodwill of T&W's business
is a valuable asset, and because the solicitation of T&W's customers by Employee
after Employee has ceased to be employed by or associated with T&W will cause
irreparable harm to the goodwill of T&W, T&W would not offer employment to
Employee unless Employee assures that such solicitation would not occur.
Employee therefore agrees and covenants that during Employee's employment by T&W
and for a period of thirty-six (36) months after termination of such employment
for any reason, Employee shall not disclose any Confidential Information about
the business of T&W as presently conducted, or as it may evolve in the ordinary
course of business between the date of this Agreement and the expiration of this
covenant.
(e) Non-Competition Agreement. Employee hereby agrees that,
during the term of employment with T&W and for a period of thirty-six (36)
months thereafter, Employee shall not, directly or indirectly, provide any
competitor or potential competitor of T&W doing or planning to do business in
the same business as T&W with any information relating in any way to T&W's
Confidential Information. Employee agrees that he shall not, whether as an
employee, agent, proprietor, partner, officer, director, member, shareholder,
independent contractor, or in any other capacity whatsoever, and in any fashion
in which he is
Employment and
Noncompetition Agreement Page 5
<PAGE> 111
beneficially interested, render any services or engage in any activities in the
United States and Canada in the business of equipment leasing and related
financial services, or in any business then competitive with the business of
T&W, or any of its affiliated companies (collectively, the "Business"), during
the term of employment with T&W and for a period of thirty-six (36) months after
Employee leaves T&W's employment for any reason. Ownership of a state chartered
or national bank is not prohibited. The period of time during which Employee is
prohibited from engaging in certain activities pursuant to the terms of this
section shall be extended by the length of time during which any such party is
in breach of the terms of this section. Provided, however, if T&W defaults in
payment of the Note evidencing T&W payment obligations to Seller, Shareholders
or Employee given as part of the consideration under that certain Asset Purchase
Agreement dated as of June 2, 1997 between T&W as "Purchaser" and Commercial
Capital Corporation as "Seller," and at that time, Employee is no longer
employed by T&W, then this Covenant Not-to-Compete shall be void and of no force
or effect whatsoever.
(f) Because of the difficulty in determining the magnitude of
damages or potential damages to T&W in the event of solicitation of an existing
customer of T&W, or competition in violation of this Agreement, Employee will
pay to T&W liquidated damages equal to the net income Employee derives in
noncompliance with this noncompetition provision. Such liquidated damages shall
be due immediately upon the rendering of the prohibited activity or services and
shall bear interest at the rate of twelve percent (12%) per annum thereafter.
8. REASONABLENESS OF RESTRICTIONS.
8.1 T&W and Employee agree and stipulate that the agreements and
covenants contained in this Agreement, including the covenant not to divulge
Confidential Information, is fair and reasonable for the protection of T&W's
Confidential Information, goodwill and other protectable interests, in light of
all the facts and circumstances of the relationship between Employee and T&W. In
the event a court of competent jurisdiction should decline to enforce any
provision of this Agreement, such provision shall be deemed to be modified or
eliminated as required by the court's order, but all remaining provisions shall
remain in full force and effect.
8.2 Employee further acknowledges, agrees and stipulates that, in the
event of the termination of employment with T&W,
Employment and
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<PAGE> 112
Employee's experience and capabilities are such that Employee can obtain
employment in business activities which are of a different and non-competing
nature with his activities as an employee of T&W, and that the enforcement of a
remedy hereunder by way of injunction shall not prevent Employee from earning a
reasonable livelihood.
9. INJUNCTIVE RELIEF.
Employee acknowledges that disclosure of any Confidential Information or
breach or threatened breach of any of the covenants or other agreements
contained herein would give rise to irreparable injury to T&W or customers of
T&W, which injury would be inadequately compensable in monetary damages.
Accordingly, T&W may seek and obtain injunctive relief from the breach or
threatened breach of any provision, requirement, or covenant of this Agreement,
in addition to and not in limitation of any other legal remedies which may be
available. Employee further acknowledges, agrees and stipulates that the
covenants and agreements contained herein are necessary for the protection of
T&W's legitimate business interests and are reasonable in scope and content. Any
breach by Employee of this Agreement (specifically including the covenant not to
compete) may cause irreparable injury to T&W. Upon breach or threatened breach,
T&W may obtain temporary restraining orders, injunctions, or other equitable
relief from a court in addition to, and not in lieu of, damages and any other
available remedy.
10. TERMINATION.
10.1 Termination by T&W for Cause. Without limiting in any way other
provisions of this Agreement, Employee may be terminated for cause upon ten (10)
days' prior written notice. In such event, Employee shall be entitled to
compensation only to the date of such termination. For purposes of this
Agreement, cause is defined as:
(a) Conviction of Employee for any felony involving moral
turpitude, or the charging of Employee with any felony
involving moral turpitude which results in a suspended
sentence or deferred prosecution;
(b) Fraud, embezzlement or conversion of T&W's property;
(c) Employee's sexual harassment of T&W's employees if admitted
by Employee in writing or determined by
Employment and
Noncompetition Agreement Page 7
<PAGE> 113
arbitration as provided below;
(d) Engaging in competition with T&W during the period of
Employee's employment with T&W;
(e) Material breach of this Agreement by Employee, if Employee
fails to cease and desist from such conduct within the ten
(10) day notice period provided above; or
(f) Divulging T&W trade secrets or other breach of
confidentiality.
In the event T&W terminates Employee's employment for cause as provided
for in this Section 10, and Employee disagrees with the T&W's determination that
just cause for termination exists, then the Employee and T&W agree to seek a
fair and prompt negotiated resolution. However, if this is not successful, the
dispute shall be resolved by binding arbitration in accordance with arbitration
procedures agreed to by Employee and T&W or, if they are unable to agree, by a
court of competent jurisdiction.
10.2 Termination by Employee Without Cause. Employee may terminate his
employment by giving at least ninety (90) days' written notice to T&W.
10.3 Termination by Employee With Cause. In the event that T&W defaults
in any of its obligations to Employee under this Employment and Noncompetition
Agreement, and T&W fails to cure such default within ten (10) days after
receiving written notice thereof, Employee may terminate his employment and seek
any damages available to Employee at law or in equity as a result of such breach
with it being specifically understood and agreed that Employee shall be relieved
from the non-competition provisions hereof.
11. MISCELLANEOUS.
11.1 Assignment. This Agreement shall not be assignable by Employee.
11.2 Amendment and/or Modification. Neither this Agreement nor any term
or provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by the parties hereto.
Employment and
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<PAGE> 114
11.3 Binding Effect. Subject to the restrictions on assignment described
above, this Agreement shall be binding upon and inure to the benefit of the
respective parties, their successors and assigns and Employee's heirs and
personal representative.
11.4 Section Headings. The section headings are for convenience only and
in no way define, limit, extend or interpret the scope of this Agreement or of
any particular paragraph hereof.
11.5 Interpretation and Fair Construction of Contract. This Agreement
has been reviewed and approved by each of the parties. Both T&W and Employee
have received independent legal advice in connection with the negotiation,
execution and performance of their respective obligations under this Agreement.
In the event a court of competent jurisdiction determines that any provision of
this Agreement is ambiguous, the language in all parts of this Agreement shall
be construed as a whole according to its fair meaning and not strictly construed
for nor against either party.
11.6 Validity. If any term of this Agreement shall be determined by a
court of competent jurisdiction to be invalid, illegal, or unenforceable, in
whole or in part, the validity of any of the other terms of this Agreement shall
not, in any way, be affected thereby.
11.7 Variations in Pronouns. All pronouns include the masculine,
feminine, neuter, singular and plural as the identification of persons, places
or entities as the context may require.
11.8 Waiver or Breach. Either party's failure to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred, in any one or more instances,
shall not be construed to be a waiver or relinquishment of any such option or
right, or of any other covenants or agreements, but the same shall be and remain
in full force and effect.
11.9 Notices. To be effective, any notice hereunder shall be in writing,
delivered in person or mailed by certified or registered mail, postage prepaid,
to the appropriate party or parties at the addresses set forth below their
signature hereto, or to such other address as the parties may hereinafter
designate.
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<PAGE> 115
11.10 Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the entire subject matter hereof,
and there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied herein. Any and all prior discussions, negotiations,
commitments and understandings relating to the subject matter hereof are merged
herein. There are no conditions precedent to the effectiveness of this Agreement
other than as stated herein, and there are no related collateral agreement
existing between the parties that are not referenced herein.
11.11 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Washington, regardless of
the fact that Employee is now a resident of a different state. Venue of any
dispute involving the interpretation or enforcement of this Agreement shall be
in Johnson County, Kansas.
EMPLOYER:
_______________________________________
James Neese
Address: ______________________________
______________________________
T&W:
T & W FINANCIAL CORPORATION
By: ___________________________________
Thomas W. Price, President
Address: P.O. Box 3028
Federal Way, WA 98063
Employment and
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<PAGE> 116
EXHIBIT "A" (TYPICAL CALCULATION)
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<CAPTION>
<S> <C>
Sample Beginning Acquisition Equity $5,500,000
Calculation of Pre-tax ROE:
Sample Income Statement:
Contract Income xxxx
Residual Income xxxx
*Gain on Sale of Portfolio
(Up to $20 Million Origination Dollars) xxxx
Less: Operating Expenses
Direct Costs, Including Commissions (initial Direct Costs) xxxx
Provision for Bad Debts (1% of Equipment Originations) xxxx
Servicing Costs on Non-sold Portfolio (After 20 Million at .75%
of Equipment Originations) xxxx
Interest Expense on Non-sold Portfolio (After 20 Million) XXXX
Net Income Before Income Taxes (FN) A xxxx
*Currently discounted at 9.25 if it comes to T&W, otherwise actual discounting income
(FN) A Net Income Before Income Taxes
Beginning Acquisition Equity x 4 = y If y is 30% less 25% (Base Pre-tax ROE) = 5% x
Beginning Acquisition Equity divided by 4 x .50
x .50 is the Appropriate Bonus for Jim or Larry
</TABLE>
Note:
Each Quarter, pre-tax income is added to beginning equity and the reference
point changes, likewise average pre-tax equity.
<PAGE> 117
Illustration of the calculation for the Return on Equity ("ROE") quarterly
incentive bonus.
1992-1996 ROE AVERAGE CALCULATION
1992 39.2%
1993 26.0%
1994 36.4% AVERAGE, 40.29%
1995 41.1%
1996 58.7% (Unaudited)
1997 FIRST QUARTER EXAMPLE - EST. AVERAGE ROE = 58.7 (1996 AVERAGE)
OVERAGE/(UNDERAGE) CALCULATION
1997 Example First Quarter 58.70%
Previous 5 Years 40.29%
-----
Difference 18.41%
BONUS CALCULATION
Average Equity First Quarter 1997 11,047,000
Multiplied by Difference 18.41%
----------
2,033,753
Divided by 4 4
----------
508,438
Multiplied by Bonus Percentage 1%
----------
BONUS AMOUNT: $5,084.38
THE ABOVE EXAMPLE IS FOR ILLUSTRATION PURPOSES ONLY.
<PAGE> 118
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AGREEMENT is entered into effective as of June 2, 1997, between
LARRY RICE (herein referred to as "Employee") and T & W FINANCIAL CORPORATION, a
Washington corporation (herein referred to as "T&W").
In consideration of the mutual covenants herein contained, the parties
agree as follows:
1. Employment.
T&W employs Employee and Employee accepts employment effective as of
the effective date of this Agreement upon the following terms and conditions.
2. Term of Employment.
Employment under this Agreement shall be for a period of six (6) years
commencing on the effective date of this Agreement and terminating on the
earlier to occur of the following:
(a) June 1, 2003;
(b) Employee's death;
(c) at the option of T&W upon thirty (30) days prior written
notice to Employee in the event of the inability of Employee
to perform his duties hereunder by reason of injury or illness
incapacitating Employee for a continuous period exceeding one
hundred eighty (180) days;
(d) upon the termination of Employee's employment by the Board of
Directors of T&W for cause in accordance with Section 10.1; or
(e) upon Employee voluntarily terminating employment in accordance
with Section 10.2.
At the expiration of the initial term of this Agreement, this Agreement
shall be automatically renewed for two (2) succeeding terms of two (2) years
each, unless either party
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shall, at least sixty (60) days prior to the expiration of the initial term, or
any extended term, give written notice of that party's intention not to renew
this Agreement.
2.2 T&W's Personnel Policies. T&W has implemented and adopted a Policy
and Procedure Manual which contains general policies regarding dress and
grooming, attendance and work rules and regulations. Employee acknowledges that
he has received a copy of T&W's Policy and Procedure Manual and agrees to follow
all rules therein pertaining to Employee's employment at T&W. HOWEVER, THE
POLICY AND PROCEDURE MANUAL MAY BE MODIFIED BY T&W AT ANY TIME WITHOUT NOTICE
AND ANYTHING CONTAINED IN THE MANUAL, OR ANY MODIFICATION TO THE MANUAL, SHALL
NOT CONSTITUTE A MODIFICATION OF THIS AGREEMENT. In the event of a conflict
between this Agreement and the Policy and Procedure Manual, this Agreement
controls.
3. Duties and Extent of Services.
3.1 Employee's principal duties on behalf of T&W at the effective date
of this Agreement shall be to perform sales and marketing services at T&W's
Prairie Village location.
3.2 Employee will devote substantially his entire time and attention to
the business of T&W, and shall not, during such employment, engage in any other
business activity which interferes with Employee's duties and responsibilities
under this Agreement. Employee shall not directly or indirectly engage or
participate in any activities at any time during the term of this Agreement in
conflict with the best interest of T&W.
4. Compensation.
In addition to other benefits referred to herein, T&W shall pay
Employee for all services rendered by Employee under this Agreement a salary of
$14,583.33 per month. Employee's salary shall be paid in semi-monthly
installments on the 15th and last day of each month, commencing on June 15, 1997
and shall be subject to normal payroll withholding. Unless changed by agreement
of the parties, the annual salary to Employee shall remain the same as provided
herein. Employee's annual salary shall be subject to annual review and may be
increased but shall not be decreased.
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<PAGE> 120
5. Stock Options.
In consideration for entering into this Agreement, and in the event
that T&W completes an initial public offering of its common stock, T&W shall
grant Employee an option to purchase shares of common stock of T&W in an amount
equal to one percent (1%) of the issued and outstanding shares of stock in T&W
as of the effective date of the initial public offering at a per share price
equal to the initial public offering price. Under the terms of such option, the
option shall vest ratably over a five-year period (i.e., at the rate of twenty
percent (20%) per year), so that the option shall be fully exercisable five (5)
years from the date of the grant. The other terms and conditions of the option
shall be set forth in a Stock Option Plan to be adopted by T&W prior to the
completion of the initial public offering.
6. Additional Benefits.
T&W agrees at all times during Employee's employment to provide and
maintain for Employee, and Employee shall be entitled to participate in, all
fringe benefits in effect which are available for salaried employees of the T&W
or as introduced by T&W during Employee's employment. To the extent that it has
the right to do so with its other salaried employees, T&W reserves the right to
modify, suspend or discontinue any or all of such benefits at any time. In
addition to the compensation provided in Section 4, Employee shall have the
following additional benefits during the term herein.
6.1 Quarterly Bonus. In addition to the salary described above,
Employee shall be entitled to receive a bonus through participation in T&W's
return on equity ("ROE") incentive program (the"ROE Program"). Employee shall
receive twenty-five percent (25%) of any ROE in excess of twenty-five percent
(25%) on an annual pre-tax basis relative to beginning acquisition equity of
$___________________. The operation of the ROE Program is illustrated on the
attached Exhibit "A." The bonus shall be paid to Employee every April 30, July
30, October 30, and January 30 during the term of this Agreement. The bonus
payable on July 30, 1997 shall be calculated for the initial period beginning
January 1, 1997, but prorated as of June 1, 1997. In the event that a major
recapitalization of T&W occurs, the ROE Program will be restructured to produce
a basically equivalent incentive bonus program.
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6.2 Expenses. T&W will reimburse Employee for or pay for Employee all
reasonable and necessary business related expenses incurred by him in carrying
out his duties and responsibilities under this Agreement. The Employee shall
present to T&W from time to time an itemized account of such expenses in such
form as may be required by T&W.
6.3 Club Dues. T&W will reimburse Employee for or pay for Employee
social or athletic club dues as it relates to business purposes of T&W.
7. Noncompetition/Nondisclosure.
As a condition of employment with T&W, and in consideration of
continuing employment, the compensation of Employee by T&W during the term of
this Agreement, the use and enjoyment by Employee of T&W's facilities and
equipment, the ongoing disclosure to Employee of T&W's confidential and
proprietary information, the opportunity for Employee to serve T&W's customers,
and the mutual covenants contained herein, T&W and Employee recognize and agree
as follows:
(a) Confidential Information. Employee recognizes and acknowledges
that during the course of his employment hereunder, he will have access to
certain information not generally known to the public, relating to products,
sales, services or business of T&W, which may include without limitation data,
programs, customer or contact lists, contact with T&W's customers, acquisition
of information as to the nature and character of the business and the names and
requirements of the customers, prospects or projections, techniques, processes
research, work in process, intellectual property, including but not limited to
any patents, trademarks, service marks, copyrights, ideas, creations, and
properties invented, created, written, developed, furnished, produced, or
disclosed by Employee, in the course of rendering services to T&W except for
items in the public domain or items obtained by Employee from third parties not
affiliated with T&W (collectively the "Confidential Information").
(b) Possession. Employee agrees that upon request by T&W, and in any
event upon termination of employment, except for items in the public domain or
items obtained by Employee from third parties not affiliated with T&W, Employee
shall turn over to T&W all documents, notes, papers, data, files, customer
lists, office supplies or other materials or work product in Employee's
possession or under his control which were created pursuant to,
Employment and
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<PAGE> 122
or connected with or derived from, Employee's services to T&W, or which are
related in any manner to T&W's business activities, whether or not such
materials are at the date of this Agreement in Employee's possession.
(c) Non-Disclosure of Confidential Information. Employee agrees that
for and during the entire time he is employed by T&W, any Confidential
Information shall be considered and kept as private and privileged records of
T&W and will not be divulged to any person or entity. Further, upon termination
of this Agreement for any reason, Employee agrees that he will continue to treat
as private and privileged any Confidential Information and will not release any
such Confidential Information to any person or entity, either by statement,
disposition, or as a witness, except upon the issuance of a proper subpoena from
a court of competent jurisdiction, and T&W shall be entitled to an injunction by
any competent court to enjoin and restrain the unauthorized disclosure of such
information. Employee hereby agrees to notify T&W of any request for such
information, whether by subpoena or otherwise.
(d) Covenant Not to Divulge Confidential Information. Employee
further recognizes and acknowledges that because the goodwill of T&W's business
is a valuable asset, and because the solicitation of T&W's customers by Employee
after Employee has ceased to be employed by or associated with T&W will cause
irreparable harm to the goodwill of T&W, T&W would not offer employment to
Employee unless Employee assures that such solicitation would not occur.
Employee therefore agrees and covenants that during Employee's employment by T&W
and for a period of thirty-six (36) months after termination of such employment
for any reason, Employee shall not disclose any Confidential Information about
the business of T&W as presently conducted, or as it may evolve in the ordinary
course of business between the date of this Agreement and the expiration of this
covenant.
(e) Non-Competition Agreement. Employee hereby agrees that, during
the term of employment with T&W and for a period of thirty-six (36) months
thereafter, Employee shall not, directly or indirectly, provide any competitor
or potential competitor of T&W doing or planning to do business in the same
business as T&W with any information relating in any way to T&W's Confidential
Information. Employee agrees that he shall not, whether as an employee, agent,
proprietor, partner, officer, director, member, shareholder, independent
contractor, or in any other capacity whatsoever, and in any fashion in which he
is
Employment and
Noncompetition Agreement Page 5
<PAGE> 123
beneficially interested, render any services or engage in any activities in the
United States and Canada in the business of equipment leasing and related
financial services, or in any business then competitive with the business of
T&W, or any of its affiliated companies (collectively, the "Business"), during
the term of employment with T&W and for a period of thirty-six (36) months after
Employee leaves T&W's employment for any reason. ownership of a state chartered
or national bank is not prohibited. The period of time during which Employee is
prohibited from engaging in certain activities pursuant to the terms of this
section shall be extended by the length of time during which any such party is
in breach of the terms of this section. Provided, however, if T&W defaults in
payment of the Note evidencing T&W payment obligations to Seller, Shareholders
or Employee given as part of the consideration under that certain Asset Purchase
Agreement dated as of June 2, 1997 between T&W as "Purchaser" and Commercial
Capital Corporation as "Seller," and at that time, Employee is no longer
employed by T&W, then this Covenant Not-to-Compete shall be void and of no force
or effect whatsoever.
(f) Because of the difficulty in determining the magnitude of
damages or potential damages to T&W in the event of solicitation of an existing
customer of T&W, or competition in violation of this Agreement, Employee will
pay to T&W liquidated damages equal to the net income Employee derives in
noncompliance with this noncompetition provision. Such liquidated damages shall
be due immediately upon the rendering of the prohibited activity or services and
shall bear interest at the rate of twelve percent (12%) per annum thereafter.
8. Reasonableness of Restrictions.
8.1 T&W and Employee agree and stipulate that the agreements and
covenants contained in this Agreement, including the covenant not to divulge
Confidential Information, is fair and reasonable for the protection of T&W's
Confidential Information, goodwill and other protectable interests, in light of
all the facts and circumstances of the relationship between Employee and T&W. In
the event a court of competent jurisdiction should decline to enforce any
provision of this Agreement, such provision shall be deemed to be modified or
eliminated as required by the court's order, but all remaining provisions shall
remain in full force and effect.
8.2 Employee further acknowledges, agrees and stipulates that, in the
event of the termination of employment with T&W,
Employment and
Noncompetition Agreement Page 6
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Employee's experience and capabilities are such that Employee can obtain
employment in business activities which are of a different and non-competing
nature with his activities as an employee of T&W, and that the enforcement of a
remedy hereunder by way of injunction shall not prevent Employee from earning a
reasonable livelihood.
9. Injunctive Relief.
Employee acknowledges that disclosure of any Confidential Information
or breach or threatened breach of any of the covenants or other agreements
contained herein would give rise to irreparable injury to T&W or customers of
T&W, which injury would be inadequately compensable in monetary damages.
Accordingly, T&W may seek and obtain injunctive relief from the breach or
threatened breach of any provision, requirement, or covenant of this Agreement,
in addition to and not in limitation of any other legal remedies which may be
available. Employee further acknowledges, agrees and stipulates that the
covenants and agreements contained herein are necessary for the protection of
T&W's legitimate business interests and are reasonable in scope and content. Any
breach by Employee of this Agreement (specifically including the covenant not to
compete) may cause irreparable injury to T&W. Upon breach or threatened breach,
T&W may obtain temporary restraining orders, injunctions, or other equitable
relief from a court in addition to, and not in lieu of, damages and any other
available remedy.
10. Termination.
10.1 Termination by T&W for Cause. Without limiting in any way other
provisions of this Agreement, Employee may be terminated for cause upon ten (10)
days' prior written notice. In such event, Employee shall be entitled to
compensation only to the date of such termination. For purposes of this
Agreement, cause is defined as:
(a) Conviction of Employee for any felony involving moral
turpitude, or the charging of Employee with any felony
involving moral turpitude which results in a suspended
sentence or deferred prosecution;
(b) Fraud, embezzlement or conversion of T&W's property;
(c) Employee's sexual harassment of T&W's employees if
admitted by Employee in writing or determine
Employment and
Noncompetition Agreement Page 7
<PAGE> 125
arbitration as provided below;
(d) Engaging in competition with T&W during the period of
Employee's employment with T&W;
(e) Material breach of this Agreement by Employee, if Employee
fails to cease and desist from such conduct within the ten
(10) day notice period provided above; or
(f) Divulging T&W trade secrets or other breach of
confidentiality.
In the event T&W terminates Employee's employment for cause as provided
for in this Section 10, and Employee disagrees with the T&W's determination that
just cause for termination exists, then the Employee and T&W agree to seek a
fair and prompt negotiated resolution. However, if this is not successful, the
dispute shall be resolved by binding arbitration in accordance with arbitration
procedures agreed to by Employee and T&W or, if they are unable to agree, by a
court of competent jurisdiction.
10.2 Termination by Employee Without Cause. Employee may terminate his
employment by giving at least ninety (90) days' written notice to T&W.
10.3 Termination by Employee With Cause. In the event that T&W defaults
in any of its obligations to Employee under this Employment and Noncompetition
Agreement, and T&W fails to cure such default within ten (10) days after
receiving written notice thereof, Employee may terminate his employment and seek
any damages available to Employee at law or in equity as a result of such breach
with it being specifically understood and agreed that Employee shall be relieved
from the non-competition provisions hereof.
11. Miscellaneous.
11.1 Assignment. This Agreement shall not be assignable by Employee.
11.2 Amendment and/or Modification. Neither this Agreement nor any term
or provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by the parties hereto.
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11.3 Binding Effect. Subject to the restrictions on assignment
described above, this Agreement shall be binding upon and inure to the benefit
of the respective parties, their successors and assigns and Employee's heirs and
personal representative.
11.4 Section Headings. The section headings are for convenience only
and in no way define, limit, extend or interpret the scope of this Agreement or
of any particular paragraph hereof.
11.5 Interpretation and Fair Construction of Contract. This Agreement
has been reviewed and approved by each of the parties. Both T&W and Employee
have received independent legal advice in connection with the negotiation,
execution and performance of their respective obligations under this Agreement.
In the event a court of competent jurisdiction determines that any provision of
this Agreement is ambiguous, the language in all parts of this Agreement shall
be construed as a whole according to its fair meaning and not strictly construed
for nor against either party.
11.6 Validity. If any term of this Agreement shall be determined by a
court of competent jurisdiction to be invalid, illegal, or unenforceable, in
whole or in part, the validity of any of the other terms of this Agreement shall
not, in any way, be affected thereby.
11.7 Variations in Pronouns. All pronouns include the masculine,
feminine, neuter, singular and plural as the identification of persons, places
or entities and the context may require.
11.8 Waiver or Breach. Either party's failure to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred, in any one or more instances,
shall not be construed to be a waiver or relinquishment of any such option or
right, or of any other covenants or agreements, but the same shall be and remain
in full force and effect.
11.9 Notices. To be effective, any notice hereunder shall be in
writing, delivered in person or mailed by certified or registered mail, postage
prepaid, to the appropriate party or parties at the addresses set forth below
their signature hereto, or to such other address as the parties may hereinafter
designate.
Employment and
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11.10 Entire Agreement. This Agreement contains the entire agreement
and understanding of the parties with respect to the entire subject matter
hereof, and there are no representations, inducements, promises or agreements,
oral or otherwise, not embodied herein. Any and all prior discussions,
negotiations, commitments and understandings relating to the subject matter
hereof are merged herein. There are no conditions precedent to the effectiveness
of this Agreement other than as stated herein, and there are no related
collateral agreement existing between the Parties that are not referenced
herein.
11.11 Governing Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Washington, regardless
of the fact that Employee is now a resident of a different state. Venue of any
dispute involving the interpretation or enforcement of this Agreement shall be
in Johnson County, Kansas.
EMPLOYEE:
_______________________________________
Larry Rice
Address:_______________________________
T&W:
T & W FINANCIAL CORPORATION
By:____________________________________
Thomas W. Price, President
Address: P.O. Box 3028
Federal Way, WA 98063
Employment and
Noncompetition Agreement Page 10
<PAGE> 1
EXHIBIT 10.26
PROMISSORY NOTE
$____________________ Tacoma, Washington
June 2, 1997
1. Promise To Pay. FOR VALUE RECEIVED, T&W FUNDING
COMPANY VI, L.L.C., a Delaware limited liability company (hereinafter "Maker")
promises to pay to
(the "Holder") or order at _________________, Kansas, ___________, or at such
other place as may be designated by the Holder hereof from time to time, the
principal sum of ___________00/100 DOLLARS ($___________), with interest from
___________, 1997, on the terms and conditions set forth herein.
Maker and Holder acknowledge and agree that the principal amount
of this Promissory Note, as finally adjusted, shall equal the deferred portion
of the purchase price set forth in the Asset Purchase Agreement dated as of June
2, 1997 entered into between Maker and Holder (the "Agreement"). The principal
amount of the Promissory Note set forth above is temporary only and is based on
the unaudited financial statements of Commercial Capital Corporation as of April
30, 1997. As soon as practicable, post-closing adjustments shall be made to the
purchase price under the Agreement in order to reflect the change in the total
shareholders' equity of Commercial Capital Corporation from April 30, 1997 to
the actual closing date of the Agreement. The principal amount of this
Promissory Note shall then be adjusted accordingly.
2. Interest Rate. The rate of interest on the unpaid
principal balance of this Promissory Note shall be eight percent (8%).
3. Payment. Maker shall make forty (40) equal quarterly
payments of ____________________________/100 ($________________) commencing
July 1, 1997 and continuing on the 1st day of each calendar quarter thereafter.
Maker agrees to pay interest on the declining principal balance at the rate set
forth in Paragraph 2 hereof, which interest shall be deducted from each
quarterly installment and the balance applied in reduction of principal. On the
one-year anniversary date of the effective date of T&W Financial Corporation's
initial public offering, Maker shall make an additional payment to Holder equal
to fifteen percent (15%) of the original purchase price as set forth in the
Agreement. The parties shall then prepare a new amortization schedule in order
to reflect the additional principal
Promissory Note Page 1
<PAGE> 2
payment.
4. Late Charge. If any quarterly payment is not made
within fifteen (15) days of the date it is due, Holder may assess a late charge
equal to FIVE HUNDRED AND 00/100 DOLLARS ($500) to defray the expenses incident
to such delay. Payment of the late charge shall be a condition to curing any
default. This provision for a late charge is not permission to make a late
payment.
5. Prepayment. This Promissory Note may be prepaid either
in whole or in part at any time without penalty.
6. Default Interest. This Promissory Note shall bear
interest at the rate of twelve percent (12%) per annum thirty (30) days after
any installment called for herein is not paid when due or after maturity.
7. Acceleration. In the event any payments required by
this Promissory Note are not paid when due, the whole sum of both principal and
interest shall become due and payable at once without further notice at the
option of Holder. In the event of the death of Neese or Rice, a portion of the
principal balance and interest shall become due and payable at once without
further notice at the option of the holder as determined below:
a. Death of Neese. Payable to or for the benefit
of the estate of Neese: One-half of the amounts
payable to Commercial Capital Corporation and
all of the amounts payable to Neese.
b. Death of Rice. Payable to or for the benefit of
the estate of Rice: One-half of the amounts
payable to Commercial Capital Corporation and
all of the amounts payable to Rice.
8. Attorneys' Fees. In the event this Promissory Note is
placed in the hands of an attorney for collection or if suit shall be brought to
collect any of the principal or interest of this Promissory Note, Maker shall
pay reasonable attorneys' fees in addition to all costs of collection and
expenses of suit.
9. Waiver of Presentment. Presentation for payment,
notice of dishonor, protest, and notice of protest are hereby waived.
Promissory Note Page 2
<PAGE> 3
10. Nonwaiver. Failure to exercise any right or option
of Holder shall not constitute a waiver of the right to exercise such right or
option if Maker is in default hereunder.
11. Security of Promissory Note. This Promissory Note
shall be secured by an Unconditional Guaranty executed by T & W Financial
Corporation, Michael A. Price and Katherine M. Price, husband and wife, Thomas
W. Price and Patricia A. Price, husband and wife, Kenneth W. McCarthy, Jr. and
Carol L. McCarthy, husband and wife and Paul B. Luke. Reference is made to such
Unconditional Guaranty for further rights of Holder.
12. Collection Expenses. Maker agrees to reimburse Holder
on demand for all legal fees and other costs and expenses incurred in collecting
or enforcing this Note, together with interest at the default rate specified in
paragraph 6 above. Without limitation such shall include fees, costs and
expenses incurred with or without suit and in any appeal, any proceedings under
any present or future Federal Bankruptcy Act or state receivership, in any post
judgment collection proceedings. Payment of such fees, costs, expenses and
interest shall be a condition precedent to the curing of any default or the
satisfaction of this Promissory Note.
13. Governing Law, Venue and Jurisdiction. This Note shall
be construed, enforced and otherwise governed by the laws of the State of
Kansas. In the event any action shall be brought by any party to this Promissory
Note, such action shall be brought in the District Court of the State of Kansas
for Johnson County and all parties consent to the jurisdiction of such court as
to all such actions.
14. Notices. All notices, demands, requests, consents,
approvals, and other instruments required or permitted to be given pursuant to
the terms of this Promissory Note shall be in writing and shall be deemed to
have been properly given if sent by registered or certified mail, postage
prepaid, return receipt requested, to the addresses set forth below:
(a) To Maker: T&W Funding Company VI, L.L.C.
c/o Michael A. Price
P.O. Box 3028
Federal Way, WA 98063
(b) To Holder:
Promissory Note Page 3
<PAGE> 4
Provided, however, that such address may be changed upon five (5) days' written
notice thereof similarly given to the other party. Such notice, demand, request,
consent, approval, and other instrument shall have been deemed to have been
served on the third (3rd) day following the date of mailing.
MAKER:
T & W FUNDING COMPANY VI, L.L.C.
-----------------------------------
By: Michael A. Price, Member
Promissory Note Page 4
<PAGE> 1
EXHIBIT 10.27
UNCONDITIONAL GUARANTY
This Unconditional Guaranty is made and entered into as of June 2, 1997
by MICHAEL A. PRICE and KATHERINE M. PRICE, husband and wife, THOMAS W. PRICE
and PATRICIA A. PRICE, husband and wife, KENNETH W. McCARTHY, JR. And CAROL L.
McCARTHY, husband and wife, PAUL B. LUKE and T & W FINANCIAL CORPORATION (all
collectively referred to as "Guarantor") in favor of COMMERCIAL CAPITAL
CORPORATION, JAMES NEESE and LARRY RICE, individually (collectively referred to
as "Seller").
BACKGROUND
Commercial Capital Corporation, as Seller, has entered into an Asset
Purchase Agreement (the "Agreement"), Promissory Notes (the "Notes") and
Security Agreement ("Security Agreement") all dated as of June 2, 1997 (the
"Agreements") with T & W FUNDING COMPANY VI, L.L.C. (the "Purchaser"). Guarantor
has a financial interest in Purchaser, and it is to Guarantor's benefit that
Seller enter into the Agreements with Purchaser. Guarantor acknowledges that
Seller would be unwilling to enter into the Agreements without the following
unconditional guaranty, and that Seller is relying upon Guarantor's guaranty in
entering in the Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Seller to enter into the Agreement,
and for other good and valuable consideration, the parties agree as follows:
1. Guarantor unconditionally guarantees the timely, faithful and full
performance by Purchaser of all terms and conditions of the Agreement, Notes and
Security Agreement. In the event of default by Purchaser, or failure to
faithfully perform any of the terms or conditions required of Purchaser under
the Agreements, or in the event of failure of Purchaser to make any or all
payments of money required of it under the Agreements, Guarantor unconditionally
promises to pay Seller, in lawful money
Unconditional Guaranty Page 1
<PAGE> 2
of the United States, all sums at any time due and payable under the Agreements,
plus costs of collection, including reasonable attorneys fees. The obligations
of each of the undersigned individuals signing as Guarantor shall be joint and
several.
2. The obligations of Guarantor hereunder are independent of the
obligations of Purchaser under the Agreement, and a separate action or actions
may be brought against Guarantor, whether action is brought against Purchaser or
whether Purchaser be joined in any action or actions, the liability of Guarantor
hereunder being primary. Guarantor hereby waives the benefit of any suretyship
defenses affecting its liability hereunder or by enforcement thereof.
3. Guarantor authorizes Seller, without notice or demand, and without
affecting Guarantor's liability hereunder, from time to time to extend,
accelerate, or otherwise change the payment terms, or other terms, of the
Agreements or any part thereof.
4. Guarantor waives any defense arising by reason of any defense of
Purchaser, or by reason of the cessation, from any cause whatsoever, or the
liability of Purchaser under the Agreement. Guarantor waives any and all demands
for performance, notices of nonperformance or default, and notices of
cancellation or forfeiture. Seller may apply all proceeds received from
Purchaser, or others, to such part of Purchaser's indebtedness as Seller may
deem appropriate without consulting Guarantor and without prejudice to or in any
way limiting or lessening the liability of Guarantor under this Guaranty.
5. This instrument constitutes the entire agreement between Seller and
Guarantor. No oral or written representation not contained herein shall in any
way affect this Guaranty, which shall not be modified except by the parties in
writing. Waiver by Seller of any provision hereof in one instance shall not
constitute a waiver as to any other instance.
6. This Guaranty shall be governed by the internal laws of the State of
Kansas without regard to choice of law principles.
7. Guarantor and Seller irrevocably submit to the jurisdiction of the
Johnson County District, State of Kansas in any action or proceeding arising out
of or relating to this Guaranty, and agree that all claims in respect of such
action or proceeding shall be heard and determined only in Johnson County
District Court, State of Kansas.
8. The undersigned individuals warrant and represent that
Unconditional Guaranty Page 2
<PAGE> 3
they are financially interested in Purchaser.
DATED as of the day and year first written above.
GUARANTOR:
/s/ MICHAEL A. PRICE /s/ KATHERINE M. PRICE
- ---------------------------------- --------------------------------------
Michael A. Price Katherine M. Price
/s/ THOMAS W. PRICE /s/ PATRICIA A. PRICE
- ---------------------------------- --------------------------------------
Thomas W. Price Patricia A. Price
/s/ KENNETH W. MCCARTHY, JR. /s/ CAROL L. MCCARTHY
- ---------------------------------- --------------------------------------
Kenneth W. McCarthy, Jr. Carol L. McCarthy
/s/ PAUL B. LUKE
- ----------------------------------
Paul B. Luke
T & W FINANCIAL CORPORATION
/s/ THOMAS W. PRICE
- ----------------------------------
By: Thomas W. Price, President
Unconditional Guaranty Page 3
<PAGE> 1
EXHIBIT 10.28
BUSINESS LOAN AGREEMENT
<TABLE>
<S> <C> <C> <C>
Borrower: T & W FUNDING COMPANY VI, L.L.C. Lender: U.S. BANK OF WASHINGTON,
6416 PACIFIC HWY E NATIONAL ASSOCIATION
TACOMA, WA 98424 METRO CORPORATE, WWH 470
C/O 1420 5TH AVE
SEATTLE, WA 98101
================================================================================
</TABLE>
THIS BUSINESS LOAN AGREEMENT BETWEEN T & W FUNDING COMPANY VI, L.L.C.
("BORROWER") AND U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION ("LENDER") IS
MADE AND EXECUTED ON THE FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED
PRIOR COMMERCIAL LOANS FROM LENDER OR HAS APPLIED TO LENDER FOR A COMMERCIAL
LOAN OR LOANS AND OTHER FINANCIAL ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE
DESCRIBED ON ANY EXHIBIT OR SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS
AND FINANCIAL ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL
ACCOMMODATIONS FROM LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT
INDIVIDUALLY AS THE "LOAN" AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS
AND AGREES THAT: (A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS
RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET
FORTH IN THIS AGREEMENT; (B) THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY
LENDER AT ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION;
AND (C) ALL SUCH LOANS SHALL BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS
AND CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of DECEMBER 10, 1996, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
ADVANCES. The word "Advances" means the disbursements of loan proceeds
under the Loan.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower" means T & W FUNDING COMPANY VI, L.L.C. The
word "Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
COLLATERAL. The word "COLLATERAL" means and includes without limitation
all property and assets granted as collateral security for a Loan, whether
real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a
security interest, mortgage, deed of trust, assignment, pledge, chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional sale,
trust receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ELIGIBLE LEASES. "Eligible Leases" shall mean on any given date those
equipment leases ("Leases") in the possession of Lender: (a) in which
Lender holds a perfected first lien security interest in the Lease, the
subject leased equipment that is the inventory of Borrower, and all
proceeds thereof; (b) supported by a Lease Package, as described below,
delivered to Lender with each Lease, together with such other documents as
Lender may from time to time require; (c) which are leases of equipment
not exceeding $100,000.00, except that leases with equipment costs greater
than such amount shall be permitted with Lender's prior written consent;
(d) originated in the ordinary course of Borrower's business and
representing the present and unimpaired right to payment of money from
solvent U.S. lessees (excluding affiliates or subsidiaries of Borrower)
for equipment delivered by or on behalf of Borrower; (e) which are not
more than 90 days past due under the terms of the Lease; (f) which are
unconditional, fully earned, free of all rights of offset or
counterclaims, and not encumbered in any way; (g) which are not affected
by any receivership, insolvency, or bankruptcy proceeding, whether
voluntarily or involuntarily instituted, including, without limitation,
any reorganization of assets, deferment or arrangement of debts, or any
similar proceeding; (h) which are not leases with respect to which the
lessee is an officer, an employee or agent of Borrower or any of its
affiliates; (i) which are not leases with respect to which the lessee is a
person related to Borrower or its shareholders, officers, or directors;
(k) which are not leases with respect to which the subject equipment has
not been shipped or delivered to the lessee; (1) which are not leases of
any lessee who has become insolvent or fails generally to pay its debts
(including its payrolls) as such debts become due; and (m) which are not
leases with respect to which the lessee is the United States government or
any department or agency of the United States. Notwithstanding the
foregoing, Lender shall have the right to exclude any lease, and deem it
ineligible, if Lender, in its sole discretion, determines that lease to
have higher than normal indices of risk of collection.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT"
GRANTOR. The word "Grantor" means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all
Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as
all claims by Lender against Borrower, or any one or more of them; whether
now or hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated; whether Borrower may
be liable individually or jointly with others; whether Borrower may be
obligated as a guarantor, surety, or otherwise; whether recovery upon such
Indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such Indebtedness may be or hereafter may become
otherwise unenforceable.
LENDER. The word "Lender" means U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, its successors and assigns.
<PAGE> 2
12/12/1996 BUSINESS LOAN AGREEMENT PAGE 2
LOAN NO 394-26 (CONTINUED)
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
LOAN. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations
in favor of Lender, as well as any substitute, replacement or refinancing
note or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender, (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet delinquent;
(d) purchase money liens or purchase money security interests upon or in
any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this Agreement
or permitted to be incurred under the paragraph of this Agreement titled
"Indebtedness and Liens"; (e) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the
Lender in writing; and (f) those liens and security interests which in the
aggregate constitute an immaterial and insignificant monetary amount with
respect to the net value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a
lien, charge, mortgage, deed of trust, assignment, pledge, chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to indebtedness owed by Borrower to Lender in form and substance
acceptable to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e. goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible
items, but including leaseholds and leasehold improvements) less total
Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
ADVANCES. Borrower may request Advances to finance its inventory of leased
equipment. Advances under the Loan shall not exceed the greater of: 90% of the
net present value of each of the Eligible Leases (using the 8% discount rate);
or 100% of the equipment cost of each of the Eligible Leases. In no event shall
the aggregate principal amount of Advances exceed $10,000,000. Borrower shall
not request Advances more than once each calendar month. Borrower agrees that no
prepayments under the Note shall be allowed on funds advanced on the IBOR basis.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d) evidence
of insurance as required below; and (e) any other documents required under
this Agreement or by Lender or its counsel, including without limitation
any guaranties described below.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents, and such other authorizations and other documents
and instruments as Lender or its counsel, in their sole discretion, may
require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and
correct.
DELIVERY OF LEASE PACKAGE. Borrower shall have provided Lender with a
Lease Package which shall include: (a) financial spreads on the lessee;
(b) credit scoring results; (c) the original Lease; (d) UCC Assignment of
Secured Party interest from Borrower to Lender; (d) Security Agreement and
Assignment of Lease for each Lease; (e) copies of invoices for all
equipment purchased for the Lease; (f) a copy of a Certificate of
Insurance regarding the specified leased equipment naming Borrower as loss
payee; and, (g) any other documents deemed necessary by Lender.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any
Loan, and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a limited liability company which is duly
organized, validly existing, and in good standing under the laws of the
State of Washington and is validly existing and in good standing in all
states in which Borrower is doing business. Borrower has the full power
and authority to own its properties and to transact the businesses in
which it is presently engaged or presently proposes to engage. Borrower
also Is duly qualified as a limited liability company and is in good
standing in all states in which the failure to so qualify would have a
material adverse effect on its businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of
any other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of organization, operating agreement, or any
other agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change
in Borrower's financial condition subsequent to the date of the most
recent
<PAGE> 3
12/12/1996 BUSINESS LOAN AGREEMENT PAGE 3
LOAN NO 394-26 (CONTINUED)
financial statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and
as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has
not executed any security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used, or filed a financing statement
under, any other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used In this
Agreement, shall have the same meanings as set forth in the "CERCLA,"
"SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., or other applicable state or Federal laws, rules,
or regulations adopted pursuant to any of the foregoing. Except as
disclosed to and acknowledged by Lender in writing, Borrower represents
and warrants that: (a) During the period of Borrower's ownership of the
properties, there has been no use, generation, manufacture, storage,
treatment disposal, release or threatened release of any hazardous waste
or substance by any person on, under, about or from any of the properties.
(b) Borrower has no knowledge of, or reason to believe that there has been
(i) any use, generation, manufacture, storage, treatment, disposal,
release, or threatened release of any hazardous waste or substance on,
under, about or from the properties by any prior owners or occupants of
any of the properties, or (ii) any actual or threatened litigation or
claims of any kind by any person relating to such matters. (c) Neither
Borrower nor any tenant, contractor, agent or other authorized user of any
of the properties shall use, generate, manufacture, store, treat, dispose
of, or release any hazardous waste or substance on, under, about or from
any of the properties and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws,
regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender and
its agents to enter upon the properties to make such inspections and tests
as Lender may deem appropriate to determine compliance of the properties
with this section of the Agreement. Any inspections or tests made by
Lender shall be at Borrower's expense and for Lender's purposes only and
shall not be construed to create any responsibility or liability on the
part of Lender to Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the properties for hazardous waste and hazardous substances.
Borrower hereby (a) releases and waives any future claims against Lender
for indemnity or contribution in the event Borrower becomes liable for
cleanup or other costs under any such laws, and (b) agrees to indemnify
and hold harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or indirectly
sustain or suffer resulting from a breach of this section of the Agreement
or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Borrower's
ownership or interest in the properties, whether or not the same was or
should have been known to Borrower. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the
payment of the Indebtedness and the termination or expiration of this
Agreement and shall not be affected by Lender's acquisition of any
interest in any of the properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lenders Security Interests and rights in and to such
Collateral.
BINDING EFFECT This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of
the Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred with
respect to any such plan, (ii) Borrower has not withdrawn from any such
plan or initiated steps to do so, (iii) no steps have been taken to
terminate any such plan, and (iv) there are no unfunded liabilities other
than those previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 6416 PACIFIC HWY E, TACOMA, WA 98424. Unless
Borrower has designated otherwise in writing this location is also the
office or offices where Borrower keeps its records concerning the
Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to
make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon the
above representations and warranties in extending Advances to Borrower.
Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect
until such time as Borrower's Indebtedness shall be paid in full, or until
this Agreement shall be terminated in the manner provided above, whichever
is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each
fiscal year, combined and combining financial statements on T&W Financial
Corporation and its affiliates for the year ended, audited by a certified
public accountant satisfactory to Lender with an unqualified opinion from
such certified public accountant, and, as soon as available, but in no
event later than forty five (45) days after the end of each fiscal
quarter, balance sheets and profit and loss statements for the period
ended for Borrower
<PAGE> 4
12/12/1996 BUSINESS LOAN AGREEMENT PAGE 4
LOAN NO 394-26 (CONTINUED)
and each of its affiliates, prepared and certified as correct to the best
knowledge and belief by Borrower's chief financial officer or other
officer or person acceptable to Lender. All financial reports required to
be provided under this Agreement shall be prepared in accordance with
generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and
ratios:
TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of not
less than $7,000,000.00.
NET WORTH RATIO. Maintain a ratio of Total Liabilities to Tangible
Net Worth of less than 4.00 to 1.00 (Recourse debt) PBL
The following provisions shall apply for purposes of determining
compliance with the foregoing financial covenants and ratios: ALL
COVENANTS AND RATIOS WILL BE TESTED QUARTERLY FOR COMPLIANCE BASED ON THE
COMBINED FINANCIAL STATEMENT OF T & W FINANCIAL CORPORATION AND ITS
AFFILIATES. Except as provided above, all computations made to determine
compliance with the requirements contained in this paragraph shall be made
in accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
LEASE AGINGS. Deliver agings of Eligible Leases, and a certificate of
Borrower, in form and substance satisfactory to Bank on a monthly basis.
Lease agings for leases of Borrower and Subsidiaries and Affiliates shall
be available for inspection by Lender at any time.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon
request of Lender, will deliver to Lender from time to time the policies
or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice to Lender. Each Insurance policy
also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (a) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an Independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, on Lender's forms, and in the
amounts and by the guarantors named below:
Guarantors Amounts
---------- -------
MICHAEL A. PRICE Unlimited
THOMAS W. PRICE Unlimited
KENNETH MCCARTHY Unlimited
PAUL LUKE Unlimited
T & W FINANCIAL CORPORATION Unlimited
T & W FUNDING COMPANY V, L.L.C. Unlimited
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every kind
and nature, imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims
that, if unpaid, might become a lien or charge upon any of Borrower's
properties, income, or profits. Provided however, Borrower will not be
required to pay and discharge any such assessment, tax, charge, levy, lien
or claim so long as (a) the legality of the same shall be contested in
good faith by appropriate proceedings, and (b) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with generally
accepted accounting practices. Borrower, upon demand of Lender, will
furnish to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate governmental
official to deliver to Lender at any time a written statement of any
assessments, taxes, charges, levies, liens and claims against Borrower's
properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitations compliance with the Americans With Disabilities Act
and with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrower's
other properties and to examine or audit Borrower's books, accounts, and
records and to make copies and memoranda of Borrower's books, accounts,
and records. If Borrower now or at any time hereafter maintains any
records (including without limitation computer generated records and
computer software programs for the generation of such records) in the
possession of a third party, Borrower. upon request of Lender, shall
notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
QUARTERLY and at the time of each disbursement of Loan proceeds with a
certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that, as
of the date of the certificate, no Event of Default exists under this
Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
<PAGE> 5
12/12/1996 BUSINESS LOAN AGREEMENT PAGE 5
LOAN NO 394-26 (CONTINUED)
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part
or on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment. unless such environmental activity Is pursuant to and in
compliance with the conditions of a permit Issued by the appropriate
federal. state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, Summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any Intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is damage
to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements. Instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy riot having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive In the absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except as previously disclosed to Lender and
indebtedness to Lender contemplated by this Agreement, create, incur or
assume indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer, mortgage, assign,
pledge, lease, grant a security interest in, or encumber any of Borrower's
assets, or (c) sell with recourse any of Borrower's accounts, except to
Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, or (c)
make any distribution with respect to any capital account, whether by
reduction of capital or otherwise.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surely or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Advances or to disburse Loan proceeds if: (a)
Borrower or any Guarantor or any Subsidiary or Affiliate is in default under the
terms of this Agreement or any of the Related Documents or any other agreement
that Borrower or any Guarantor or any Subsidiary or Affiliate has with Lender;
(b) Borrower or any Guarantor or any Subsidiary or Affiliate becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, in the financial
condition of any Subsidiary or Affiliate, or in the value of any Collateral
securing any Loan; (d) any Guarantor seeks, claims or otherwise attempts to
limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan
with Lender; or (e) Lender in good faith deems itself insecure, even though no
Event of Default shall have occurred.
ACCESS LAWS. Without limiting the generality of any provision of this agreement
requiring Borrower to comply with applicable laws, rules, and regulations,
Borrower agrees that it will at all times comply with applicable laws relating
to disabled access including, but not limited to, all applicable titles of the
Americans with Disabilities Act of 1990.
STATUTE OF FRAUDS DISCLOSURE. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower or any Subsidiary or Affiliate to comply with or to perform
any other term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower or such Subsidiary of Affiliate.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor or any
Subsidiary or Affiliate default under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement,
in favor of any other creditor or person.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security Interest) at
any time and for any reason.
<PAGE> 6
12/12/1996 BUSINESS LOAN AGREEMENT PAGE 6
LOAN NO 394-26 (CONTINUED)
DEATH OR INSOLVENCY. The dissolution (regardless of whether election to
continue is made), any member withdraws from Borrower, or any other
termination of Borrower's existence as a going business or the death of
any member, the Insolvency of Borrower, the appointment of a receiver for
any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the Indebtedness,
or by any governmental agency. This includes a garnishment, attachment, or
levy on or of any of Borrower's deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
the Indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED
BY LENDER IN THE STATE OF WASHINGTON. IF THERE IS A LAWSUIT, BORROWER
AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS
OF KING COUNTY, THE STATE OF WASHINGTON SUBJECT TO THE PROVISIONS ON
ARBITRATION, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON.
ARBITRATION. LENDER AND BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT OR CLASS IN NATURE,
ARISING FROM THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION
CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF
THE AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act
to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trustor
mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any
party. Judgment upon any award rendered by any arbitrator may be entered
in any court having jurisdiction. Nothing in this Agreement shall preclude
any party from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes. The Federal Arbitration Act shall apply
to the construction, interpretation, and enforcement of this arbitration
provision.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
MULTIPLE PARTIES. All obligations of Borrower under this Agreement shall
be joint and several, and all references to Borrower shall mean each and
every Borrower. This means that each of the Borrowers signing below is
responsible for all obligations in this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any rights to
privacy it may have with respect to such matters. Borrower additionally
waives any and all notices of sale of participation interests, as well as
all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will
be considered as the absolute owners of such interests in the Loans and
will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower
further waives all rights of offset or counterclaim that it may have now
or later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such purchaser
may enforce Borrower's obligation under the Loans irrespective of the
failure or Insolvency of any holder of any interest in the Loans. Borrower
further agrees that the purchaser of any such participation interests may
enforce its interests Irrespective of any personal claims or defenses that
Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses, whether or not there is a lawsuit,
including attorneys' fees for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any
court costs, in addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be given
at the address shown above. Any party may change Its address for notices
under this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, if there is more than
one Borrower, notice to any Borrower will constitute notice to all
Borrowers. For notice purposes, Borrower will keep Lender informed at all
times of Borrower's current address(es).
<PAGE> 7
12/12/1996 BUSINESS LOAN AGREEMENT PAGE 7
LOAN NO 394-26 (CONTINUED)
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower"
as used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
SUCCESSOR AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure
to the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
in this Agreement or in any Certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made
by Lender or on Lender's behalf.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Borrower, or between
Lender and any Grantor, shall constitute a waiver of any of Lender's
rights or of any obligations of Borrower or of any Grantor as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent in subsequent instances where such
consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
DECEMBER 10, 1996.
BORROWER:
T & W FUNDING COMPANY VI, L.L.C.
BY: /s/ M.A. PRICE
-----------------------------------
BY: M.A. PRICE ,Member
----------------------------
LENDER:
U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION
BY: /s/ DeANNA K. ROLING, V.P.
-----------------------------------
Authorized Officer
================================================================================
<PAGE> 1
EXHIBIT 10.29
ALTERNATIVE RATE OPTIONS
PROMISSORY NOTE
(PRIME RATE, IBOR)
$ 10,000,000.00 Date: December 10, 1996
T&W Funding Company VI, L.L.C. ("Borrower")
U. S. BANK OF WASHINGTON, NATIONAL ASSOCIATION ("LENDER")
1. TYPE OF CREDIT. This note is given to evidence Borrower's obligation to repay
all sums which Lender may from time to time advance to Borrower ("Advances")
under a:
[ ] single disbursement loan. Amounts loaned to Borrower hereunder will
be disbursed in a single Advance in the amount shown in Section 2.
[X] revolving line of credit. No Advances shall be made which create a
maximum amount outstanding at any one time which exceeds the maximum
amount shown in Section 2. However, Advances hereunder may be
borrowed, repaid and reborrowed, and the aggregate Advances loaned
hereunder from time to time may exceed such maximum amount.
[ ] non-revolving line of credit. Each Advance made from time to time
hereunder shall reduce the maximum amount available shown in Section
2. Advances loaned hereunder which are repaid may not be reborrowed.
2. PRINCIPAL BALANCE. The unpaid principal balance of all Advances outstanding
under this note ("Principal Balance") at one time shall not exceed
$10,000,000.00.
3. PROMISE TO PAY. For value received Borrower promises to pay to Lender or
order at Seattle Main Office, the Principal Balance of this note, with interest
thereon at the rate(s) specified in Sections 4 and 11 below.
4. INTEREST RATE. The interest rate on the Principal Balance outstanding may
vary from time to time pursuant to the provisions of this note. Subject to the
provisions of this note, Borrower shall have the option from time to time of
choosing to pay interest at the rate or rates and for the applicable periods of
time based on the rate options provided herein; provided, however, that once
Borrower notifies Lender of the rate option chosen in accordance with the
provisions of this note, such notice shall constitute Borrower's irrevocable
request for an Advance hereunder at the rate option specified in such notice.
The rate options are the Prime Borrowing Rate and the IBOR Borrowing Rate, each
as defined herein.
(a) THE PRIME BORROWING RATE.
(i) The Prime Borrowing Rate is a per annum rate equal to Lender's prime
rate plus 0.00% per annum.
(ii) Whenever Borrower desires to use the Prime Borrowing Rate option,
Borrower shall give Lender notice orally or in writing in accordance with
Section 15 of this note, which notice shall specify the requested disbursement
date and principal amount of the Advance, and that Borrower has chosen the Prime
Borrowing Rate option.
(iii) Prepayments of all or any part of the Principal Balance bearing
interest at the Prime Borrowing Rate may be made at any time without penalty.
Upon prepayment of any such principal amount, Borrower also must pay all accrued
interest thereon to the date of prepayment.
(iv) Subject to Section 11 of this note, interest shall accrue on the
unpaid Principal Balance at the Prime Borrowing Rate unless and except to the
extent that the IBOR Borrowing Rate is in effect.
(b) THE IBOR BORROWING RATE.
(i) The following terms shall have the following meanings:
"Business Day" means any day other than a Saturday, Sunday, or other day
that commercial banks in Portland, Oregon or New York City are authorized or
required by law to close.
"IBOR Amount" means each principal amount for which Borrower chooses to
have the IBOR Borrowing Rate apply for any specified IBOR Interest Period.
"IBOR Interest Period" means as to any IBOR Amount, a period of 1,2,3,6,12
months commencing on the date the IBOR Borrowing Rate becomes applicable
thereto; provided, however, that: (A) no IBOR Interest Period shall be selected
which would extend beyond October 31, 1997; (B) no IBOR Interest Period shall
extend beyond the date of any principal payment required under Section 6 of this
note, unless the sum of the principal amounts bearing interest at the Prime
Borrowing Rate, plus IBOR Amounts with IBOR Interest Periods ending on or before
the scheduled date of such principal payment, plus principal amounts remaining
unborrowed under a line of credit, equals or exceeds the amount of such
principal payment; (C) any IBOR Interest Period which would otherwise expire on
a day which is not a Business Day, shall be extended to the next succeeding
Business Day, unless the result of such extension would be to extend such IBOR
Interest Period into another calendar month, in which event the IBOR Interest
Period shall end on the immediately preceding Business Day; and (D) any IBOR
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such IBOR Interest Period) shall end on the last Business Day of a
calendar month.
(ii) The IBOR Borrowing Rate is Lender's IBOR Rate plus 1.75% per annum.
Lender's IBOR Rate for any IBOR Interest Period is the rate per annum (computed
on the basis of a 360-day year and the actual number of days elapsed) equal to
the arithmetic average (rounded upward to the nearest 1/16 of 1%) of the rate
per annum determined by Lender as of the times specified in Section 4(b)(iii) on
the date two (2) Business Days prior to the first day of such IBOR Interest
Period as the rates offered to Lender by three Eurodollar money market dealers
in such Eurodollar market as may be selected by Lender for U.S. dollar deposits
to be delivered on the first day of such IBOR Interest Period for the number of
months therein; provided, however, that Lenders IBOR Rate shall be adjusted to
take into account the maximum reserves required to be maintained for
Eurocurrency liabilities by banks during each such IBOR Interest Period as
specified in Regulation D of the Board of Governors of the Federal Reserve
System or any successor regulation.
(iii) Borrower may obtain IBOR Borrowing Rate quotes from Lender between
8:00 a.m. and 12:00 noon (Portland, Oregon time) on any Business Day. Any IBOR
Borrowing Rate quoted (A) before 10:00 a.m. shall be based on Lender's IBOR Rate
determined as of approximately 8:00 a.m. on such day, and Borrower may request
an Advance at such rate only by giving Lender notice in accordance with Section
4(b)(iv) before 10:00 a.m. on such day; and (B) between 10:00 a.m. and 12:00
noon shall be based on Lender's IBOR Rate determined as of approximately 10:00
a.m. on such day, and Borrower may request an Advance at such rate only by
giving Lender notice in accordance with Section 4(b)(iv) not later than 12:00
noon on such day.
(iv) Whenever Borrower desires to use the IBOR Borrowing Rate option,
Borrower shall give Lender irrevocable notice (either in writing or orally and
promptly confirmed in writing) between 8:00 am, and 12:00 noon (Portland, Oregon
time) two (2) Business Days in advance of the desired effective date of such
rate. Any oral notice shall be given by, and any written notice or confirmation
of an oral notice shall be signed by, the person(s) authorized in Section 15 of
this note, and shall specify the requested effective date of the rate, IBOR
Interest Period and IBOR Amount, and whether Borrower is requesting a new
Advance at the IBOR Borrowing Rate under a line of credit, conversion of any
portion of the Principal Balance bearing interest at the Prime Borrowing Rate to
an IBOR Amount, or a new IBOR Interest Period for an outstanding IBOR Amount.
Notwithstanding any other term of this note, Borrower may elect the IBOR
Borrowing Rate in the minimum principal amount of $100,000.00 and in integral
multiples of $ N/A: provided, however, that no more than N/A separate IBOR
Interest Periods may be in effect at any one time.
(v) Borrower may not prepay all or any part of any IBOR Amount(s).
Page 1 of 4
<PAGE> 2
(vi) If at any time Lender's IBOR Rate is unascertainable or unavailable
to Lender or if IBOR Rate loans become unlawful, the option to select the IBOR
Borrowing Rate shall terminate immediately. If the IBOR Borrowing Rate is then
In effect, (A) It shall terminate automatically with respect to all IBOR Amounts
(1) on the last day of each then applicable IBOR Interest Period, if Lender may
lawfully continue to maintain such loans, or (ii) immediately if Lender may not
lawfully continue to maintain such loans through such day, and (B) subject to
Section 11, the Prime Borrowing Rate automatically shall become effective as to
such amounts upon such termination.
(vii) If at any time after the date hereof (A) any revision in or adoption
of any applicable law, rule, or regulation or in the interpretation or
administration thereof (i) shall subject Lender or its Eurodollar lending office
to any tax, duty, or other charge, or change the basis of taxation of payments
to Lender with respect to any loans bearing interest based on Lenders IBOR Rate,
or (ii) shall impose or modify any reserve, insurance, special deposit, or
similar requirements against assets of, deposits with or for the account of, or
credit extended by Lender or its Eurodollar lending office, or impose on Lender
or its Eurodollar lending office any other condition affecting any such loans,
and (B) the result of any of the foregoing is (i) to increase the cost to Lender
of making or maintaining any such loans or (ii) to reduce the amount of any sum
receivable under this note by Lender or its Eurodollar lending office, Borrower
shall pay Lender within 15 days after demand by Lender such additional amount as
will compensate Lender for such increased cost or reduction. The determination
hereunder by Lender of such additional amount shall be conclusive in the absence
of manifest error. If Lender demands compensation under this Section 4(b)(vii),
Borrower may upon three (3) Business Days' notice to Lender pay the accrued
interest on all IBOR Amounts, together with any additional amounts payable under
Section 4(b)(viii). Subject to Section 11, upon Borrower's paying such accrued
interest and additional costs, the Prime Borrowing Rate immediately shall be
effective with respect to the unpaid principal balance of such IBOR Amounts.
(viii) Upon any termination of any IBOR Borrowing Rate (including but not
limited to conversion to another rate) or payment of all or any portion of any
IBOR Amount on a date other than the last day of the then applicable IBOR
Interest Period, including without limitation (A) acceleration under Section 11
or (B) repayment in response to a notice under Section 4(b)(vii), Borrower shall
pay to Lender on demand such amount as Lender reasonably determines (determined
as though 100% of the applicable IBOR Amount had been funded in the applicable
Eurodollar market) is equivalent to all direct or indirect losses, expenses,
liabilities, or reductions in yield to Lender resulting therefrom, whether
incurred in connection with liquidation or reemployment of funds or otherwise.
(ix) If Borrower chooses the IBOR Borrowing Rate, Borrower shall pay
interest based on such rate, plus any other applicable taxes or charges
hereunder, even though Lender may have obtained the funds loaned to Borrower
from sources other than the applicable Eurodollar market. Lenders determination
of the IBOR Borrowing Rate and any such taxes or charges shall be conclusive in
the absence of manifest error.
(x) Notwithstanding any other term of this note, Borrower may not select
the IBOR Borrowing Rate if an event of default hereunder has occurred and is
continuing.
(xi) Nothing contained in this note, including without limitation the
determination of any IBOR Interest Period or Lender's quotation of any IBOR
Borrowing Rate, shall be construed to prejudice Lender's right, if any, to
decline to make any requested Advance or to require payment on demand.
5. COMPUTATION OF INTEREST. All interest under Section 4 and Section 11 will be
computed at the applicable rate based on a 360-day year and applied to the
actual number of days elapsed.
6. PAYMENT SCHEDULE.
(a) PRINCIPAL. Principal shall be paid:
[ ] on demand.
[X] on demand, or if no demand, on October 31, 1997.
[ ] on
[ ] subject to Section 7, in installments of
[ ] each, plus accrued Interest
[ ] each including accrued interest
beginning on and on the same day of each thereafter until
when the entire Principal Balance plus interest thereon
shall be due and payable.
[ ]
(b) INTEREST.
(i) interest on all amounts bearing interest at the Prime Borrowing Rate
shall be paid:
[X] on the 31st day of December, 1996 and on the same day of each
month thereafter prior to maturity and at maturity.
[ ] at maturity.
[ ] at the time each principal installment is due and at maturity.
[ ]
(ii) Interest on all IBOR Borrowing Rate Amounts shall be paid:
[ ] on the last day of the applicable IBOR Interest Period, and if
such IBOR Interest Period is longer than three months, on the
last day of each three month period occurring during such IBOR
Interest Period, and at maturity.
[X] on the 31st day of December, 1996 and on the same day of each
month thereafter prior to maturity and at maturity.
[ ] at maturity.
[ ] at the time each principal installment is due and at maturity.
[ ]
7. CHANGE IN PAYMENT AMOUNT. If the interest rate on this note is subject to
change in accordance with Section 4, the holder of this note may, from time to
time, in holder's sole discretion, increase or decrease the amount of each of
the installments remaining unpaid at the time of each change in rate to an
amount holder in its sole discretion deems necessary to continue amortizing the
Principal Balance a( the same rate established by the installment amounts
specified in Section 6(a), whether or not a "balloon" payment may also be due
upon maturity of this note. Holder shall notify the undersigned of each such
change in writing. Whether or not the installment amount is increased under this
Section 7, Borrower understands that, as a result of increases in the rate of
interest in accordance with Section 4, the final payment due, whether or not a
"balloon" payment, shall include the entire Principal Balance and interest
thereon then outstanding, and may be substantially more than the installment
specified in Section 6.
8. ALTERNATE PAYMENT DATE. Notwithstanding any other term of this note, if in
any month there is no day on which a scheduled payment would otherwise be due
(e.g. February 31), such payment shall be paid on the last banking day of that
month.
9. PAYMENT BY AUTOMATIC CHARGE.
[ ] Please automatically deduct the amount of all principal and interest
payments from account number N/A. If there are insufficient funds in the account
to pay the automatic deduction in full, Lender may allow the account to become
overdrawn, or Lender may reverse the automatic deduction. Borrower will pay all
the fees on the account which result from the automatic deductions, including
any overdraft/NSF charges. If for any reason Lender does not charge the account
for a payment, or if an automatic payment is reversed, the payment is still due
according to this note. If the account is a Money Market Account, the number of
withdrawals from that account is limited as set out in the agreement. Lender may
cancel the automatic deduction at any time in its discretion.
Provided, however, if no account number is entered above, Borrower does not want
to make payments by automatic charge.
10. LENDER'S PRIME RATE. Lender's prime rate is the rate of interest which
Lender from time to time establishes as its prime rate and is not, for example,
the lowest rate of interest which Lender collects from any borrower or class of
borrowers. When Lender's prime rate is applicable under Section 4(a)
Page 2 of 4
<PAGE> 3
or 11(b), the interest rate hereunder shall be adjusted without notice effective
on the day Lender's prime rate changes, but in no event shall the rate of
interest be higher than allowed by law.
11. DEFAULT.
(a) Without prejudice to any right of Lender to require payment on demand or to
decline to make any requested Advance, each of the following shall be an event
of default: (i) Borrower fails to make any payment when due. (ii) Borrower fails
to perform or comply with any term, covenant or obligation in this note or any
agreement related to this note, or in any other agreement or loan Borrower has
with Lender. (iii) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this note or perform
Borrower's obligations under this note or any related documents. (iv) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect. (v) Borrower
becomes insolvent, a receiver is appointed for any part of Borrowers property,
Borrower makes an assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (vi) Any creditor tries to take any of Borrower's property on
or in which Lender has a lien or security interest. This includes a garnishment
of any of Borrower's accounts with Lender. (vii) Any of the events described in
this default section occurs with respect to any guarantor of this note or any
guaranty of Borrower's Indebtedness to Lender ceases to be, or is asserted not
to be, in full force and effect. (viii) Lender in good faith deems itself
insecure. If this note is payable on demand, the inclusion of specific events of
default shall not prejudice Lender's right to require payment on demand or to
decline to make any requested Advance.
(b) Without prejudice to any right of Lender to require payment on demand, upon
the occurrence of an event of default, Lender may declare the entire unpaid
Principal Balance on this note and all accrued unpaid interest immediately due
and payable, without notice. Upon default, including failure to pay upon final
maturity, Lender, at its option, may also, if permitted under applicable law,
increase the interest rate on this note to a rate equal to the Prime Borrowing
Rate plus 5%. The interest rate will not exceed the maximum rate permitted by
applicable law. In addition, if any payment of principal or interest is 15 or
more days past due, Borrower will be charged a late charge of 5% of the
delinquent payment.
12. EVIDENCE OF PRINCIPAL BALANCE; PAYMENT ON DEMAND. Holder's records shall, at
any time, be conclusive evidence of the unpaid Principal Balance and interest
owing on this note. Notwithstanding any other provisions of this note, in the
event holder makes Advances hereunder which result in an unpaid Principal
Balance on this note which at any time exceeds the maximum amount specified in
Section 2, Borrower agrees that all such Advances, with interest, shall be
payable on demand.
13. LINE OF CREDIT PROVISIONS. If the type of credit indicated in Section 1 is a
revolving line of credit or a non-revolving line of credit, Borrower agrees that
Lender is under no obligation and has not committed to make any Advances
hereunder. Each Advance hereunder shall be made at the sole option of Lender.
14. DEMAND NOTE. If this note is payable on demand, Borrower acknowledges and
agrees that (a) Lender is entitled to demand Borrower's immediate payment in
full of all amounts owing hereunder and (b) neither anything to the contrary
contained herein or in any other loan documents (including but not limited to,
provisions relating to defaults, rights of cure, default rate of interest,
installment payments, late charges, periodic review of Borrower's financial
condition, and covenants) nor any act of Lender pursuant to any such provisions
shall limit or impair Lender's right or ability to require Borrower's payment in
full of all amounts owing hereunder immediately upon Lender's demand.
15. REQUESTS FOR ADVANCES.
(a) Any Advance may be made or interest rate option selected upon the request of
Borrower (if an individual), any of the undersigned (if Borrower consists of
more than one Individual), any person or persons authorized in subsection (b) of
this Section 15, and any person or persons otherwise authorized to execute and
deliver promissory notes to Lender on behalf of Borrower.
(b) Borrower hereby authorizes any 1 (one) of the following individuals to
request Advances and to select interest rate options: Michael A. Price, Thomas
W. Price, Kenneth McCarthy, and Paul Luke unless Lender is otherwise instructed
in writing.
(c) All Advances made pursuant to this Section 15 shall be disbursed by deposit
directly to Borrower's account number N/A at N/A branch of Lender, or by
cashier's check issued to Borrower.
(d) Borrower agrees that Lender shall have no obligation to verify the identity
of any person making any request pursuant to Section 15, and Borrower assumes
all risks of the validity and authorization of such requests. In consideration
of Lender agreeing, at its sole discretion, to make Advances upon such requests,
Borrower promises to pay holder, in accordance with the provisions of this note,
the Principal Balance together with interest thereon and other sums due
hereunder, although any Advances may have been requested by a person or persons
not authorized to do so.
16. PERIODIC REVIEW. Lender will review Borrower's credit accommodations
periodically. At the time of the review, Borrower will furnish Lender with any
additional information regarding Borrower's financial condition and business
operations that Lender requests. This information may include but is not limited
to, financial statements, tax returns, lists of assets and liabilities, agings
of receivables and payable, inventory schedules, budgets and forecasts. If upon
review, Lender, in its sole discretion, determines that there has been a
material adverse change in Borrower's financial condition, Borrower will be in
default. Upon default, Lender shall have all rights specified herein.
17. NOTICES. Any notice hereunder may be given by ordinary mail, postage paid
and addressed to Borrower at the last known address of Borrower as shown on
holder's records. If Borrower consists of more than one person, notification of
any of said persons shall be complete notification of all. Notice may be given
either before or reasonably soon after the effective date of the change.
18. ATTORNEY FEES. Whether or not litigation or arbitration is commenced,
Borrower promises to pay all costs of collecting overdue amounts. Without
limiting the foregoing, in the event that holder consults an attorney regarding
the enforcement of any of its rights under this note or any document securing
the same, or if this note is placed in the hands of an attorney for collection
or if suit or litigation Is brought to enforce this note or any document
securing the same, Borrower promises to pay all costs thereof including such
additional sums as the court or arbitrator(s) may adjudge reasonable as attorney
fees, including without limitation, costs and attorney fees incurred in any
appellate court, in any proceeding under the bankruptcy code, or in any
receivership and post-judgment attorney fees incurred in enforcing any judgment.
19. WAIVERS; CONSENT. Each party hereto, whether maker, co-maker, guarantor or
otherwise, waives diligence, demand, presentment for payment, notice of
non-payment, protest and notice of protest and waives all defenses based on
suretyship or impairment of collateral. Without notice to Borrower and without
diminishing or affecting Lender's rights or Borrower's obligations hereunder,
Lender may deal in any manner with any person who at any time is liable for, or
provides any real or personal property collateral for, any indebtedness of
Borrower to Lender, including the indebtedness evidenced by this note. Without
limiting the foregoing, Lender may, in its sole discretion: (a) make secured or
unsecured loans to Borrower and agree to any number of waivers, modifications,
extensions and renewals of any length of such loans, including the loan
evidenced by this note; (b) impair, release (with or without substitution of new
collateral), fail to perfect a security interest in, fail to preserve the value
of, fail to dispose of in accordance with applicable law, any collateral
provided by any person; (c) sue, fail to sue, agree not to sue, release, and
settle or compromise with, any person,
20. JOINT AND SEVERAL LIABILITY. ALL UNDERTAKINGS OF THE UNDERSIGNED BORROWERS
ARE JOINT AND SEVERAL AND ARE BINDING UPON ANY MARITAL COMMUNITY OF WHICH ANY OF
THE UNDERSIGNED ARE MEMBERS. HOLDER'S RIGHTS AND REMEDIES UNDER THIS NOTE SHALL
BE CUMULATIVE.
Page 3 of 4
<PAGE> 4
ARBITRATION.
(a) Either Lender or Borrower may require that all disputes, claims,
counterclaims and defenses, including those based on or arising from any
alleged to?? ("Claims") relating in any way to this note or any transaction of
which this note is a part (the "Loan"), be settled by binding arbitration in
accordance with th?? Commercial Arbitration Rules of the American Arbitration
Association and Title 9 of the U.S. Code. All Claims will be subject to the
statutes of limitation applicable if they were litigated. This provision is
void if the Loan, at the time of the proposed submission to arbitration, is
secured by real property located outside of Oregon or Washington, or if the
effect of the arbitration procedure (as opposed to any Claims of Borrower)
would be to materially impair Lender's ability to realize on any collateral
securing the Loan.
(b) If arbitration occurs and each party's Claim is less than $100,000, one
neutral arbitrator will decide all issues; if any party's Claim is $100,000 or
more, three neutral arbitrators will decide all issues. All arbitrators will be
active Washington State Bar members in good standing. All arbitration hearings
will be held in Seattle, Washington. In addition to all other powers, the
arbitrator ?) shall have the exclusive right to determine all issues of
arbitrability. Judgment on any arbitration award may be entered in any court
with jurisdiction.
(c) If either party institutes any judicial proceeding relating to the Loan,
such action shall not be a waiver of the right to submit any Claim to
arbitration. In addition, each has the right before, during and after any
arbitration to exercise any number of the following remedies, in any order or
concurrently: (i) setoff; (ii) self-help repossession; (iii) judicial or
non-judicial foreclosure against real or personal property collateral; and (iv)
provisional remedies, including injunction, appointment of receiver,
attachment, claim and delivery and replevin.
22. GOVERNING LAW.
This note shall be governed by and construed and enforced in accordance with the
laws of the State of Washington without regard to conflicts of law principles;
provided, however, that to the extent that Lender has greater rights or remedies
under Federal law, this provision shall not be deemed to deprive Lender of such
rights and remedies as may be available under Federal law.
23. OUT OF DEBT PERIOD.
Borrower agrees to reduce the principal balance of the Line of Credit Facility
to $0.00 for a minimum of 30 consecutive days during each calendar year.
24. DISCLOSURE.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
EACH OF THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS
DOCUMENT.
T & W Funding Company VI, L.L.C.
Borrower Name (Corporation,
Partnership or other Entity) Signature of Individual Borrower
/s/ MICHAEL A. PRICE Member
- ------------------------------------ -----------------------------------
By Title Signature of Individual Borrower
/s/ [SIGNATURE] Member
- ------------------------------------ -----------------------------------
By Title Signature of Individual Borrower
- --------------------------------------------------------------------------------
For valuable consideration, Lender agrees to the terms of the arbitration
provision set forth in this note.
Lender Name: U.S. Bank of Washington N.A.
----------------------------------
By: De Anna K. Poling
-------------------------------------------
Title: Vice President
----------------------------------------
Date: 12/19/96
-----------------------------------------
<PAGE> 1
EX 10.30
P.L.M. CONSULTING GROUP LLC
T & W FUNDING COMPANY VI LLC
BUSINESS LOAN AGREEMENT - PART A
PAGE 2
BORROWER ("YOU"): T & W FUNDING CO. VILLC
GUARANTORS: Michael A. Price, Thomas W. Price
The above guarantees are to be supported by their
assigned interest in T & W Funding Co. VILLC and T & W
Finance Corp IV.
LOAN AMOUNT: $15,000,000 Wholesale Lease Line of Credit.
LOAN PURPOSE: Proceeds to fund leases for non-consumer purposes.
INTEREST RATE: The rate of interest shall be fixed at the 30 day
BBAIRS LIBOR + 200 basis points. The rate will be
adjusted on the last banking day of each month; or
floating at the Seafirst Bank's publicly announced
Prime lending rate plus zero, changed on the day of
any Seafirst Bank prime lending rate change, whichever
is less. All interest will be calculated on a 360 day
basis.
REPAYMENT: Interest payments shall be paid monthly on the last day
of each month by automatic deduction from the borrowers
checking account. Principal reductions will be
necessary if the month-end borrowing certificate
evidences a collateral shortfall. The borrowing
certificate must be received no later than 10 days
after each month-end and any principal reductions are
due immediately upon receipt by the bank of the
borrowing certificate. (See Exhibit A for example of
the borrowing certificate.)
ADVANCE RATE: The advance rate shall be the aggregate total remaining
payment stream on each lease (not to include estimated
residuals) discounted at 8%. This total is to be
margined at 90%. Leases over 90 days delinquent are not
eligible for the borrowing base. Lease maturities are
not to exceed 60 months.
SECURITY: Advances on this line are to be secured by a first
position perfected security interest in the chattel
paper and underlying collateral supporting the advance.
We are to be shown as secured party's assignee on UCC
filings and legal owner on titled goods for all
underlying collateral supporting each advance.
Also, collateral securing other loans with Bank may
secure this loan.
ADMINISTRATION: Administration shall be according to Collateral Line,
Loan and Security Agreement dated November 22, 1996.
AVAILABILITY/EXPIRATION: This revolving facility is available for advances until
May 1, 1997. If, however, advances are made and/or new
promissory notes executed after this date, such
advances will extend and be subject to this commitment
until repaid in full, unless a written statement signed
by the Bank and Borrower provides otherwise, or a
subsequent mutually satisfactory loan agreement is
executed.
<PAGE> 2
P.L.M. CONSULTING GROUP LLC
T & W FUNDING COMPANY VI LLC
BUSINESS LOAN AGREEMENT - PART A
PAGE 3
OTHER TERMS AND CONDITIONS
FINANCIAL INFORMATION: You will provide us the following financial exhibits at
the following times:
Description Times
Independent CPA audited fiscal year-end financial Annually within 90 days of
statement with no exceptions to G.A.A.P. The fiscal year-end.
statement must include individual balance sheets
of all the related companies and include all
eliminating entries.
Internally prepared balance sheet and income Monthly within 30 days of
statement with no exceptions to G.A.A.P. The month-end.
statements must be a consolidation and include
all eliminating entries.
Internally prepared aging of receivables for Monthly within 30 days of
entire portfolio. month-end.
Personal financial statement of Michael A. Annually
Price and Katherine M. Price.
Personal financial statement of Thomas W. Annually
Price and Patricia A. Price.
Personal financial statement of Paul B. Annually
Luke.
Personal financial statement of Kenneth W. Annually
McCarthy
Borrower shall have internal credit approval limits of $75,000.00 in aggregate
to any lessee or related lessees. All other transactions booked to Borrower's
portfolio are to be pre-approved by Bank prior to acquisition by Borrower.
These limits shall continue to be subject to Bank's sole discretion, and may be
rescinded at any time by Bank.
A report will be required with each advance request showing the new leases
assigned and the discounted and margined value. By the 10th of each month a
reconciling borrowing certificate must be provided showing all leases assigned,
the discounted and margined values of the payment streams and current note
balance. If there is a collateral deficit at this point, a note reduction would
have to be made. Leases over 90 days delinquent are ineligible for the
borrowing base.
Quarterly audits of the lease portfolio will be performed by the SFNB auditor.
FINANCIAL STANDARD: You agree to maintain the following:
Leverage as defined by the ratio of total liabilities to tangible net worth
shall not exceed 7.0:1.0. For calculation purposes, the following adjustments
will be made to the month end and year end consolidated balance sheet:
A Cash - Norwest Bank - Special Deleted
B Net Securitized Lease Receivables Deleted
C Securitized Residuals Add Back
D Net Discounted (non-recourse) Lease Receivables Deleted
E Discounted (non-recourse) Residual Add Back
F Net IDC Deleted
G Securitized Lease Payable Delete
H Discounted Lease Payable Delete
<PAGE> 3
P.L.M. CONSULTING GROUP LLC
T & W FUNDING COMPANY VI LLC
BUSINESS LOAN AGREEMENT - PART A
PAGE 4
Please acknowledge your approval and acceptance of the above conditions by
signing and returning the duplicate of the letter by December 1, 1996.
Otherwise, this offer will expire.
Sincerely,
/s/ WILLIAM J. PITT
---------------------
William J. Pitt
Vice President
WJP/sh
Approved and accepted this 22nd day of November, 1996.
P.L.M. CONSULTING GROUP LLC
By: /s/ MICHAEL A. PRICE
-----------------------
Title: Member
-----------------------
T & W FUNDING CO. VI LLC
By: /s/ MICHAEL A. PRICE
-----------------------
Title: Member
-----------------------
<PAGE> 4
[SEAFIRST LOGO]
BUSINESS LOAN AGREEMENT
PART B
1. PROMISSORY NOTE(S). All loans shall be evidenced by promissory notes in
a form and substance satisfactory to Bank.
2. CONDITIONS TO AVAILABILITY OF LOAN/LINE OF CREDIT. Before Bank is
obligated to disburse/make any advance, or at any time thereafter which
Bank deems necessary and appropriate, Bank must receive all of the
following, each of which must be in form and substance satisfactory to
Bank ("loan documents"):
2.1 Original, executed promissory note(s);
2.2 Original executed security agreement(s) and/or deed(s) of trust
covering the collateral described in Part A;
2.3 All collateral described in Part A in which Bank wishes to have
a possessory security interest;
2.4 Financing statement(s) executed by Borrower;
2.5 Such evidence that Bank may deem appropriate that the security
interests and liens in favor or Bank are valid, enforceable,
and prior to the rights and interests of others except those
consented to in writing by Bank;
2.6 The following guarantees in favor of the Bank: P.L.M. Consulting
Group LLC: Michael A. Price, Thomas We. Price, Paul B. Luke,
Kenneth W. McCarthy; T & W Funding Co. VI LLC: Michael A. Rice,
Thomas W. Price.
2.7 Evidence that the execution, delivery, and performance by
Borrower of this Agreement and the execution, delivery, and
performance by Borrower and any corporate guarantor or
corporate subordinating creditor of any instrument or agreement
required under this Agreement, as appropriate, have been duly
authorized;
2.8 Any other document which is deemed by the Bank to be required
from time to time to evidence loans or to effect the provisions
of this Agreement;
2.9 If requested by Bank, a written legal opinion expressed to
Bank, of counsel for Borrower as to the matters set forth in
sections 3.1 and 3.2, and to the best of such counsel's
knowledge after reasonable investigation, the matters set forth
in sections 3.3, 3.5, 3.6, 3.7, 3.8 and such other matters as
the Bank may reasonably request;
2.10 Pay or reimburse Bank for any out-of-pocket expenses expended
in making or administering the loans made hereunder including
without limitation attorney's fees (including allocated costs
of in-house counsel);
<PAGE> 5
T & W FINANCIAL CORPORATION
BUSINESS LOAN AGREEMENT - PART B
PAGE 2
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank, except as Borrower has disclosed to Bank in writing, as of the
date of this Agreement and hereafter so long as credit granted under
this Agreement is available and until full and final payment of all
sums outstanding under this Agreement and promissory notes that:
3.1 Borrower is duly organized and existing under the laws of the
state of its organization as a:
A) P.L.M. Consulting Group LLC
B) T & W Funding Co. VI LLC
Borrower is properly licensed and in good standing in each state
in which Borrower is doing business and Borrower has qualified
under, and complied with, where required, the fictitious or
trade name statutes of each state in which Borrower is doing
business, and Borrower has obtained all necessary government
approvals for its business activities; the execution, delivery
and performance of this Agreement and such notes and other
instruments required herein are within Borrower's powers, have
been duly authorized, and, as to Borrower and any guarantor, are
not in conflict with the terms of any charter, bylaw, or other
organization papers of Borrower, and this Agreement, such notes
and the loan documents are valid and enforceable according to
their terms;
3.2 The execution, delivery, and performance of this Agreement, the
loan documents and any other instruments are not in conflict
with any law or any indenture, agreement or undertaking to which
Borrower is a party or by which Borrower is bound or affected;
3.3 Borrower has title to each of the properties and assets as
reflected in its financial statements (except such assets which
have been sold or otherwise disposed of in the ordinary course
of business); and no assets or revenues of the Borrower are
subject to any lien except as required or permitted by this
Agreement, disclosed in its financial statements or otherwise
previously disclosed to Bank in writing.
3.4 All financial information, statements as ownership of Borrower
and all other statements submitted by Borrower to Bank, whether
previously or in the future, are and will be true and correct in
all material respects upon submission and are and will be
complete upon submission insofar as may be necessary to give
Bank a true and accurate knowledge of the subject matter
thereof;
3.5 Borrower has filed all tax returns and reports as required by
law to be filed and has paid all taxes and assessments
applicable to Borrower or to its properties which are presently
due and payable, except those being contested in good faith;
3.6 There are no proceedings, litigation or claims (including
unpaid taxes) against Borrower pending or, to the knowledge of
the Borrower, threatened, before any court or government agency,
and no other event has occurred which may have a material
adverse effect on Borrower's financial condition;
3.7 There is no event which is, or with notice or lapse of time, or
both, would be, an Event of Default (as defined in Section 7)
under this Agreement;
3.8 Borrower has exercised due diligence in inspecting Borrower's
properties for hazardous wastes and hazardous substances. Except
as otherwise previously disclosed and acknowledged to Bank in
writing; (a) during the period of Borrower's ownership of
Borrower's properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or hazardous substance by any
<PAGE> 6
T & W FINANCIAL CORPORATION
BUSINESS LOAN AGREEMENT - PART B
PAGE 3
person in, on, under or about any of Borrower's properties: (b)
Borrower has no actual or constructive knowledge that there has
been any use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste
or hazardous substance by any person in, on, under or about any
of Borrower's properties by any prior owner or occupant of any
of Borrower's properties; and (c) Borrower has no actual or
constructive notice of any actual or threatened litigation or
claims of any kind by any person relating to such matters. The
terms "hazardous waste(s)," "hazardous substance(s),"
"disposal," "release," and "threatened release" as used in this
Agreement shall have the same meanings as set forth in the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 1601, et
seq., the Superfund Amendments and Reauthorization Act of 1986,
as amended, Pub. L. No. 99-499, the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, as amended, 49
U.S.C. Section 6901, et seq., or other applicable state or
federal laws, rules or regulations adopted pursuant to any of
the foregoing.
3.9 Each chief place of business of Borrower, and the office or
offices where Borrower keeps its records concerning any of the
collateral, is located at 6416 Pacific Highway East, Tacoma,
Washington 98424.
4. AFFIRMATIVE COVENANTS. So long as credit granted under this Agreement is
available and until full and final payment of all sums outstanding under
this Agreement and promissory note(s) Borrower will:
4.1 Maintain a tangible net worth of at least $9,550,000 not permit
Borrower's total indebtedness which is not subordinated in a
manner satisfactory to Bank to exceed seven Borrower's tangible
net worth. "Tangible net worth" means the excess of total assets
over total liabilities, excluding, however, from the
determination of total assets (a) all assets which should be
classified as intangible assets such as goodwill, patents,
trademarks, copyrights, franchises, and deferred charges
(including unamortized debt discount and research and
development costs), (b) treasury stock, (c) cash held in a
sinking or other similar fund established for the purpose of
redemption or other retirement of capital stock, (d) to the
extent not already deducted from total assets, reserves for
depreciation, depletion, obsolescence or amortization of
properties and other reserves or appropriations of retained
earnings which have been or should be established in connection
with the business conducted by the relevant corporation, and (e)
any revaluation or other write-up in book value of assets
subsequent to the fiscal year of such corporation last ended at
the date of this Agreement;
4.2 Promptly give written notice to Bank of: (a) all litigation and
claims made or threatened affecting Borrower where the amount is
$50,000 or more; (b) any substantial dispute which may exist
between Borrower and any governmental regulatory body or law
enforcement authority; (c) any Event of Default under this
Agreement or any other agreement with Bank or any other creditor
or any event which become an Event of Default; and (d) any other
matter which has resulted or might result in a material adverse
change in Borrower's financial condition or operations;
4.3 Borrower shall as soon as available, but in any event with 90
days following the end of each Borrower's fiscal years and
within 30 days following the end of each month provide to Bank,
in a form satisfactory to Bank (including audited statements if
required at any time by Bank), such financial statements and
other information respecting the financial condition and
operations of Borrower as Bank may reasonably request;
<PAGE> 7
T & W FINANCIAL CORPORATION
BUSINESS LOAN AGREEMENT - PART B
PAGE 4
4.4 Borrower will maintain in effect insurance with responsible insurance
companies in such amounts and against such risks as is customarily
maintained by persons engaged in businesses similar to that of
Borrower and all policies covering property given as security for the
loans shall have loss payable clauses in favor of Bank. Borrower
agrees to deliver to Bank such evidence of insurance as Bank may
reasonably require and, within thirty (30) days after notice from
Bank, to obtain such additional insurance with an insurer
satisfactory to the Bank;
4.5 Borrower will pay all indebtedness taxes and other obligations for
which the Borrower is liable or to which its income or property is
subject before they shall become delinquent, except any which is being
contested by the Borrower in good faith;
4.6 Borrower will continue to conduct its business as presently
constituted, and will maintain and preserve all rights, privileges and
franchises now enjoyed, conduct Borrower's business in an orderly,
efficient and customary manner, keep all Borrower's properties in good
working order and condition, and from time to time make all needed
repairs, renewals or replacements so that the efficiency of Borrower's
properties shall be fully maintained and preserved;
4.7 Borrower will maintain adequate books, accounts and records and
prepare all financial statements required hereunder in accordance with
generally accepted accounting principles and practices consistently
applied, and in compliance with the regulations of any governmental
regulatory body having jurisdiction over Borrower or Borrower's
business;
4.8 Borrower will permit representatives of Bank to examine and make
copies of the books and records of Borrower and to examine the
collateral of the Borrower at reasonable times;
4.9 Borrower will perform, on request of Bank, such acts as may be
necessary or advisable to perfect any lien or security interest
provided for herein or otherwise carry out the intent of this
Agreement;
4.10 Borrower will comply with all applicable federal, state and municipal
laws, ordinances, rules and regulations relating to its properties,
charters, businesses and operations, including compliance with all
minimum funding and other requirements related to any of Borrower's
employee benefit plans;
4.11 Borrower will permit representatives of Bank to enter onto Borrower's
properties to inspect and test Borrower's properties as Bank, in its
sole discretion, may deem appropriate to determine Borrower's
compliance with section 5.8 of this Agreement; provided however, that
any such inspections and tests shall be for Bank's sole benefit and
shall not be construed to create any responsibility or liability on
the part of Bank to Borrower or to any third party.
5. NEGATIVE COVENANTS. So long as credit granted under this Agreement is
available and until full and final payment of all sums outstanding under this
Agreement and promissory note(s):
5.1 Borrower will not, without the prior written consent of Bank, purchase
or lease under an agreement for acquisition incur any other
indebtedness for borrowed money, mortgage, assign, or otherwise
encumber any of Borrower's assets, nor sell, transfer or otherwise
hypothecate any such assets except in the ordinary course of business.
Borrower shall not guaranty, endorse, co-sign, or otherwise become
liable upon the obligations of others, except by the endorsement of
negotiable instruments for deposit or collection in the ordinary
course of business. For purposes of this paragraph, the sale or
assignment of accounts receivable, or the granting of security
interest therein, shall be deemed the incurring of indebtedness for
borrowed money;
<PAGE> 8
T&W FINANCIAL CORPORATION
BUSINESS LOAN AGREEMENT - PART B
PAGE 5
5.2 Borrower will not liquidate or dissolve or enter into any
consolidation, merger, pool, joint venture, syndicate or other
combination, or sell, lease, or dispose of Borrower's business assets
as a whole or such as in the opinion of Bank constitute a substantial
portion of Borrower's business or assets;
5.3 Borrower will not engage in any business activities or operations
substantially different from or unrelated to present business
activities or operations; and
5.4 Borrower, and Borrower's tenants, contractors, agents or other parties
authorized to use any of Borrower's properties, will not use,
generate, manufacture, store, treat, dispose of, or release any
hazardous substance or hazardous waste in, on, under or about any of
Borrower's properties, except as previously disclosed to Bank in
writing as provided in section 3.8; and any such activity shall be
conducted in compliance with all applicable federal, state and local
laws, regulations and ordinances, including without limitation those
described in section 3.8.
6. WAIVER, RELEASE AND INDEMNIFICATION. Borrower hereby: (a) releases and
waives any claims against Bank for indemnity or contribution in the event
Borrower becomes liable for cleanup or other costs under any of the
applicable federal, state or local laws, regulations or ordinances,
including without limitation those described in section 3.8, and (b)
agrees to indemnify and hold Bank harmless from and against any and all
claims, losses, liabilities, damages, penalties and expenses which Bank may
directly or indirectly sustain or suffer resulting from a breach of (i) any
of Borrower's representations and warranties with respect to hazardous
wastes and hazardous substances contained in section 3.8, or (ii) section
5.8. The provisions of this section 6 shall survive the full and final
payment of all sums outstanding under this Agreement and promissory notes
and shall not be affected by Bank's acquisition of any interest in any of
the Borrower's properties, whether by foreclosure or otherwise.
7. EVENTS OF DEFAULT. The occurrence of any of the following events ("Events
of Default") shall terminate any and all obligations on the part of Bank to
make or continue the loan and/or line of credit and, at the option of Bank,
shall make all sums of interest and principal outstanding under the loan
and/or line of credit immediately due and payable, without notice of
default, presentment or demand for payment, protest or notice of non
payment or dishonor, or other notices or demands of any kind or character,
all of which are waived by Borrower, and Bank may proceed with collection
of such obligations and enforcement and realization upon all security which
it may hold and to the enforcement of all rights hereunder or at law:
7.1 The Borrower shall fail to pay when due any amount payable by it
hereunder on any loans or notes executed in connection herewith;
7.2 Borrower shall fail to comply with the provisions of any other
covenant, obligation or term of this Agreement for a period of fifteen
(15) days after the earlier of written notice thereof shall have been
given to the Borrower by Bank or Borrower or any Guarantor has
knowledge of an Event of Default or an event that can become an Event
of Default;
7.3 Borrower shall fail to pay when due any other obligation for borrowed
money, or to perform any term or covenant on its part to be performed
under any agreement relating to such obligation or any such other debt
shall be declared to be due and payable and such failure shall
continue after the applicable grace period;
7.4 Any representation or warranty made by Borrower in this Agreement or
in any other statement to Bank shall prove to have been false or
misleading in any material respect when made;
Revised 3/96
<PAGE> 9
7.5 Borrower makes an assignment for the benefit of creditors, files
a petition in bankruptcy, is adjudicated insolvent or bankrupt,
petitions to any court for a receiver or trustee for Borrower or
any substantial part of its property, commences any proceeding
relating to the arrangement, readjustment, reorganization or
liquidation under any bankruptcy or similar laws, or if there is
commenced against Borrower any such proceedings which remain
undismissed for a period of thirty (30) days or, if Borrower by
any act indicates its consent or acquiescence in any such
proceeding or the appointment of any such trustee or receiver;
7.6 Any judgment attaches against Borrower or any of its properties
for an amount in excess of $50,000 which remains unpaid,
unstayed on appeal, unbonded, or undismissed for a period of
thirty (30) days;
7.7 Loss of any required government approvals, and/or any
governmental regulatory authority makes or institutes action
which, in the opinion of Bank, will adversely affect Borrower's
condition, operations or ability to repay the loan and/or line
of credit;
7.8 Failure of Bank to have a legal, valid and binding first lien
on, or a valid and enforceable prior perfected security interest
in, any property covered by any deed of trust or security
agreement required under this Agreement;
7.9 Borrower dies, becomes incompetent, or ceases to exist as a
going concern;
7.10 Occurrence of an extraordinary situation which gives Bank
reasonable grounds to believe that Borrower may not, or will be
unable to, perform its obligations under this or any other
agreement between Bank and Borrower; or
7.11 Any of the preceding events occur with respect to any guarantor
of credit under this Agreement, or such guarantor dies or
becomes incompetent, unless the obligations arising under the
guaranty and related agreements have been unconditionally
assumed by the guarantor's estate in a manner satisfactory to
Bank.
8. SUCCESSORS; WAIVERS. Notwithstanding the Events of Default above, this
Agreement shall be binding upon and inure to the benefit of Borrower and
Bank, their respective successors and assigns, except that Borrower may
not assign its rights hereunder. No consent or waiver under this
Agreement shall be effective unless in writing and signed by the Bank
and shall not waive or affect any other default, whether prior or
subsequent thereto, and whether of the same or different type. No delay
or omission on the part of the Bank in exercising any right shall
operate as a waiver of such right or any other right.
9. ARBITRATION
9.1 At the request of either Bank or Borrower any controversy or
claim between the bank and Borrower, arising from or relating to
this Agreement or any Loan Document executed in connection with
this Agreement or arising from any alleged tort shall be settled
by arbitration in King County Washington. The United States
Arbitration Act will apply to the arbitration proceedings which
will be administered by the American Arbitration Association
under its commercial rules of arbitration except that unless the
amount of the claim(s) being arbitrated exceeds $5,000,000 there
shall be only one arbitrator. Any controversy over whether an
issue is arbitrable shall be determined by the arbitrator(s).
Judgement upon the arbitration award may be entered in any court
having jurisdiction. The institution and maintenance of any
action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of
either party, including plaintiff, to submit the controversy or
claim to arbitration if such action for judicial relief is
contested.
<PAGE> 10
T & W FINANCIAL CORPORATION
BUSINESS LOAN AGREEMENT - PART B
PAGE 7
For purposes of the application of the statute of limitations the
filing of an arbitration as provided herein is the equivalent of
filing a lawsuit and the arbitrator(s) will have the authority to
decide whether any claim or controversy is barred by the statute of
limitations, and if so, to dismiss the arbitration on that basis. The
parties consent to the joinder in the arbitration proceedings of any
guarantor, hypothecator or other party having an interest related to
the claim or controversy being arbitrated.
9.2 Notwithstanding the provisions of Section 9.1, no controversy or claim
shall be submitted to arbitration without the consent of all parties
if at the time of the proposed submission, such controversy or claim
arises from or relates to an obligation secured by real property;
9.3 No provision of this Section 9 shall limit the right of the Borrower
or the Bank to exercise self-help remedies such as setoff, foreclosure
or sale of any collateral, or obtaining any ancillary provisional or
interim remedies from a court of competent jurisdiction before, after
or during the pendency of any arbitration proceeding. The exercise of
any such remedy does not waive the right of either party to request
arbitration. At Bank's option foreclosure under any deed of trust may
be accomplished by exercise of the power of sale under the deed of
trust or judicial foreclosure as a mortgage.
10. COLLECTION ACTIVITIES, LAWSUITS AND GOVERNING LAW. Borrower agrees to pay
Bank all costs and expenses (including reasonable attorney's fees and the
allocated cost for in-house legal services incurred by Bank), to enforce
this Agreement, any notes or any Loan Documents pursuant to this Agreement,
whether or not suit is instituted. If suit is instituted by Bank to enforce
this Agreement or any of these documents, Borrower consents to the personal
jurisdiction of the Courts of the State of Washington and Federal Courts
located in the State of Washington. Borrower further consents to the venue
of this suit, being laid in King County, Washington. This Agreement shall
be construed in accordance with the laws of the State of Washington.
11. ADDITIONAL PROVISIONS. Borrower agrees to the additional provisions set
forth immediately following this Section 11 or any "Exhibit --" attached to
and hereby incorporated into Agreement. This Agreement supersedes all oral
negotiations or agreements between Bank and Borrower with respect to the
subject matter hereof and constitutes the entire understanding and
Agreement of the matters set forth in this Agreement.
11.1 If any provision of this Agreement is held to be invalid or
unenforceable, then (a) such provision shall be deemed modified if
possible, or if not possible, such provision shall be deemed stricken,
and (b) all other provisions shall remain in full force and effect.
11.2 If the imposition of or any change in any law, rule, or regulation
guideline or the interpretation or application of any thereof by any
court of administrative or governmental authority (including any
request or policy whether or not having the force of law) shall impose
or modify and taxes (except U.S. federal, state or local income or
franchise taxes imposed on Bank), reserve requirements, capital
adequacy requirements or other obligations which would: (a) increase
the cost to Bank for extending or maintaining any loans and/or line of
credit to which this Agreement relates, (b) reduce the amounts payable
to Bank under this Agreement, such notes and other instruments, or (c)
reduce the rate of return on Bank's capital as a consequence of Bank's
obligations with respect to any loan and/or line of credit to which
this Agreement relates, then Borrower agrees to pay Bank such
additional amounts as will compensate Bank therefor, within five (5)
days after Bank's written demand for such payment, which demand shall
be accompanied by an explanation of such imposition or charge and a
calculation in reasonable detail of the additional amounts payable by
Borrower, which explanation and calculations shall be conclusive,
absent manifest error.
<PAGE> 11
T & W FINANCIAL CORPORATION
BUSINESS AGREEMENT - PART B
PAGE 8
11.3 Bank may sell participations in or assign this loan in whole or
in part without notice to Borrower and Bank may provide
information regarding the Borrower and this Agreement to any
prospective participant or assignee. If a participation is sold
or the loan is assigned the purchaser will have the right of set
off against the Borrower and may enforce its interest in the
Loan irrespective of any claims or defenses the Borrower may
have against the Bank.
12. Notices. Any notices shall be given in writing to the opposite party's
signature below or as that party may otherwise specify in writing.
13. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
This Business Loan Agreement (Parts A and B) executed by the parties on
November 22, 1996. Borrower acknowledges having read all of the provisions of
this Agreement and Borrower agrees to it terms.
SEAFIRST BANK
Metropolitan Wholesale Banking Team 5
By: /s/ WILLIAM J. PITT
-------------------------------
William J. Pitt, Vice President
Address: 1001 Fourth Avenue, 4th Floor Phone: (206) 358-1698
Seattle, Washington 98154 Fax: (206) 358-0019
P.L.M. CONSULTING GROUP LLC
By: /s/ MICHAEL A. PRICE By: [SIG]
------------------------------- -----------------------------
Title: MEMBER Title: MEMBER
---------------------------- --------------------------
Address: 6416 Pacific Highway East Phone: (206) 922-5164
Tacoma, Washington 98424 Fax: (206) 922-0453
T & W FUNDING CO. VI LLC
By: /s/ MICHAEL A. PRICE By: [SIG]
------------------------------- -----------------------------
Title: MEMBER Title: MEMBER
---------------------------- --------------------------
Address: 6416 Pacific Highway East Phone: (206) 922-5164
Tacoma, Washington 98424 Fax: (206) 922-0453
<PAGE> 1
EXHIBIT 10.31
T & W FUNDING COMPANY VI, LLC
COLLATERAL LINE, LOAN, AND SECURITY AGREEMENT
1. PARTIES. The parties to this Agreement are BANK OF AMERICA NW, N.A.
DBA SEAFIRST BANK (Hereinafter called "Bank") and the undersigned engaged in the
business of renting, selling on finance terms, and leasing personal property
(hereinafter called "Borrower").
2. RECITAL AND DEFINITIONS. The underlying transactions involved in this
borrowing relationship will include, but are not limited to, financing leases,
rental vehicles and/or equipment, and purchase contracts. The agreements
evidencing these transactions will hereinafter be called "chattel paper." The
payment obligor under the chattel paper, which could be a lessee, renter, or
purchaser, will hereinafter be called "obligor."
3. LOAN.
3.1 Credit Extension. Bank, in its discretion, is willing to extend
credit to Borrower, subject to the terms and conditions hereof.
3.2 Limit. The maximum amount of credit outstanding at any one time
shall not exceed a limit established from time to time between Borrower and
Bank.
3.3 Promise to Pay. Borrower promises to repay to Bank all sums advanced
pursuant to this Agreement together with interest thereon. Borrower's debt shall
be evidenced by this Agreement, supplementing documents, and the Bank's records
reflecting advances and payments.
3.4 Advances. When Borrower desires an advance, it shall prepare a
Borrowing Certificate form (see Exhibit A) provided by Bank and deliver it,
together with such other documents and information as Bank requires, to the
Bank. If approved, Bank will advance by depositing funds in the Borrower's
checking account with Bank designated by Borrower for such deposits. Borrower
warrants that all advances will be exclusively for business purposes.
3.5 Interest. The rate of interest shall be fixed at the 30 day
BBAIRS LIBOR + 200 basis points. The rate will be adjusted on the last
banking day of each month; or floating at the Seafirst Bank's publicly announced
Prime lending rate plus zero, changed on the day of any Seafirst Bank prime
lending rate change, whichever is less. All interest will be calculated on a 360
day basis.
3.6 Repayment of Principal. Interest payments shall be paid monthly on
the last day of each month by automatic deduction from the borrowers checking
account. Principal reductions will be necessary if the month-end borrowing
certificate evidences a collateral shortfall. The borrowing certificate must be
received no later than 10 days after each month-end and any principal reductions
are due immediately upon receipt by the bank of the borrowing certificate. (See
Exhibit A for example of the borrowing certificate.)
4. SECURITY AGREEMENT.
4.1 To secure all credit extended hereunder, any extension, and
renewals thereof, and the full payment and performance by debtor of all
obligations under this Agreement or any other agreement, and all other
obligations of Borrower to Bank now existing or hereafter arising, direct or
indirect, Borrower grants to Bank a security interest in the following property,
called "Collateral:"
a. All presently owned and hereafter acquired goods held as
inventory for sale, lease, or rent. Particular descriptions of items shall be
delivered to Bank from time to time, but the failure to deliver any such
description does not imply that such property is not intended as Collateral; and
b. All presently owned and hereafter acquired chattel paper and
payments, and all accounts due or to become due thereunder relating to goods
sold, leased, rented or financed by Borrower, the evidence of all such
obligations of which are delivered or proposed to be delivered, to Bank;
Page 1
<PAGE> 2
c. All returned goods, goods traded in or in substitution for
goods financed under any chattel paper delivered to Bank;
d. All insurance claims, or claims for insurance premium refunds
due under any policy of insurance covering collateral;
e. All proceeds of the foregoing.
4.2 Borrower agrees to deliver to Bank, descriptions of goods subject to
this Agreement and all chattel paper covering the same. The specific description
contained in any one document may be used for all description purposes. Bank may
maintain such chattel paper and documentation in a separate file or files as it
desires, notwithstanding that each and every agreement and other collateral
shall secure all indebtedness of Borrower to Bank.
4.3 Warranties. Borrower warrants that it owns the collateral and it is
free and clear of all security interest, and encumbrance of every nature except
that granted thereunder; that it will not transfer or create or permit the
existence of any other lien or security interest upon the collateral without the
written consent of Bank. Borrower covenants that it will fully and punctually
perform all duties required of it under or in connection with any chattel paper
in which a security interest is hereby granted, so that each will be valid and
enforceable without any setoff, defenses, or counterclaim in respect thereof.
Borrower warrants that each agreement in which a security interest is granted
arises in a bona fide transaction in the ordinary course of Borrower's business
and without impediment to the enforcement and collection thereof.
4.4 Insurance. Borrower agrees that it will see that obligors will
maintain insurance on goods sold or leased and that such insurance names Bank as
loss payee. Such insurance shall cover liability collision comprehensive, theft,
fire, and other risks customary for the type of property insured. Upon demand of
Bank, Borrower will deliver policies and receipts showing payment of premiums to
the Bank. In the event of loss, Bank shall have full power to collect any and
all insurance upon such property and to apply the same at its option to any
obligations secured hereby whether or not mature, or to the restoration,
reconditioning or replacement of collateral. Bank shall have no liability for
any loss that may occur by reason of omission or lack of coverage by any such
insurance.
4.5 Notice; Collections. Borrower agrees to make upon its books, suitable
and proper entries disclosing all security interests in chattel paper granted to
Bank. Bank authorizes Borrower to receive collection of amounts due or to become
due under the terms of any chattel paper in which a security interest is granted
to Bank. Upon five days' written notice, Bank at any time may terminate the
authority of Borrower to make collection on chattel paper hereunder, and Bank
may at its election notify any obligor of the security interest and/or effect
collection on any chattel paper from obligor. If Bank makes direct collections
from obligors, any late charges or collection charges received by Bank shall be
retained by it for expenses incurred for such collections and not applied to
Borrower's indebtedness. All sums received by Borrower as proceeds of sale, rent
or lease of said property shall be held in trust for Bank as security for the
indebtedness of Borrower. Borrower agrees to permit Bank or its duly accredited
representative to examine its books and records and the collateral at all
reasonable times during business hours. Bank may from time to time conduct
independent verification of any and all assigned chattel paper.
4.6 Obligor Defaults; Acceleration; Insurance Claims. If a default in
payment due on any chattel paper occurs and such default continues 90 days or if
four payments are contractually due, Bank may require Borrower to pay
immediately to Bank the then unpaid balance owed by Borrower to Bank on the
advance applicable to such chattel paper. Borrower has no right to and shall not
make any payments directly or indirectly for the account of any obligor on any
chattel paper subject hereto.
4.7 Damage to Goods; Insurance Claims. If any of the property which is
the subject matter of any chattel paper hereunder is lost, damaged or destroyed,
by fire, theft, or for any other reason, Borrower shall give immediate written
notice thereof to Bank and shall promptly file proof of loss with the insurance
company and upon receipt of settlement shall pay to Bank the full unpaid balance
by Borrower to Bank on the advance applicable to such chattel paper.
4.8 Repossessed or Returned Goods. Borrower shall immediately pay to Bank
the then unpaid balance owing on any advance made in connection with any chattel
paper, if the property is repossessed or returned or repurchased by a lessee or
renter, whether upon termination of a lease or otherwise.
Page 2
<PAGE> 3
5. APPOINTMENT OF AGENT. The Borrower hereby designates and appoints Bank
its true and lawful attorney with power irrevocable, for it and in its name,
place and stead to ask, demand, receive, receipt and give acquittance for, any
and all amounts which may be or become, due or payable to Borrower pursuant to
the collateral, or any amendment or supplements thereto, and in its discretion
to file any claim or take any action or proceeding, or either, in its own name
or in the name of the Borrower, or otherwise, which Bank deems necessary or
desirable in order to collect or enforce payment of any and all amounts which
may become due or owing pursuant to the collateral or any amendment or
supplement thereto. The acceptance of this appointment by Bank shall not
obligate it to perform any duty, covenant or obligation required to be performed
by Borrower under or by virtue of the collateral or any amendments or
supplements thereto. Bank may also execute, on behalf of Borrower, any financing
statements or other instruments, which in the opinion of Bank, may be desirable
to perfect or protect its interest or position with respect to the collateral.
Without limiting the generality of the foregoing, Bank is authorized, upon
giving notice to Borrower, to notify account obligors and effect direct
collection of payments due under the collateral. At the request of Bank,
Borrower agrees to enter into any notices desired by Bank to be sent to account
obligors.
6. WAIVERS. This Agreement shall not be qualified or supplemented by
course of dealing. No waiver or modification by Bank of any of the terms or
conditions hereof shall be effective unless in writing, signed by Bank. No
waiver or indulgence by Bank as to any required performance by Borrower shall
constitute a waiver as to any subsequent required performance or other
obligations of Borrower hereunder.
7. DEFAULT.
7.1 Events of Default. Time is of the essence of this Agreement. The
following are called "events of default:"
a. Any failure to pay when due, the full amount of any payment of
principal, interest, taxes, insurance premiums, or other charges which are or
may be secured hereby; or
b. Any failure to perform as required by any covenant or agreement
herein; or
c. The falsity of any representation by Borrower herein or in any
credit application or financial statement given by Borrower to Bank as a basis
for any extension of credit secured hereby; or
d. If the collateral should be seized or levied upon under any
legal or governmental process against Borrower or against the collateral; or
e. If Borrower becomes insolvent or is the subject of a petition
in bankruptcy, either voluntary or involuntary, or any other proceeding under
creditor relief laws, or makes an assignment for the benefit of creditors; or,
if Borrower is named in, or the collateral is subjected to, a suit for the
appointment of a receiver, or
f. The bank deems itself insecure.
7.2 ACCELERATION; PENALTY INTEREST RATE. If an event of default
occurs, the entire amount of indebtedness secured hereby shall then, or at any
time thereafter at the option of the Bank, become immediately due and payable
without notice or demand. It shall thereafter and until payment in full, bear
interest at the rate of 24% per annum or the interest rate charged on the
indebtedness, whichever is higher, and Bank shall have immediate rights to
pursue the remedies provided herein.
8. REMEDIES. Bank shall have all remedies provided by law, and without
limiting the generality of the foregoing shall be entitled as follows:
a. Borrower agrees to put Bank in possession of the collateral on
demand; and
b. Bank is authorized to enter any premises where the collateral
is situated and take possession of it without notice or demand and without legal
proceedings; and
Page 3
<PAGE> 4
c. At the request of Bank, Borrower shall assemble the collateral
and make it available to Bank at a place designated by Bank which is reasonably
convenient to both parties; and Bank may make notification as provided by this
agreement and pursue collection, or, at Borrower's option, sell all or part of
the collateral and make application of all proceeds or sums due on indebtedness
as provided for in this agreement; and
d. Borrower agrees that a period of ten days from the time notice
is sent by first class mail or otherwise, shall be a reasonable period of
notification of a sale or other disposition of the collateral; and
e. Borrower agrees that any notice or other communication by Bank
to it shall be sent to the mailing address stated herein; and
f. Borrower agrees to pay on demand, the amount of all expenses
reasonably incurred by Bank, arising out of or in connection with this Agreement
or the debt secured hereby, including but not being limited to reasonable
attorney's fees incurred by Bank whether incurred in protecting or defending the
priority of Bank's interest, or in collection of realization procedures, or in
defending Bank against claims asserted by Borrower or others; including fees
incurred in both trial and appellate courts, or fees incurred without suit. The
sums agreed to be paid in this paragraph shall be secured hereby; and
g. Bank or its authorized agent shall at all reasonable times have
the right to be present at Borrower's place of business to receive all
communications and remittances relating to said collateral; and
h. Borrower agrees to pay any deficiency remaining after
application of the net proceeds to any indebtedness secured hereby.
9. APPLICATION LAW; SUCCESSORS. This Agreement and indebtedness and
obligations are subject to the laws of the United States and the State of
Washington and are to be construed in accordance therewith. All rights of Bank
hereunder extend to the successors and assigns of Bank and to the holder of any
note or participation evidencing indebtedness granted hereunder. The obligations
of Borrower hereunder, extend to and are binding upon the Borrower's heirs,
representatives, successors and assigns, provided that Borrower may not assign
any rights granted hereunder.
EXECUTED AT Federal Way, Washington on November 22,1996.
BORROWER'S ADDRESS: BORROWER: T & W FUNDING COMPANY VI, LLC
P.0. Box 3028 By: ____________________________________
Federal Way, Washington 98063 Michael A. Price, Managing Member
By: ____________________________________
Thomas W. Price, Managing Member
BANK ADDRESS: SEAFIRST BANK
1001 Fourth Avenue
P.0. Box 3586 HOB-4 By: ____________________________________
Seattle, Washington 98124 William J. Pitt, Vice President
Borrower's checking account to which advances shall be deposited and payment
charged:
Account Number 67692004 Branch of Seafirst Bank: _______________
Page 4
<PAGE> 5
c. At the request of Bank, Borrower shall assemble the collateral
and make it available to Bank at a place designated by Bank which is reasonably
convenient to both parties; and Bank may make notification as provided by this
agreement and pursue collection, or, at Borrower's option, sell all or part of
the collateral and make application of all proceeds or sums due on indebtedness
as provided for in this agreement; and
d. Borrower agrees that a period of ten days from the time notice
is sent by first class mail or otherwise, shall be a reasonable period of
notification of a sale or other disposition of the collateral; and
e. Borrower agrees that any notice or other communication by Bank
to it shall be sent to the mailing address stated herein; and
f. Borrower agrees to pay on demand, the amount of all expenses
reasonably incurred by Bank, arising out of or in connection with this Agreement
or the debt secured hereby, including but not being limited to reasonable
attorney's fees incurred by Bank whether incurred in protecting or defending the
priority of Bank's interest, or in collection of realization procedures, or in
defending Bank against claims asserted by Borrower or others; including fees
incurred in both trial and appellate courts, or fees incurred without suit. The
sums agreed to be paid in this paragraph shall be secured hereby; and
g. Bank or its authorized agent shall at all reasonable times have
the right to be present at Borrower's place of business to receive all
communications and remittances relating to said collateral; and
h. Borrower agrees to pay any deficiency remaining after
application of the net proceeds to any indebtedness secured hereby.
9. APPLICATION LAW; SUCCESSORS. This Agreement and indebtedness and
obligations are subject to the laws of the United States and the State of
Washington and are to be construed in accordance therewith. All rights of Bank
hereunder extend to the successors and assigns of Bank and to the holder of any
note or participation evidencing indebtedness granted hereunder. The obligations
of Borrower hereunder, extend to and are binding upon the Borrower's heirs,
representatives, successors and assigns, provided that Borrower may not assign
any rights granted hereunder.
EXECUTED AT Federal Way, Washington on November 22,1996.
BORROWER'S ADDRESS: T & W FUNDING COMPANY VI, LLC
P.0. Box 3028
Federal Way, Washington 98063 By: ____________________________________
Michael A. Price, Managing Member
By: ____________________________________
Thomas W. Price, Managing Member
BANK ADDRESS: SEAFIRST BANK
1001 Fourth Avenue
P. 0. Box 3586 HOB-4 By: ____________________________________
Seattle, Washington 98124 William J. Pitt, Vice President
Borrower's checking account to which advances shall be deposited and payment
charged:
Account Number 67692004 Branch of Seafirst Bank: _______________
Page 4
<PAGE> 6
[FINANCIAL CORPORATION LETTERHEAD]
Exhibit A
14 November 1996
Mr. Bill Pitt
SEAFIRST BANK
BUSINESS BANKING #78
HOB-4
RE: BORROWING SUMMARY (For T & W Funding Co VI LLC)
BORROWING BASE SUMMARY
- - Total Eligible Lease Payments
Receivable Discounted at 8% as of 11/14/96 $13,870,660.16
- - Margin @ 90% x 90%
- - Borrowing Base (Note Amount) $12,483,594.14
DEBT SUMMARY
- - Bank Note Amount $12,483,594.14
BORROWING CAPACITY SUMMARY
- - Borrowing base $12,483,594.14
- - Outstanding Note Balance $11,324,036.65
- - Borrowing Capacity/Request $ 1,159,557.49
The undersigned hereby certifies that the above information is true and correct.
Sincerely,
T & W Funding Co VI LLC.
[SEAL]
M. A. Price, Managing Member
MAP/dld
TOM/SEAFIRST.TOM
[UAEL LOGO]
<PAGE> 1
EXHIBIT 10.32
[KEY BANK LOGO]
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$7,500,000.00 03-29-1996 08-25-2000 2000000 506 260430 KLBOQ
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References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular
loan or item.
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<S> <C>
BORROWER: T & W FUNDING COMPANY VI L.L.C. LENDER: KEY BANK OF WASHINGTON
P.O. BOX 3028 TACOMA COMMERCIAL BANKING CENTER
FEDERAL WAY, WA 98063 1119 PACIFIC AVENUE
P.O. BOX 11500 WA-31-01-0214
TACOMA, WA 98401-5500
==================================================================================================================================
</TABLE>
THIS BUSINESS LOAN AGREEMENT BETWEEN T & W FUNDING COMPANY VI L.L.C.
("Borrower") and KEY BANK OF WASHINGTON ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands, and agrees that:
(a) In granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing or extending of any Loan by Lender at all
times shall be subject to Lender's sole judgment and discretion; and (c) all
such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of March 29, 1996, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The work "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Business
Loan Agreement from time to time.
BORROWER. The word "Borrower" means T & W FUNDING COMPANY VI L.L.C.,
The word "Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
COLLATERAL. The word "Collateral" means and includes without
limitation all property and assets granted as collateral security for a
Loan, whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted in
the form of a security interest, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever whether created by law,
contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
title "EVENTS OF DEFAULT."
GRANTOR. The word "Grantor" means and includes without limitation each
and all of the persons or entities granting a Security interest in and
Collateral for the indebtedness, including without limitation all
Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties
connection with any indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now hereafter existing, voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable indebtedness may be or hereafter may become
barred by any statute of limitations; and whether such indebtedness may
be or hereafter become otherwise unenforceable.
LENDER. The word "Lender" means KEY BANK OF WASHINGTON, its successors
and assigns.
LOAN. The word "Loan" or "Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to
this Agreement from time to time.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and
security interests securing indebtedness owed by Borrower to Lender;
liens for taxes; assessments, or similar charges either not yet due or
being contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; purchase money liens or purchase money security interests
upon or in any property acquired or held by Borrower in the ordinary
course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this
Agreement titled "Indebtedness and Liens"; (e) liens and security
interests which, as of the date of this Agreement, have been disclosed
to and approved by the Lender in writing; and (f) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of
Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, and all other
instruments, agreements.
<PAGE> 2
03-29-1996 BUSINESS LOAN AGREEMENT PAGE 2
LOAN NO. 2000000 (Continued)
===============================================================================
documents, whether now or hereafter existing, executed in connection
with the indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law; contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form
of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance under this Agreement shall be subject to the fulfillment to
Lender's satisfaction of all of the conditions set forth in this Agreement and
in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory
to Lender the following documents for the Loan: (a) the Note, (b)
Security Agreements granting to Lender security interests in the
Collateral, (c) Financing Statements perfecting Lender's Security
Interests; (d) evidence of insurance as required below; and (a) any
other documents required under this Agreement or by Lender or its
counsel, including without limitation any guaranties described below.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender property certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents, and such other authorizations and other documents
and instruments as Lender or its counsel, in their sole discretion, may
require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement of any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and
correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this
Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any indebtedness exists;
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
Washington and is validly existing and in good standing in all states in
which Borrower is doing business. Borrower has the full power and
authority to own its properties and to transact the businesses in which
it is presently engaged or presently proposes to engage. Borrower also
is duly qualified as a foreign corporation and is in good standing in
all states in which the failure to so qualify would have a material
adverse effect on its businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower; do not require the consent or
approval of any other person, regulatory authority or governmental body;
and do not conflict with, result in a violation of, or constitute a
default under (a) and provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding
upon Borrower or (b) any law governmental regulation, court decree, or
order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
????? constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and
as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all
Borrower's properties free and clear of all Security Interests, and has
not executed any security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used, or filed a financing statement
under any other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in
the Agreement shall have the same meanings as set forth in the "CERCLA,"
"SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., or other applicable state or Federal laws, rules,
regulations adopted pursuant to any of the foregoing. Except as
disclosed to and acknowledged by Lender in writing, Borrower represents
and warrants that: (a) During the period of Borrower's ownership of the
properties, there has been no use, generation, manufacture, storage
treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, about or from any of the
properties. (b) Borrower has no knowledge of, or reason to believe
that there has been (i) any use, generation, manufacture, storage,
treatment disposal, release, or threatened release of any hazardous
waste or substance on, under, about or from the properties by any prior
owners occupants of any of the properties, or (ii) any actual or
threatened litigation or claims of any kind by any person relating to
such matters. Neither Borrower nor any tenant, contractor, agent or
other authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste or
substance on, under, about or from any of the properties; and any such
activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties
to make such inspections and tests Lender may deem appropriate to
determine compliance of the properties with this section of the
Agreement. Any inspections or tests made Lender shall be at Borrower's
expense and for Lender's purposes only and shall not be construed to
create any responsibility or liability on the part of Lender to
Borrower or to any other person. The representations and warranties
contained herein are based on Borrower's due diligence investigating the
properties for hazardous waste and hazardous substances. Borrower
hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Borrower becomes liable for
cleanup or other costs under any such laws, and (b) agrees to indemnify
and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly
or indirectly sustain or suffer resulting from a breach of this section
of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release occurring
prior to Borrower's ownership or interest in the properties, whether or
not the same was or should have been known to Borrower. The provisions
of this section of the Agreement, including the obligation to indemnify,
shall survive payment of the indebtedness and the ?????? or explanation
of this Agreement and shall not ??affected by Lender's acquisition of
any inte???? in any of the properties, whether by foreclosure or
otherwise.
<PAGE> 3
03-29-1996 BUSINESS LOAN AGREEMENT PAGE 3
LOAN NO 2000000 (CONTINUED)
================================================================================
LITIGATIONS AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, (iii) no steps have been taken to terminate any
such plan, and (iv) there are no unfunded liabilities other than those
previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at P.O. BOX 3028, FEDERAL WAY, WA 98063. Unless
Borrower has designated otherwise in writing this location is also the
office or offices where Borrower keeps its records concerning the
Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be true and accurate in every material respect on the date as of which such
information is dated or certified; and none of such information is or will
be incomplete by omitting to state any material fact necessary to make such
information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in making the above referenced Loan to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as Borrower's Indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no
event later than ninety (90) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended, audited
by a certified public accountant satisfactory to Lender, as, as soon as
available, but in no event later than thirty (30) days after the end of
each month, Borrower's balance sheet and profit and loss statement for the
period ended, prepared and certified as correct to the best knowledge and
belief by Borrower's chief financial officer or other officer or person
acceptable to lender. All financial reports required to be provided under
this Agreement shall be prepared in accordance with generally accepted
accounting principles, applied on a consistent basis, and certified by
Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports
with respect to Borrower's financial condition and business operations as
Lender may request from time to time.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
Insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice to Lender. Each Insurance policy
also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default by
Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loan, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing Insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually) Borrower will have
an independent appraiser satisfactory to Lender determine, as applicable,
the actual cas value or replacement cost of Collateral. The cost of such
appraisal shall be paid by Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, on Lender's forms, and the
amounts and by the guarantors named below:
Guarantors Amounts
---------- -------
T & W FINANCE CORP I Unlimited
T & W FINANCE CORP II Unlimited
T & W FINANCE CORP III Unlimited
T & W FINANCE CORP IV Unlimited
T & W FINANCIAL CORPORATION Unlimited
MICHAEL A. PRICE Unlimited
THOMAS W. PRICE Unlimited
OTHER AGREEMENT. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and Lender
and notify Lender immediately in writing of any default in connection with
any other such agreements.
<PAGE> 4
03-29-1996 BUSINESS LOAN AGREEMENT PAGE 4
LOAN NO 2000000 (CONTINUED)
================================================================================
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this agreement or
under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records at all reasonable
times and to provide Lender with copies of any records it may request, all
at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects
with all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part
of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal, state or local
governmental authorities shall furnish to Lender promptly and in any
event within thirty (30) days after receipt thereof a copy of any notice,
summons, lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with any
environmental activity whether or not there is damage to the environment
and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loan and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while
this Agreement is in effect, Borrower shall not, without the prior written
consent of Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by the
Agreement, create, incur or assume Indebtedness for borrowed money,
including capital leases, (b) except as allowed as a Permitted Lien, sell,
transfer, mortgage, assign, pledge, lease, grant a security interest in, or
encumber any of Borrower's assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
cease operations, liquidate, merge, transfer, acquire or consolidate with
any other entity, change ownership, change its name, dissolve or transfer
or sell collateral out of the ordinary course of business, (c) pay any
dividends on Borrower's stock (other than dividends payable in its stock,
provided, however that notwithstanding the foregoing, but only so long as
no Event of Default has occurred and is continuing or would result from the
payment of dividends. If Borrower is a "Subchapter S Corporation" (as
defined in the Internal Revenue Code of 1986, as amended), Borrower may pay
cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and make
estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholders of a
Subchapter S corporation because of their ownership of shares of stock of
Borrower, or (d) purchase or retire any of Borrower's outstanding shares or
alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents of any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or Guarantor becomes insolvent, files a
petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c)
there occurs a material adverse change in Borrower's financial condition, in
the financial condition of any guarantor, or in the value of any Collateral
securing any Loan; or (d) a Guarantor seeks, claims or otherwise attempts to
limit, modify or revoke such guarantor's guaranty of the Loan or any other loan
with Lender.
ADDITIONAL COVENANT I. Borrower agrees and covenants with Lender that the
Borrower will provide:
1. Fiscal year end audited combined and combining financial statements.
2. Monthly financial statement, trial balance and delinquency report within 30
days.
3. Maximum combined debt-to-worth of 6:1 after netting non-recourse leases
and the initial indirect costs.
ADDITIONAL COVENANT II. Borrower agrees to permit Lender to conduct
semi-annual collateral audits.
ADDITIONAL COVENANT III. Borrower covenants and agrees with Lender that
Borrower will payable in advance associated with any pledged lease that becomes
90 days delinquent within 15 days of said delinquency.
<PAGE> 5
03-29-1996 BUSINESS LOAN AGREEMENT Page 5
Loan No 2000000 (Continued)
================================================================================
ADDITIONAL COVENANT IV. Annual personal financial statements and tax returns of
guarantors.
ADDITIONAL COVENANT V. Original lease agreements pledged to Lender and copies
of related Invoices and documents.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when
due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase of sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property of Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
indebtedness, or ?? any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower or Grantor, as the case may
be, as to the validity or reasonableness of the claim which is the basis
of the creditor or forfeiture proceeding, and if Borrower or Grantor
gives Lender written notice of the creditor forfeiture proceeding and
furnishes reserves or a surety bond for the creditor or forfeiture
proceeding satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor ??
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness. Lender, at its
option, may, ?? shall not be required to, permit the Guarantor's estate
to assume unconditionally the obligations arising under the guaranty in
a manner satisfactory to lender, and, in doing so, cure the Event of
Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment performance of the
Indebtedness is impaired.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been
given a notice of a similar default within the preceding twelve (12)
months, it may be cured (and no Event of Default will have occurred) if
Borrower or Grantor, as the case may be, after receiving written notice
from Lender demanding cure of such default: (a) cures the default within
fifteen (15) days; or (b) if the cure requires more than fifteen (15)
days, immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately terminate and, at Lender's option, all indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except through the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional addition, Lender shall have all the rights and remedies provided in
the Related Documents or available at law, in equity, or otherwise. Except as
may be prohibited by applicable law, all of Lender's rights and remedies shall
be cumulative and may be exercised singularity or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and
an election to make expenditures or to take action to perform the obligation of
Borrower or of any Grantor shall not affect Lender's right to declare a default
and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
matters set forth in this Agreement. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted
by Lender in the State of Washington. If there is a law?? Borrower
agrees upon Lender's request to submit to the jurisdiction of the courts
of King or Pierce County, the State of Washington Agreement shall be
governed by and construed in accordance with the laws of the State of
Washington.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define provisions
of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower under
this Agreement shall be joint and several, and all references to
Borrowers shall mean each and every Borrower. This means that each of
the Borrowers signing below is responsible for all obligations in this
Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other relating to the Loan, and Borrower hereby waives any rights to
privacy it may have with respect to such matters. Borrower additionally
waives any and all notices of sale of participation interests, as well
as all notices of any repurchase of such participation interests.
Borrower also agrees the purchasers of any such participation interests
will be considered as the absolute owners of such interests in the Loans
and will have rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower
further waives the rights of offset or counterclaim that it may have now
or later against Lender or against any purchaser of such a participation
interest unconditionally agrees that either Lender or such purchaser may
enforce Borrower's obligation under the Loans irrespective of the fai??
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests may
enforce interests irrespective of any personal claims or defenses that
Borrower may have against Lender.
<PAGE> 6
03-29-1996 BUSINESS LOAN AGREEMENT PAGE 6
LOAN NO 2000000 (CONTINUED)
================================================================================
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lenders' legal expenses, whether or not there is a lawsuit,
including attorneys' fees for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any
court costs, in addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilie, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be given
at the address shown above. Any party may change its address for notices
under this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's address.
To the extent permitted by applicable law, if there is more than one
Borrower, notice to any Borrower will constitute notice to all Borrowers.
For notice purposes, Borrower will keep Lender informed at all times of
Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with this provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor as to all future transactions.
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
MARCH 29, 1996.
BORROWER:
T & W FUNDING COMPANY VI L.L.C.
By:
---------------------------
MICHAEL A. PRICE, President
LENDER:
KEY BANK OF WASHINGTON
By: /s/ KAROL BREKKEN
--------------------------
Authorized Officer
<PAGE> 1
EXHIBIT 10.33
[KEY BANK LOGO]
LOAN MODIFICATION AND/OR EXTENSION AGREEMENT
Date: July 31, 1996
Borrower: T & W FUNDING COMPANY VI, L.L.C.
Lender: KEY BANK OF WASHINGTON
Note: Dated August 28, 1995, original principal amount of
$7,500,000.00
Loan #: 262746-2009100
FOR VALUE RECEIVED, Borrower and Lender hereby agree to modify the
above-referenced Loan and promissory note as follows:
1. MODIFICATION AND/OR EXTENSION PROVISIONS.
a. The maturity date of the loan is hereby extended to July 31, 1997.
b. Interest rate and payment provisions are not being modified, and
Borrower shall continue to make regular installment payments as
provided in the Note. Provisions for adjustment of the interest rate
and/or payment amounts (if any) shall continue to apply.
c. Exhibits "A" and "B" to the Lease Line of Credit and Security
Agreement dated August 28, 1995, have been modified as per attached
Exhibits.
2. CONDITIONS. The modifications and/or extension described above are
subject to and conditioned upon Borrower's full satisfaction of all of the
following conditions on or before, July 31, 1996, time being of the essence.
a. There shall be no uncured event of default under the Loan, nor any
event or condition which with notice or the passage of time would be
an event of default thereunder.
b. Borrower shall deliver to Lender a fully executed original of this
Loan Modification and/or Extension Agreement.
c. All expenses incurred by Lender in connection with this Agreement
(including without limitation, attorney fees, recording charges,
charges for title policy update(s), escrow charges, costs of
obtaining updated or additional appraisal(s) or collateral
valuations, if required by Lender) shall be paid by borrower.
3. GENERAL PROVISIONS. Except as modified above, all other provisions of
the Note and any other documents securing or relating to the Loan (the "Loan
Documents") remain in full force and effect. All security given for the Loan
and all guarantees of the Loan (as applicable) shall continue in full force.
Borrower warrants and represents to Lender that it has full right, power and
authority to enter into this agreement and to perform all its obligations
hereunder, and that all information and materials submitted to Lender in
connection with this modification are accurate and complete. Borrower warrants
that no default exists under the Loan Documents. Borrower reaffirms its
obligation to pay the Loan in full and reaffirms the validity and enforceability
of the Loan Documents, without set-off, counterclaim or defense. Borrower
acknowledges that:
1
<PAGE> 2
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
KEY BANK OF WASHINGTON BORROWER:
T & W FUNDING COMPANY, VI L.L.C.
/s/ KAY BREKKEN MICHAEL A. PRICE, Member
- --------------------------------- ----------------------------------
Kay Brekken, Vice President Authorized Officer Title
2
<PAGE> 3
[KEY BANK LOGO]
EXHIBIT A
ADDITIONAL TERMS RIDER
THIS ADDITIONAL TERMS RIDER modifies the Lease Line of Credit and
Security Agreement, and sets forth additional affirmative and negative covenants
of Debtor, and/or other agreed modifications or additional provisions to the
Agreement (if any):
1 Additional Covenants. Borrower agrees and covenants with Bank
that Borrower will:
(a) Provide fiscal year-end audited combined and
combining financial statements within 90 days of Borrower's
fiscal year end.
(b) Provide quarterly financial statements and
delinquency reports within 30 days of each quarter end.
(c) Provide monthly present value report on all
leases assigned to Bank.
(d) Provide annual financial statements and tax
returns of all guarantors of Borrower's obligations hereunder.
(e) Maintain at all times a maximum combined
debt-to-worth ratio of 6:1 (after netting securitized lease
receivables, initial indirect costs, and non-recourse
liabilities), calculated in accordance with Lender's standard
underwriting and financial analysis criteria.
(f) Pay off any Advance related to any Lease Contract
pledged hereunder that becomes 90 days delinquent, within 15
days of the expiration of such 90-day delinquency period.
(g) Borrower may loan money to or create other
outstanding obligations from the Forstman Little Group and/or
any of Borrower's affiliated entities, but such affiliated
indebtedness shall at no time exceed One Million One Hundred
Forty Thousand Dollars ($1,140,000.00) in the aggregate and no
such loan or other obligation shall have a term in excess of
three years.
2. Guarantors. Prior to requesting any Advance, Borrower shall furnish
to Bank, on Bank's forms and in the amounts set forth below, guarantee
agreements executed and delivered by each of the following:
Guarantors Amounts
---------- -------
T & W FINANCIAL CORPORATION
AND AFFILIATED COMPANIES Unlimited
T & W FINANCE CORP. I Unlimited
T & W FINANCE CORP. II Unlimited
T & W FINANCE CORP. III Unlimited
T & W FINANCE CORP. IV Unlimited
T & W FUNDING COMPANY V, L.L.C. Unlimited
PLM CONSULTING GROUP, L.L.C. Unlimited
MICHAEL A. PRICE Unlimited
THOMAS W. PRICE Unlimited
PAUL B. LUKE Unlimited
KENNETH W. MCCARTHY, JR. Unlimited
<PAGE> 4
[KEY BANK LOGO]
EXHIBIT B
CERTIFICATE FOR BORROWING
UNDER LEASE LINE OF CREDIT
AND ASSIGNMENT OF LEASE
T & W FUNDING COMPANY VI, L.L.C. applies for and requests an advance in the
amount of $__________________________ , under the terms of the note dated
8/21/95 in the amount of $7,500,000.00. In addition, the undersigned certifies
that the total value of the accounts pledged hereby is that shown on Line 1.
EXECUTED on this_______________________day of_______________________19_________
[BORROWER:]
T & W Funding Company VI, L.L.C.
By:_________________________ Title:___________________ Date of Figures:________
LEASE RECEIVABLE COLLATERAL
1) Net Present Value of Total Eligible $__________________
Lease Receivables Discounted at 8.0%
2) Required Margin @ 90% of Net Present Value 90%
3) TOTAL BORROWING BASE (Line 1 times Line 2) $__________________
RECAP OF BORROWINGS
4) Total Amount of Borrowings Outstanding Last
Certificate $__________________
5) Add: Advance Requested $__________________
6) Total Amount of Borrowings This Certificate
(Line 4 plus Line 5) $__________________
7) Collateral Surplus or (Deficit) $__________________
(Line 3 minus Line 6)
[BANK APPROVAL:]
KEY BANK OF WASHINGTON
By:________________________________
<PAGE> 5
LEASE AUDIT SHEET
<TABLE>
<CAPTION>
<S> <C>
Customer Name: T & W Funding Company VI, L.L.C. Lessee Name:__________________________
Lease No.:__________________________ Lessee Name:__________________________
Dated:______________________________ Matures:______________________________
1. CERTIFICATE FOR BORROWING 7. GUARANTEES
& ASSIGNMENT OF LEASE
____ Equipment Description ____ Signed and Dated
____ Lessee's Name
____ Payment Balances to Note Amount 8. TITLE COPY / TITLE APPLICATION
____ Signature and Title of Lessor
____ Conforms to Dealer Plan ____ Key Bank shown as Legal Owner
____ Signed
2. LEASE AGREEMENT
9. BILL OF SALE
____ Original Lease
____ Lessee's Legal Name Shown Correctly ____ Signed and Dated
____ Signed and Dated with Titles ____ UCC Lien Search Completed
____ Amount Greater Than or Equal to
Advance Amount
3 UCC'S 10 INVOICES
____ Lessee's Legal Name Shown Correctly ____ Amount Greater Than or Equal to Advance
____ Key Bank Shown as Assignee ____ Matches Equipment Description
____ Signed and Titled by Lessee and Lessor
____ UCC-1 for Customer
4 BORROWING AUTHORITY 11 COPY OF CHECK
____ Amount Greater Than or Equal to Advance
____ Borrowing Authority ____ Matches Invoice
5 DELIVERY AND ACCEPTANCE 12 CREDIT INFORMATION
____ Signed Delivery and Acceptance ____ Bank Reports
____ Trade Reports
6 INSURANCE INFORMATION ____ Credit Report(s)- Pers
____ Credit Report(s)- Bus
____ Insurance Authorization Letter ____ Financial Statements
____ Signed and Dated ____ Taxes - Pets
____ Taxes - Bus
</TABLE>
<PAGE> 1
EXHIBIT 10.34
AMENDED AND RESTATED
MASTER LOAN AND SECURITY AGREEMENT
T & W Funding Company VI, L.L.C.
with
CoreStates Bank, N.A.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C> <C> <C>
SECTION 1. DEFINITIONS AND INTERPRETATION...........................................................1
1.1 Terms Defined............................................................................1
1.2 Capitalized Terms........................................................................7
1.3 Accounting Principles....................................................................7
SECTION 2. THE LOAN.................................................................................7
2.1 Credit Facility - Description............................................................8
2.2 Advances and Payments....................................................................9
2.3 Preconditions to Advances and Assignment of Leases
and Lease Property.....................................................................9
2.4 Credit Facility Interest................................................................10
2.5 Additional Interest Provisions..........................................................11
2.6 Prepayments.............................................................................11
2.7 Use of Proceeds.........................................................................12
2.8 Capital Adequacy........................................................................12
SECTION 3. COLLATERAL..............................................................................12
3.1 Description.............................................................................13
3.2 Lien Documents..........................................................................13
3.3 Other Actions...........................................................................13
3.4 Searches................................................................................13
3.5 Filing Security Agreement...............................................................14
3.6 Power of Attorney.......................................................................14
3.7 Sureties................................................................................14
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES......................................................14
4.1 Resolutions, Opinions. and other Documents..............................................14
4.2 Absence of Certain Events...............................................................15
4.3 Warranties and Representations at closing...............................................15
4.4 Compliance with this Agreement..........................................................15
4.5 Officers' Certificate...................................................................15
4.6 Closing.................................................................................16
4.7 Non-Waiver of Rights....................................................................16
SECTION 5. REPRESENTATIONS AND WARRANTIES..........................................................16
5.1 Corporate Organization and Validity.....................................................16
5.2 Places of Business......................................................................17
5.3 Pending Litigation......................................................................17
5.4 Title to Collateral.....................................................................17
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5.5 Governmental Consent....................................................................17
5.6 Taxes...................................................................................17
5.7 Financial Statements....................................................................17
5.8 Full Disclosure.........................................................................18
5.9 Subsidiaries............................................................................18
5.10 Guarantees/Contracts....................................................................18
5.11 Government Regulations, etc.............................................................18
5.12 Names...................................................................................18
5.13 Other Associations......................................................................19
5.14 Environmental Matters...................................................................19
5.15 Solvency................................................................................19
5.16 Leases and Leased Property ..........................................................19
5.17 Mortgages and Mortgaged Property........................................................22
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS........................................................24
6.1 Payment of Taxes and Claims.............................................................24
6.2 Maintenance of Properties and...........................................................24
6.3 Business conducted......................................................................25
6.4 Litigation..............................................................................25
6.5 Taxes...................................................................................25
6.6 Bank Accounts...........................................................................25
6.7 Warranties for Future Advances..........................................................25
6.8 Financial Covenants.....................................................................26
6.9 Financial and Business..................................................................26
6.10 Officers' Certificates..................................................................27
6.11 Inspection..............................................................................28
6.12 Tax Returns and Reports.................................................................28
6.13 Material Adverse Developments...........................................................28
6.14 Places of Business......................................................................28
6.15 Sale of Collateral......................................................................28
6.16 Receipt of Payments.....................................................................28
SECTION 7. BORROWER'S NEGATIVE COVENANTS...........................................................29
7.1 Merger, Consolidation, Dissolution or Liquidation.......................................29
7.2 Liens and Encumbrances..................................................................29
7.3 Negative Pledge.........................................................................29
7.4 Transactions With Affiliates or Subsidiaries............................................29
7.5 Guarantees..............................................................................30
7.6 Distributions, Redemptions and Other Indebtedness.......................................30
7.7 Use of Lender' Name.....................................................................30
7.8 Change of Ownership Interests...........................................................30
</TABLE>
iii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
7.9 Change of Management....................................................................30
SECTION 8. DEFAULT.................................................................................30
8.1 Events of Default.......................................................................30
8.2 Cure....................................................................................32
8.3 Rights and Remedies on Default..........................................................32
8.4 Nature of Remedies......................................................................33
8.5 Set-Off.................................................................................33
SECTION 9. MISCELLANEOUS...........................................................................34
9.1 Governing Law...........................................................................34
9.2 Integrated Agreement....................................................................34
9.3 Waiver..................................................................................34
9.4 Time....................................................................................34
9.5 Expenses of Lender......................................................................35
9.6 Brokerage...............................................................................35
9.7 Notices.................................................................................35
9.8 Headings................................................................................36
9.9 Survival................................................................................36
9.10 Successors and Assigns..................................................................36
9.11 Counterparts............................................................................36
9.12 Modification............................................................................36
9.13 Signatories.............................................................................36
9.14 Third Parties...........................................................................36
9.15 Discharge of Taxes, Borrower's Obligations, Etc.........................................36
9.16 Consent to Jurisdiction.................................................................37
9.17 Waiver of Jury Trial....................................................................37
9.18 Warrant of Attorney.....................................................................37
9.19 Information to Participant..............................................................38
</TABLE>
iv
<PAGE> 5
EXHIBIT LIST
Exhibit 2.1(d) - Form of Borrowing Base Certificate
Exhibit 2.3(b) - Form of Assignment of Pledged Agreements
Exhibit 5.1 - Borrower's States of Qualifications
Exhibit 5.2 - Places of Business
Exhibit 5.3 - Pending Litigation
Exhibit 5.9 - Subsidiaries and Affiliates
Exhibit 5.10 - Existing Guaranties, Investments and
Borrowings, Leases and Employment
Agreements
Exhibit 5.12 - Schedule of Names
Exhibit 5.13 - Other Associations
Exhibit 5.14 - Environmental Matters
Exhibit 6.10 - Officers' Certificates
v
<PAGE> 6
AMENDED AND RESTATED
MASTER LOAN AND SECURITY AGREEMENT
This Amended and Restated Master Loan and Security Agreement
("Agreement") is dated as of this 30th day of October, 1996, by and among T&W
Funding Company VI, L.L.C, a Delaware Limited Liability Company ("Borrower"),
and CoreStates Bank, N.A, a national banking association ("Lender").
BACKGROUND
A. Borrower is a Delaware Limited Liability Company in the business of
leasing personal property to Lessees or otherwise financing the purchase of
personal property for third party purchasers pursuant to leases or installment
sale agreements. Borrower is also in the business of issuing commercial
mortgages pursuant to promissory notes secured by mortgages in real estate.
B. Borrower wishes, from time to time, to obtain advances from Lender
up to the Maximum Credit Limit for the purpose capitalizing the financial
transactions described above. Lender is willing to make loans and grant
extensions of credit to Borrower under the terms and provisions hereinafter set
forth.
C. 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 or are defined in the referenced sections:
Account - The meaning ascribed thereto in the Pennsylvania Uniform
commercial Code.
Adjusted Debt to Tangible Net Worth Ratio - At any time means the
ratio of (i) total Liabilities less Nonrecourse Debt to (ii) Financial's
Tangible Net Worth.
Advance(s) - Any monies advanced or credit extended to Borrower by
Lender under the Credit Facility.
<PAGE> 7
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.
Agreement - This Loan and Security Agreement, as it may hereafter
be amended, supplemented or replaced from time to time.
Assignment of Pledged Agreements Section 2.3(b)
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,
Books and Records - All original ledger cards, payment schedules,
credit applications, Contract Rights, liens, security instruments, guarantees
and other General Intangibles relating in any to the Leases, Leased Property,
Mortgages or Mortgaged Property.
Borrowing Base - As of any date of determination, an amount equal
to the lesser of (i) the Maximum Credit Limit, and (ii) the sum of the aggregate
of (a) the lesser of the following with respect to each Eligible Leases, (x)
Ninety percent (90%) of the Present Value of the remaining contractual lease
payments, and (y) the actual cost of the Leased Property, less advance payments,
broker's fees and security deposits and (b) the lesser of the following with
respect to all the Eligible Mortgages (v) Ninety percent of the Present Value of
the remaining contractual mortgage payments and (w) five million dollars.
Business Day - Any day that is not a Saturday or Sunday or day on
which 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.
Collateral - All of Borrower's right, title and interest, whether
now or hereafter existing or acquired, in and to (i) the Leases and Leased
Property; (ii) the Mortgages and Mortgaged Property; (iii) Books and Records;
(iv) all Property of Borrower, including without limitation, all of Borrower's
deposit accounts, now or hereafter located with Lender or in Lender's
possession, and all documents and records associated therewith; and (y) all cash
and noncash proceeds, thereof, including insurance proceeds.
Collateral Assignment - Section 4.1(j)
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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 Lender
elects, in its 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 5.16 below.
Defaulted Mortgage - Any Mortgage where the Mortgage or Mortgaged
Property associated therewith fails, at any time, to comply with all the
representations and warranties set forth in Section 5.17 below.
Distribution -
(1) Dividends or other distributions on capital stock of Borrower;
and
(2) The redemption, repurchase or acquisition of such stock or of
warrants, rights or other options to purchase such stock.
Eligible Lease(s) - All Leases which meet at all times all of the
following specifications: (1) are not subject to any Lien, security interest or
prior assignment other than Borrower's and Lender's respective security
interests and the rights of the Lessees thereunder; (2) are valid and
enforceable Leases, representing the undisputed obligation of each Lessee, with
rentals due thereunder not more than 90 days contractually past due; (3) are not
subject to any defense, set off, counterclaim, deduction, allowance or
adjustment; (4) provide 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 Subsidiary or
Affiliate of Borrower, does not control Borrower, and is not under the control
of or under common control with Borrower; (8) are not Defaulted Leases and
comply with all general warranties set forth in Section 5.16 hereof, (9) are
Leases which have not been an "Eligible Lease" under the Borrowing Base for more
than twelve months in the aggregate; and (10) are Leases with initial stated
terms of not greater than 84 months.
Eligible Mortgage(s) - All Mortgages which meet at all times all of
the following specifications: (i) are not subject to any Lien, mortgage or prior
assignment other than Borrower's and Lender's respective mortgage, (2) are valid
and enforceable Mortgages, representing the undisputed obligation of each
Mortgagor; with payment thereunder, not more
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than 90 days contractually past due, (3) are not subject to any defense,
set-off, counterclaim, deduction, allowance or adjustment, (4) arise in the
ordinary course of Borrower's business, (5) Borrower has not received notice of
bankruptcy, receivership, reorganization, insolvency or a material adverse
change in the financial condition of Mortgagor, (6) Mortgagor is not a
Subsidiary or Affiliate of Borrower, does not control Borrower and is not under
common control with Borrower, (7) are not Defaulted Mortgages and comply with
all general warranties set forth in Section 5.17 hereof, (8) no Mortgages from
any single Mortgagor shall have an aggregate principal amount in excess of one
million dollars ($1,000,000), (9) are Mortgages with a tenor of no greater than
seven years, (10) Borrower shall have obtained an appraisal of the Mortgaged
Property from an independent expert satisfactory to Lender, (11) the amount of
the Mortgage shall be no greater than seventy-five percent of the appraisal
value Mortgaged Property, (12) each Mortgagor shall have been in business a
minimum of ten years, (13) the Mortgage is no prepayable except in the last six
months of the term of the Mortgage, (14) the principals of the Mortgagor or have
personally guaranteed the Mortgage, (15) there are no Mortgage renewal options,
(16) Mortgagor has had positive cash flow from operations for the last three
years.
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.
Expenses - Section 9.5.
Financial - T & W Financial Corp., an Affiliate of Borrower as an
entity consolidated with all its Affiliates for financial reporting purposes.
Financial Statements - The consolidated financial statements of
Financial prepared in accordance with GAAP.
GAAP - Generally accepted accounting principles as in effect on the
Closing Date, as 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 all rights under any remarketing agreements),
books, records, ledgers, journals, check books, print outs, blue prints,
designs, computer programs, computer tapes, formula, customer lists, chooses 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
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Hazardous Substance - Section 5.14.
Initial Term - Section 2.1 (d).
Inventory - The meaning ascribed thereto Pennsylvania Uniform
Commercial Code and shall include all additions, improvements, accessions,
attachments, upgrades, replacements and substitutions thereto or therefor.
Lease(s) - All of 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 and/or
pledged to Borrower, and now or hereafter designated on any schedule as being
assigned and/or pledged by Borrower to Lender pursuant to the terms hereof. The
term "Lease" includes (i) all payments to be made thereunder, (ii) all rights of
Borrower, as assignee therein, and (iii) any and all amendments, renewals,
extensions or guarantees thereof.
Leased Property. Any property leased or to be leased or financed
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 - AR liabilities of every kind of Financial as would be
shown on a consolidated Financial Statement of Financial prepared in accordance
with GAAP.
Libor - The one month Eurodollar Rate determined as provided in the
Revolving Credit Note.
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, encumbrance, pledge,
conditional sale or trust receipt, a lease, consignment or bailment for security
purposes, a trust, or an assignment.
Loans - Collectively, all Revolving Credit Loans.
Loan Documents - This Agreement, the Revolving Credit Note, the
Waiver and Estoppel, Collateral Assignment 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.
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Maturity Date - The later of October 30, 1997 or (ii) the last day
of the then Current Term.
Maximum Credit Limit - Ten Million Dollars ($ 10,000,000).
Mortgaged Property - Any property in which a Mortgage is granted to
Borrower; the term "Mortgaged Property" includes any and all additions,
improvements, fixtures, and buildings thereon.
Mortgage - All Accounts, Documents, General Intangibles,
Instruments and rents arising in connection with each and every mortgage in
real estate, assigned and/or pledged to Borrower, and now or hereafter
designated on any schedule as being assigned and/or pledged by Borrower to
Lender pursuant to the terms hereof The term "Mortgage" includes (i) all
payments to be made under the Note associated therewith, (ii) any and all
amendments, renewals, extensions and guaranties of the Note and/or Mortgage.
Mortgagor - The Mortgagor's or obligor(s) responsible for payment
and/or performance under a Mortgage.
Net Income - The consolidated net income after taxes of Financial
as such would appear on Financial's consolidated statement of income, 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 Lender, 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 Credit Facility and
any extensions, modifications, substitutions, increases and renewals thereof,
and the payment of all reasonable amounts advanced by Lender to preserve,
protect and enforce rights hereunder and in the Collateral and all Expenses
incurred by Lender 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, trust,
unincorporated association or organization, joint venture or any other entity.
Present Value - The value, from time to time, of the remaining
contractual lease payments due under a Lease or payments due under a Mortgage,
discounted at the rate of eight percent (8%) per annum.
Property - Any interest of Borrower in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
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Revolving Credit Note - Section 2.1(b).
Subsidiary - Any corporation more than fifty percent (50%) of whose
voting stock is legally and beneficially owned by Borrower or owned by a
corporation more than fifty percent (50%) of whose voting stock is legally and
beneficially owned by Borrower.
Surety(ies) - Collectively T & W Financial Corporation, a
Washington corporation. T & W Finance Corp. I, II, and a Delaware limited
liability corporations, Michael A. Price, Katherine M. Price, Thomas W. Price,
Patricia Price, Kenneth W. McCarthy Jr. and Paul Luke jointly and severally.
Surety Agreement - Section 3.7.
Tangible Net Worth - At any time means the amount of stockholders
equity, plus Subordinated Debt, on a consolidated basis (excluding trademarks
any future goodwill acquired, covenants not to compete, deferred closing costs
and all other intangible assets as that term is defined under GAAP).
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.
1.2 Capitalized Terms: All other capitalized terms not otherwise
defined herein, shall have the meaning ascribed thereto in the Pennsylvania
Uniform Commercial Code unless the context clearly indicates otherwise.
1.3 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,
Lender hereby establishes for the benefit of Borrower a credit facility ("Credit
Facility") which shall include Advances extended by Lender, in its sole
discretion, to or for the benefit of Borrower from time to time hereunder in the
form of revolving credit loans "Revolving credit Loans". Lender is not committed
to make any advance under the Credit Facility. The aggregate outstanding
principal amount of all Loans, at any time, shall not exceed the Maximum Credit.
The aggregate outstanding principal amount of all Revolving Credit
Loans at any
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time shall not exceed the Borrowing Base. 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, to be increased by future
Revolving Credit Loans which may be made by Lender. If the aggregate outstanding
amount of all Loans at any time exceeds the Maximum Credit Limit Borrower shall
immediately repay such excess in full. If the aggregate outstanding amount of
all Revolving Credit Loans exceeds the Borrowing Base, Borrower shall either
immediately (x) repay such excess in fall or (y) cause additional Eligible
Leases and/or additional Eligible Mortgages to be pledged in accordance with the
terms hereof Lender has the right at any time and from time to time, in its sole
discretion, (but without any obligation) to set aside reasonable reserves
against the Borrowing Base in such amounts as it may deem appropriate. The
obligations of Borrower under the Credit Facility and this Agreement shall at
all times be absolute and unconditional.
(ii) In no event shall the initial principal amount of any
Revolving Credit Loan be less than $100,000.
(b) At closing, Borrower shall execute and deliver its promissory
note to Lender for the total principal amount of the Maximum Credit Limit (as
may be amended, modified or replaced from time to time, the "Revolving Credit
Note"). The Revolving Credit Note shall evidence Borrower's absolute and
unconditional obligation to repay Lender for all Revolving credit Loans (which
have not been repaid) made by Lender 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 Note, which is
deemed incorporated herein by reference and made a part hereof. The Revolving
Credit Note 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 October 30, 1997. The Credit Facility may, nonetheless, be renewed annually
in Lender's sole discretion, for additional one year periods provided Borrower
requests such renewal at least 60 days prior to the anniversary date of this
Agreement. Upon such request, Lender shall notify Borrower of Lender's decision
no later than such anniversary date. After the Maturity Date no further Advances
shall be available from Lender.
(d) Borrower shall deliver, at least monthly on the first Business
Day of each month, and with each borrowing request, unless Lender requests
more-frequent delivery, a Borrowing Base Certificate in the form of Exhibit
"2.1(d)" attached hereto and made a part hereof, and made a part hereof,
executed by an Authorized Officer, evidencing the availability under the
Borrowing Base.
2.2 Advances 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 Expenses and
all other charges and any other obligations of Borrower hereunder, shall be made
to Lender at its main Philadelphia banking
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office CoreStates Bank, N.A., 1339 Chestnut Street, Philadelphia, Pennsylvania,
in United States dollars, in immediately available funds. Lender shall have the
unconditional right and discretion to charge Borrower's operating account 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 Lender from time to time
under the Credit Facility shall be made available by crediting such proceeds to
Borrower's operating account with Lender.
(ii) All Advances requested by Borrower must be requested by
11:00 A.M. Philadelphia time, three Business Days prior to the date of such
requested Advance. All requests or confirmation of requests for an Advance are
to be in writing and may be sent by telecopy or facsimile transmission provided
that Lender shall have the right to require that receipt of such request not be
effective unless confirmed via telephone with Lender.
2.3 Preconditions to Advances and Assignment of Leases and Leased
Property
(a) Before Lender will make any Advance or convert a Revolving
Credit Loan to a Term Loan:
(i) Borrower will deliver to Lender the following (dated and
signed) in form and substance satisfactory to Lender:
A. A borrowing request setting forth the requested date of the
Advance (but no sooner than 3 Business Days after Lender 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
Lender 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 Lender need not make any Advances
until it receives actual written confirmation and a Borrowing Base Certificate,
B. Such financial information concerning any of the Leases and
Mortgages, Borrower, Financial, any Lessee or any Mortgagor as Lender may
reasonably request, and
C. Such other instruments, agreements and documents as Lender
reasonably requests to carry out the intent of the parties to this Agreement.
(ii) No Event of Default has occurred hereunder or Unmatured
Event of Default shall have occurred hereunder and remain outstanding.
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(b) In order to increase the Borrowing Base, Borrower shall
deliver or cause to be delivered to Lender for the benefit of Lender the
following items:
(i) A description of the collateral package, which shall
include, a description of (a) the Lessee, 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 (b) the Mortgagor, the
Mortgaged Property, the appraised value of the Mortgaged Property, the net
remaining balance under the Mortgage(s), and the terms of and payments owned
under such Mortgage, and such other information which Lender shall reasonably
request,
(ii) An Assignment of Pledged Agreements signed by Borrower
assigning all of Borrowers right, title and interest in and to the Leased
Property and Leases and/or Mortgage Property and Mortgages to Lender, in the
form attached hereto as Exhibit "23(b)" ("Assignment of Pledged Agreements"),
(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) a copy of the appraisal for each Mortgaged Property,
(v) If requested by Lender, additional Uniform Commercial
Code ("UCC") financing statements covering, inter alia, the Leased Property and
the Leases and/or Mortgages, listing Lender, as secured party and Borrower as
debtor, to be filed in locations reasonably required by Lender,
(vi) 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 recording offices,
(vi) The sole original of each Lease for chattel paper
purposes under the UCC, along with all schedules and evidence of the assignment
thereof to Borrower, duly assigned to Lender,
(vii) The sole original of each promissory note or other
instrument evidencing Mortgagor's obligation and copies of each Mortgage,
(viii) Evidence that each item of Leased Property and
Mortgaged Property is insured against such risks, in such amounts, with such
insurance, and on such terms and conditions as shall be satisfactory to Lender
("Insurance Coverage"),
(ix) A certificate of acceptance or other document
evidencing that the Lessee has received and accepted the Leased Property, and
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(x) An undated notice signed by Borrower directing each
Lessee and Mortgagor to pay all sums due or to become due under each Lease and
Mortgage, as applicable, directly to Lender ("Lessee Notice") to be used only
following the occurrence of an Event of Default.
2.4 Credit Facility Interest:
Revolving Credit Loans: The unpaid principal balance of all
Revolving Credit Loans shall bear interest, subject to the terms hereof, at the
per annum rate equal to the Eurodollar Rate (as defined in the Revolving Credit
Note) for each advance. Interest on Revolving Credit Loans shall be due and
payable in arrears on the last day of each Eurodollar Interest Period (as
defined in the Revolving Credit Note).
2.5 Additional Interest Provisions.
(a) Calculation of Interest: Interest on the Loans, regardless of
the rate option, shall be based on a three hundred sixty (360) day year
comprised of twelve 30-day months 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, regardless of
the rate option, shall be increased to a rate equal to three (3%) percentage
points in excess of the applicable non-default interest rate.
(c) Continuation of Interest charges: All contractual rates of
interest chargeable on outstanding Loans, regardless of the rate option, 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 Lender has charged or received interest hereunder in excess of the
highest applicable rate, Lender, shall in its sole discretion, apply and set off
such excess interest received by Lender 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 Prepayments:
(a) Revolving Credit Loans: Subject to Section I(b), of the
Revolving Credit Note any portion of the principal on the Revolving Credit Note
may be prepaid at any time and
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from time to time in whole or in part without premium or penalty.
(b) Minimum Prepayment: Any and all prepayments shall be in a
minimum amount equal to the lesser of (i) the aggregate outstanding balance of
all Revolving Credit Loans being prepaid or (ii) $50,000.
(c) Proceeds of Collateral: Prior to the occurrence of an Event of
Default, (i) proceeds from the sale or other disposition of Collateral
comprising a portion of the Borrowing Base to the extent that the aggregate
outstanding amount of all Revolving Credit Loans exceeds the Borrowing Base,
shall promptly be paid to Lender 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 Lender and Lender may
apply such proceeds to any of Borrower's Obligations in such order as Lender may
decide in its sole discretion.
(d) 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. If the aggregate outstanding amount of
all Revolving Credit Loans exceeds the Borrowing Base, Borrower shall either
immediately (i) repay such excess in full or (ii) pledge additional Eligible
Leases and/or Eligible Mortgages in accordance with the terms hereof Following
the occurrence of an Event of Default, all such prepayments shall be applied to
Borrower's obligation in such order as Lender may decide in its sole discretion.
2.7 Use of Proceeds: The extensions of credit under and proceeds of the
Credit Facility shall be used to provide Borrower with working capital.
2.8 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 Lender allocates capital resources to its commitments (including any
commitments hereunder), and as a result thereof, in the opinion of Lender, the
rate of return on Lender's capital with regard to the Loans is reduced to a
level below that which Lender could have achieved but for such circumstances,
then in such case and upon notice from Lender to Borrower, from time to time,
Borrower shall pay Lender such additional amount or amounts as shall compensate
Lender for such reduction in its rate of return. Such notice shall contain the
statement of 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, Lender may use any reasonable method of averaging and attribution that
it deems applicable.
SECTION 3. COLLATERAL
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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 assigns and grants to
Lender a continuing first lien on and security interest in, upon and to the
Collateral.
3.2 Lien Documents: At Closing and thereafter as Lender deems
necessary, Borrower shall execute and deliver to Lender, or have executed and
delivered (all in form and substance reasonably satisfactory to Lender):
(a) Financing Statements - Financing statements pursuant to the
UCC, which Lender may file in any jurisdiction where any Collateral is or may be
located and in any other jurisdiction that Lender deems appropriate; and
(b) Other Agreements - Any other agreements, documents, instruments
and writings, including, without limitation, security agreements and Assignment
of Pledged Agreements, reasonably required by Lender to evidence, perfect or
protect Lender's hens and security interest in the Collateral or as Lender may
reasonably request from time to time.
3.3 Other Actions: In addition to the foregoing, Borrower shall do
anything further that may be lawfully and reasonably required by Lender to
effectuate the intentions and objects of this Agreement, including, but not
limited to, the execution and delivery of lockbox agreements (following the
occurrence of an Event of Default), continuation statements, amendments 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 Lender's Lien thereon)
to Lender, all items for which Lender must or may receive possession to obtain a
perfected security interest, including without limitation, all Leases,
Mortgages, notes, certificates and documents of title, chattel paper, warehouse
receipts, instruments, and any other similar instruments constituting
Collateral.
3.4 Searches: Lender shall, prior to or at Closing, and thereafter as
Lender may reasonably determine from time to time, at Borrower's 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 searches with the Secretary of State and
local filing office of each state where Borrower maintain their executive
office, a place of business, or assets;
(b) Judgements, 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 Lender good standing certificates showing Borrower and the
Sureties to be in good standing in their respective states of incorporation and
in each other state or foreign country in which such entity is doing and
presently intends to do business for which a failure to be so qualified might
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have material adverse effect on Borrower's, or Sureties business, financial
condition, property or Lender's 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 Lender is hereby
irrevocably made, constituted and appointed 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 Lender hereunder or is necessary to perfect Lender's 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)
following an Event of Default, do such other and further acts and deeds in the
name of Borrower that Lender may reasonably deem necessary or desirable to
enforce any Account or other Collateral, including without limitation, execute a
bill of sale containing no representations, warranties or indemnities on behalf
of Borrower, in the name of Lender or Borrower, in favor of a third party
purchaser of any Property constituting Collateral.
3.7 Sureties: Each Surety shall jointly and severally, absolutely and
unconditionally, guarantee as surety, the Obligations of Borrower and shall
execute and deliver to Lender, at Closing, a Surety Agreement in form and
substance satisfactory to Lender ("Surety Agreement").
SECTION 4. CLOSING AND CONDITION PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following conditions
precedent (all documents to be in form and substance satisfactory to Lender and
Lender's counsel):
4.1 Resolutions, opinions. and other Documents: Borrower shall have
delivered to Lender the following:
(a) this Agreement and the Revolving Credit Note, 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 Note
to be issued hereunder and each document required to be delivered by any Section
hereof and (ii) Borrower's Articles of
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Incorporation and By-laws;
(d) an incumbency certificate identifying all Authorized officers
of Borrower, with specimen signatures;
(e) a written opinion of Borrower's independent counsel addressed
to Lender,
(f) agreement to pay or payment by Borrower of all Expenses
associated with the Credit Facility incurred to the Closing Date;
(g) Uniform Commercial Code, 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 and Corporate Tax Lien
Search Certificates showing no tax Liens on Borrower's Property and 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 Lender's rights hereunder;
(h) an initial borrowing base certificate dated the Closing Date
evidencing Borrower's minimum borrowing availability under the Borrowing Base as
of the Closing Date;
(i) a Surety Agreement from each Surety, pursuant to which such
Surety, guarantees as surety all of the obligations of Borrower to Lender along
with corporate resolutions and incumbency certificates from Financial
authorizing the execution of the Surety Agreements;
(j) a collateral pledge agreement ("Collateral Assignment")
pursuant to which Borrower shall pledge to Lender, as security for its
obligations, all of its right, title and interest in the Collateral;
4.2 Absence of Certain Event: 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
compiled 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: Lender shall have received a certificate
dated the Closing
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Date and signed by an Authorized officer of Borrower certifying that all of the
conditions specified in this Section have been fulfilled.
4.6 Closing: Subject to the conditions of this Section 4, and the sole
discretion of Lender, the Credit Facility shall be made available upon execution
hereof and completion of the conditions contained in Section 4.1 hereof (the
"Closing Date")
4.7 Non-Waiver of Rights: By completing the Closing hereunder, or by
making advances hereunder, Lender does not thereby waive a breach of any
warranty, representation or covenant made by Borrower hereunder or any
agreement, document, or instrument delivered to Lender or otherwise referred to
herein, and any claims and rights of Lender resulting from any breach or
misrepresentation by Borrower are specifically reserved by Lender.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lender to complete the Closing and make the initial Advances
under the Credit Facility to Borrower, Borrower warrants and represents to
Lender that:
5.1 Corporate Organization and Validity:
(a) Borrower is a corporation duly organized and validly existing
under the laws of its state of incorporation, 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 charter, minutes or bylaw
provisions 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 charter, minutes 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 corporate action to
authorize the execution, delivery and performance of this Agreement, and the
documents and related agreements required hereby.
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(d) This Agreement, the Revolving Credit Note 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 Leases and the Mortgages
other books and records concerning the Collateral, are at the addresses listed
in Exhibit "5.2" attached hereto and made a part hereof.
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 or any
Affiliate or shareholder thereof, in any court or before any governmental
authority or arbitration board or tribunal 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 has advised
Lender of the litigation matters disclosed on Exhibit "5.3" attached hereto.
5.4 Title to Collateral: Borrower has valid, first priority perfected
security interest in the Mortgaged Property. Borrower has good and marketable
title to all of the Collateral (except the Mortgaged Property) free from Liens
or claims, except for the interests of Lender, as applicable and except claims
and rights of Lessees under the Leases and the Mortgagor with respect to the
Mortgaged Properties.
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 Note 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 Note 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:
(a) Financial's annual internally prepared balance sheet as of
fiscal year end 1995 and the internal quarterly balance sheet as of June 30,
1996 and the related income statements as of such dates, (complete copies of
which have been delivered to Lender), have
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<PAGE> 23
been prepared in accordance with GAAP and present fairly, accurately and
completely the financial position of Financial as of such dates and the results
of its operations for such periods.
(b) The fiscal year for Borrower currently ends on December 3 1.
Borrower's federal tax identification number is 911547059.
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 Lender 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
fisted on Exhibit "5.9" attached hereto and made a part hereof
5.10 Guarantees/Contracts:
(a) Borrower does not own nor hold equity or long term debt
investments in, has any outstanding advances to, or serves as guarantor, surety
or accommodation maker for the obligations of, or has any outstanding borrowings
from any Person except as described in Exhibit "5.10", attached hereto and a
made part hereof.
(b) Borrower is not a party to any contract or agreement, or
subject to any charter or other corporate restriction, which materially and
adversely affects its business, financial condition, property or prospects or
its ability to perform hereunder.
5.11 Government Regulations, etc.:
(a) 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.
(b) 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: Within five (5) years prior to the Closing Date, neither
Borrower nor Financial has conducted business under or used any other name
(whether corporate or assumed) except for the names shown on Exhibit "5.12",
attached hereto and made a pan hereof.
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<PAGE> 24
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
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 of such real property or where made a part hereof
Substances that have occurred or are presently occurring on 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. 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.
5.16 Leases and Leased Property: Each Lease reported to Lender 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 "5.16" 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 the Books and Records relating thereto are
accurate, complete and genuine;
(b) The sole original of each Lease has been delivered to Lender,
and all other counterparts of each Lease shall contain a legend stating that the
Lease has been assigned to
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<PAGE> 25
CoreStates Bank, N.A, pursuant to that certain Loan and Security Agreement dated
October 1996, 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) Except as otherwise consented to by Lender in writing, no more
than ten (10%) percent of the Credit Facility is secured by Leases with the same
Lessee (or its Affiliates);
(e) The original amount and unpaid balance of each Lease shown on
the Books and Records and on any statement or schedule delivered to Lender 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 unless such prepayment has been delivered to Lender within 5 days of the
date of such prepayment;
(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, set off, 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) Neither Borrower nor Financial has, and neither will, 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 or
Financial to such Lessee against future rentals accruing under the Lease;
(h) Each item, of Leased Property has been delivered to and, in all
instances, accepted by the Lessee and to the best of Borrower's knowledge,
information and belief is in good condition, ordinary wear and tear accepted,
has not been lost, stolen, destroyed or damaged and has not been removed from
service;
(i) Each Lease has been duly executed by Borrower and each Lessee
and 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 had the authority to assign
all of its right, title and interest therein as provided herein;
(j) Each of the Leases and all Leased Property which is the subject
matter thereof at the time of its assignment to Lender and at all times
thereafter, will be free and clear of any and all assignments, options, rights,
or other Liens whatsoever except Borrower's and
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<PAGE> 26
Lender's;
(k) Financial made an adequate credit investigation of each Lessee
and determined that the Lessee's credit was satisfactory;
(1) All costs, fees, and expenses incurred in making and closing
each of the Leases has been paid and each Lease is and will be current at the
time of the assignment thereof to Lender. No Lessee is in default under the
corresponding Lease nor to the best of Borrower's knowledge, information and
belief, does an event exist which with the giving of notice or the passage of
time or both, will result in a default under any Lease,
(m) 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 Financial 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;
(n) Borrower has a valid, first priority perfected lien and
security interest in each Lease and the corresponding Leased Property;
(o) Lender has a valid, first priority perfected lien and security
interest in each Lease and the Leased Property subject to no other Lien.
Borrower has taken and in the future, shall take all steps necessary to maintain
Lender's first perfected lien and security interest in each Lease and the Leased
Property including, if required, ensuring that Borrower's security interest (in
the event the Lease is not a "true lease") is perfected through filing financing
statements, amendments thereto, or assignments and/or continuations thereof and
recording of the documentation necessary to perfect Borrower's Liens;
(p) For each Lease, Borrower 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,
in favor of Borrower and Borrower and Lender, as assignees;
(q) Each Lease is valid and enforceable and presents the undisputed
obligation of the Lessee named therein and is not more than ninety (90) days
contractually past due;
(r) Each item of Leased Property has been insured in the ordinary
course of Borrower's or the corresponding Lessee's business;
(s) Borrower has not received notice of a bankruptcy, receivership,
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<PAGE> 27
reorganization or insolvency of any Lessee;
(t) No Lessee is a subsidiary, or Financial or Borrower, or under
common control with Financial or Borrower or is an officer or employee of
either; and
(u) No Lease has been restructured due to a Lessee default or
provides for the lease of Leased Property, ownership of which is evidenced by
certificate of title.
5.17 Mortgages and Mortgaged Property: Each Mortgage reported to Lender
as an Eligible Mortgage and the Mortgaged Property associated therewith shall,
at all times when such Mortgages are included in the Borrowing Base
calculation, be in compliance with all of the following representations.
(a) Each Mortgage 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 Mortgagor and the Mortgaged
Property named and referenced therein, constitutes (along with the note issued
with respect thereto) the entire agreement for the financing of the Mortgaged
Property thereby covered, has not been altered or amended, except as set forth
in the related schedules and the Books and Records relating thereto are
accurate, complete and genuine;
(b) The sole original of each note related to a Mortgage;
(c) Except as otherwise consented to by Lender in writing, no more
than One Million Dollars of the outstandings under the Credit Facility is
secured by Mortgages with the same Mortgagor (or its Affiliates);
(d) The original amount and unpaid balance of each Mortgage shown
on the Books and Records and on any statement or schedule delivered to Lender in
connection therewith is the true and correct amount actually owed Borrower, no
portion of which, except as specifically provided for in the Mortgage, has been
prepaid unless such prepayment has been delivered to Lender within 5 days of the
date of such prepayment;
(e) The amount due under each Mortgage is not subject to, and the
terms of the Mortgage provide that the Mortgagee may not assert, any claim or
reduction, counterclaim, set off, recoupment, or any other claim, allowance or
adjustment and no Mortgage has been renegotiated, restructured or compromised
except as renewed in the ordinary course of business;
(f) Neither Borrower nor Financial has, and neither will, enter
into any agreement with a Mortgagor of any Mortgaged Property which provides,
directly or indirectly, for the crediting of any obligation or liability of
Borrower or Financial to such Mortgagor against future payments, accruing under
the Mortgage;
(g) Each Mortgage has been duly executed by Borrower and each
Mortgagor
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<PAGE> 28
and is a valid, legal and binding obligation of Financial, and such Mortgagor,
and is enforceable against Borrower and such Mortgagor in accordance with its
terms. Borrower is the sole owner of each of the Mortgages and had the authority
to assign all of its right, title and interest therein upon the terms set forth
herein;
(h) Each of the Mortgages and all Mortgaged Property which is the
subject matter thereof at the time of its assignment to Lender and at all times
thereafter, will be free and clear of any and all assignments, options, rights,
or other Liens whatsoever except Borrower's and Lender's;
(i) Financial made an adequate credit investigation of each
Mortgagor determined that the Mortgagor's credit was satisfactory;
(j) All cost, fees, and expenses incurred in making and closing
each of the Mortgage has been paid and each Mortgage is and will be current at
the time of the assignment thereof to Lender. No Mortgagor is in default under
the corresponding Mortgage nor to the best of Borrower's knowledge, information
and belief, does an event exist which with the giving of notice or the passage
of time or both will result in a default under any Mortgage.
(k) All rentals, fees, costs, expenses and charges paid or payable
by the Mortgagor under any Mortgage, including without limitation, any brokerage
and other fees paid to Borrower do not violate any laws relating to the maximum
fees, cost, expenses or charges that can be charged in any state in which any
Mortgaged Property is located or in which the corresponding Mortgagor located,
or in which a transaction was consummated, or in any other state which may have
jurisdiction with respect to any such Mortgaged Property, Mortgage or Mortgagee;
(1) Borrower has a valid, first priority perfected lien and
Mortgage in each Mortgaged Property.
(m) Lender has a valid, first priority perfected lien and security
interest in each Mortgage and the Mortgaged Property subject to no other Lien.
Borrower has taken and in the future, shall take all steps necessary to maintain
Lender's first perfected lien and security interest in each Mortgage and the
Mortgaged Property.
(n) Each Mortgage is valid and enforceable and presents the
undisputed obligation of the Mortgage named therein and is not more than ninety
(90) days contractually past due;
(o) Each item of Mortgaged Property has been insured in the
ordinary course of Borrower's or the corresponding Mortgagor's business;
(p) Neither Financial nor Borrower have received notice of
bankruptcy,
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<PAGE> 29
receivership, reorganization or insolvency of any Mortgagor;
(q) No Mortgagor is a subsidiary, or Affiliate of Financial or
Borrower, or under common control with Financial or Borrower or is an officer or
employee of either; and
(r) No Mortgage has been restructured due to a Mortgagor default.
(s) Lender has been duly recorded in the appropriate real estate
records office as the Mortgagee of records as to each Mortgage.
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants that until all of Borrower's Obligations to Lender
are paid and satisfied in full and the Revolving Credit 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 caused to be
maintained insurance, including without limitation, insurance on the Collateral
against fire, flood, casualty and such other hazards and business interruption
insurance, in such amounts, with such deductibles and with such insurers as are
customarily used by companies operating in the same industry as Borrower,
Financial or the corresponding to Closing, Borrower shall furnish Lender with
such evidence of insurance as Lender may require. Borrower hereby appoints
Lender as Borrower's attorney-in-fact, exercisable at Lender'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 Lender pursuant to the
provisions of this paragraph may be applied by Lender to Borrower's Obligations,
Borrower also agrees to notify Lender, promptly, upon Borrower's receipt of a
notice of termination, cancellation, or non-renewal from its insurance company
of any such policy.
(b) 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 Lender.
(c) Corporate Existence and Rights - Borrower shall do (or cause to
be done) all things necessary to preserve and keep in full force and effect its
existence, good standing, rights and franchises.
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<PAGE> 30
(d) Compliance with Laws - Borrower shall be in compliance in all
material respects 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 shall obtain and maintain any and all licenses,
permits, franchises 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 Lender of any
litigation claiming in excess of $50,000 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, Mortgages or the
acquisition, sale or lease of any of the Leased Property.
6.6 Bank Accounts: Within a reasonable period of time hereafter and to
the extent practicable, Borrower shall maintain its major depository and
disbursement account(s) with Lender.
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 Sections 2.2 and 2.3
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<PAGE> 31
hereof;
(d) No Lien including, without limitation, any federal tax Lien,
has been imposed on Borrower or Financial which may, in any way, take priority
over Lender's 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; provided that
Borrower may update the representations in Section 5 to accurately reflect the
state of Borrower's affairs as of the date of a request for an Advance by giving
written notice thereof to Lender, and further provided that such updates do not
reflect events or conditions which constitute violations of Section 6 or 7
hereof or otherwise reflect material adverse developments.
6.8 Financial Covenants: Borrower shall cause Financial to maintain and
comply with the following financial covenants as reflected on and computed from
the Financial Statements:
(a) Adjusted Debt to Tangible Net Worth Ratio: Financial 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, of not more than: 6 to 1.
(b) Tangible Net Worth: Financial 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 $4,000,000.00 plus an amount equal
to 50% of Financial's Net Income, without respect to losses, for each fiscal
year commencing with the fiscal year ending December 31, 1994.
6.9 Financial and Business information: Borrower shall deliver to
Lender the following:
(a) Financial Statements and Collateral Reports: such data,
reports, statements and information, financial or otherwise, as Lender may
reasonably request, including, without limitation:
(i) within one hundred twenty (120) days after the end of each
fiscal year of Borrower, deliver to Lender, the Financial Statements for such
year including the balance sheet of Financial 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 Financial and reasonably satisfactory to the
Lender 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 Financial's financial condition. Such independent
accountants shall also provide a statement certifying that nothing has come to
their attention to cause them to believe
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that calculations contained in the compliance certificate are inaccurate.
(ii) within fifteen (15) days of the end of each calendar
month, deliver to Lender, Borrower's Lease receivables and Mortgage receivables
aging report and such other reports as Lender reasonably deem necessary,
certified by, an Authorized officer as true and correct, all in form and
substance reasonably satisfactory to Lender;
(iii) within forty-five (45) days after the end of each fiscal
quarter, deliver to Lender Financial's internally prepared quarterly
consolidated Financial Statements, including balance sheet and income statement.
(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 Urmatured 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 $100,000;
(d) Securities and other Reports - if Borrower or Financial shall be
required to file any reports with any federal or state securities exchange
commission promptly upon their becoming available, one copy of each financial
statement, report, notice or proxy statement sent by such entity to stockholders
generally, and, a copy of each regular or periodic report, and any registration
statement, or prospectus in respect thereof
6.10 Officers' Certificates: Along with the set of Financial Statements
delivered to Lender at the end of each fiscal quarter and fiscal year pursuant
to Section 6.9(a) hereof, deliver to Lender a certificate (in the form of
Exhibit "6.10" attached hereto and made a part hereof) from an Authorized
Officer of Borrower setting forth:
(a) Covenant Compliance - the information (including detailed
calculations) required in order to establish whether Borrower is in compliance
with the requirements of Sections 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
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such condition or event existed or exists, specifying the nature and period of
existence the what action Borrower has taken or proposes to take with respect
thereto.
6.11 Inspection: Borrower will permit and cause Borrower to permit, any
of Lender's officers or other representatives to visit and inspect any of
Borrower's locations where any Collateral is kept during regular business hours
upon reasonable prior notice, to examine and audit all of such entities' 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. All such inspections
(anticipated to be performed twice a year) shall be at Borrower's expense at the
standard rates charged by the Lender or an outside firm engaged to perform such
services, for such activities (plus the Lender's or such outside firm's Out,
of-pocket expenses), provided that prior to the occurrence of an Event of
Default, Borrower will not be liable for audit fees and expenses in excess of
Five Thousand Dollars ($5,000) per annum.
6.12 Tax Returns and Reports: At Lender's request from time to time,
Borrower shall promptly furnish Lender with copies of the annual federal and
state income tax returns of Borrower and Financial.
6.13 Material Adverse Developments: Borrower agrees that promptly 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 Lender prompt written notice specifying the nature of such development
or information and such anticipated effect.
6.14 Places of Business: Borrower shall give thirty (30) days prior
written notice to Lender of any changes in the location of any of its respective
places of business, of the places where its books and records are kept, or the
establishment of any new, or the discontinuance of any existing place of
business.
6.15 Sale of Collateral: Borrower shall mark its books and records to
indicate Lender's security interest in the Collateral, including the Leases
Leased Property, Mortgages and Mortgaged Property and, unless Lender consents
otherwise in writing, Borrower shall cause Borrower to retain title at all times
to the Leased Property; provided 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 Leases and Leased Property and Mortgages
pursuant to Securitization Transactions or otherwise. So long as no Event of
Default or Unmatured Event of Default has occurred, upon receipt of the proceeds
(if required) from the sale of such Leases, Leased Property and/or Mortgages.
Lender shall execute such documentation as is reasonably necessary to release
its security interest in such Leases, Lease Property and/or Mortgages.
6.16. Receipt of Payments: Prior to the occurrence of an Event of
Default and the Lender's notification to (i) Lessees to redirect payments under
Leases and (ii) Mortgagors to
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redirect payments under the Mortgages to a place designated by Lender, Borrower
shall direct all Lessees and Mortgagors to make payments to Borrower shall
notify Lender in writing prior to Financial changing such address or the
location where payments are to be received.
SECTION 7. BORROWER'S NEGATIVE COVENANTS:
Borrower covenants that until all of Borrower's Obligations to Lender
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, and shall cause Financial not to, sell,
lease, license transfer or otherwise dispose of their respective Property other
than Property sold in the ordinary course or ordinary operation of their
respective businesses without Lender's prior written consent.
(b) Borrower shall not merge or consolidate with, or acquire, any
other Person or commence a dissolution or liquidation.
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 other than a Lien in favor of Lender
and rights of Lessees under Leases.
7.3 Negative Pledge: Borrower shall not pledge, grant or permit any
Lien to exist on the common stock of its Subsidiaries and Affiliated nor on any
Lease, Leased Property or Mortgage other than a Lien in favor of Lender and
rights of Lessees under Leases.
7.4 Transactions With Affiliates or Subsidiaries:
(a) Borrower shall not enter into any transaction with any
Subsidiary or other Affiliate including, without limitation, the purchase, sale,
lease or exchange of Property, or the loaning or giving of funds to any
Affiliate or any Subsidiary, other than pursuant to the Financial Loan
Documents, 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 prohibited 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
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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, and unless
otherwise consented to by Lender, Borrower shall not become or be liable,
directly or indirectly, primary or secondary, matured or contingent, in any
manner, whether as guarantor, surety, accommodation maker, or otherwise, for the
existing or future indebtedness of any kind of any Person.
7.6 Distributions, Redgntions and Other Indebtedness: Borrower shall
not declare or pay or make any forms of Distribution in any fiscal year, to its
shareholders, their successors or assigns.
7.7 Use of Lender's Name: Borrower shall not use Lender's name (or the
name of any of any Lender's Affiliates) in connection with any of its business
operations except to identify the existence of the Credit Facility and the name
of the Lender 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.
7.8 Change of Ownership Interests: Thomas W. Price, Patricia Price,
Michael A. Price and Katherine Price shall not at any time own less than 100%,
of the capital stock of Financial entitled to vote generally.
7.9 Change of Management: The President of Financial or the Borrower
shall not at any time be a Person other than Thomas W. Price or Michael A.
Price, unless otherwise consented to by Lender in writing.
SECTION 8. DEFAULT
8.1. Events of Default: Each of the following events shall constitute
an event of default ("Event of Default") and Lender shall thereupon have the
option, 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 (h), (i) or (j) 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 on the due date of such payment and such
failure to pay is not cured within 5 days of the date such payment is due and
payable; or
(b) Other Charges - if Borrower fails to pay any other charges,
fees, Expenses or other monetary obligations owing to Lender arising out of or
incurred in connection with this Agreement and such failure to pay is not cured
within 5 days of the date such payment is due and payable; or
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(c) Particular Covenant Defaults - if Borrower fails to perform,
comply with or observe any covenant or undertaking contained in this Agreement,
provided however, that with respect only to the covenants contained in Sections
6.1 and 6.5, Borrower shall have 20 days from the date upon which Borrower first
becomes aware of the occurrence of such failure to comply with or observe such
covenants; or
(d) Warranties or Representatives - 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 reference to this Agreement, is
false, erroneous, or misleading in any material respect when made; or
(e) Agreements with Others - if Borrower shall default beyond any
grace period under any agreement with any creditor for borrowed money in excess
of $100,000 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 such failure to perform causes Borrower's obligations which
are the subject of such agreement to become due prior to the stated maturity
date or the regularly scheduled date of payment; or
(f) Other Agreements with Lender - 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 Lender including without limitation, the Revolving Credit Note,
hereunder and the Collateral Assignment; or
(g) Judgements - if any final judgment for the payment of money in
excess of $50,000 which is not fully and unconditionally covered by insurance or
for which Borrower has not established a cash or cash equivalent reserve in the
amount of such judgment shall be rendered, which has not been dismissed, bonded
or stayed within, or which remains undischarged or unpaid for a period of, 45
days after the entry thereof; or
(h) Assignment for Benefit of Creditors, etc. - if Borrower or
Financial, 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 or Financial which might materially and adversely
affect any such entity; or
(i) Bankruptcy, Dissolution, etc. - upon the commencement of any
action for the dissolution or liquidation of Borrower or Financial or the
commencement of any proceeding to avoid any transaction entered into by any such
entity, or the commencement of any case or proceeding for reorganization or
liquidation of any such entity's debts under the Bankruptcy Code or any other
state or federal law, now or hereafter enacted for the relief of debtors,
whether instituted by or against such entity; provided, however, that such
entity shall have sixty (60) days to obtain the dismissal or discharge of
involuntary proceedings filed against
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it, it being understood that notwithstanding the discretionary nature of the
Credit Facility, during such sixty (60) day period, Lender shall be under no
obligation to make Advances hereunder and Lender may seek adequate protection in
any bankruptcy proceeding; or
(j) Receiver - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for Borrower or for any of
Borrower's Property; or
(k) Execution Process, Seizure, etc. - the issuance of any
execution or distraint process against Borrower, or any material Property of
Borrower is seized by any governmental entity, federal state or local; or
(1) Termination of Business - if Borrower or Financial cease any
material portion of its business operations as presently conducted; or
(m) Investigations - any indication or evidence received by Lender
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 if an officer or director of
Financial, or Borrower is the subject of an indictment; or
(n) Surety - if any Surety breaches or defaults under the terms
and conditions of its respective Surety Agreement, or any such Surety Agreement
ceases to be in full force and effect.
8.2 Cure - Nothing contained in this Agreement or the Loan Documents
shall be deemed to compel Lender 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 Lender under this Agreement or the Loan Documents (each of which
is also then exercisable by Lender), Lender may, in its discretion, upon or at
any time after the occurrence and during the continuance of an Event of Default,
to terminate the Credit Facility.
(b) In addition to all other rights, options and remedies granted
or available to Lender under this Agreement or the Loan Documents (each of which
is also then exercisable by Lender), Lender 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 subject to the rights of the Lessees and
Mortgagors, 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 and
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Mortgagors of Lender's security interest in the Collateral and require payment
under the Leases and Mortgages to be made directly to Lender and Lender may, in
its own name or in the name of Borrower, exercise all rights of the lessor under
the Leases and the Mortgagee under the Mortgages and collect, sue for and
receive payment on all Leases and Mortgages, and settle, compromise and adjust
the same on any terms as may be satisfactory to Lender, in its sole and absolute
discretion for any reason or without reason and Lender 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 Lender); or
(ii) By its own means or with judicial assistance, subject to
the rights of the Lessees and Mortgagors, 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 (e)
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 expense, subject to the
rights of the Lessees, to assemble all or any part of the Leased Property and
make it available to Lender at any place designated by Lender; or
(e) Borrower hereby agrees that a notice received by it at least
ten (10) 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
permitted 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
Lender without prior notice to Borrower. Borrower covenants and agrees not to
interfere with or impose any obstacle to Lander'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 Lender
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 Lender 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 Lender, 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 Lender or any
participant is attached or otherwise liened or levied upon by any third party,
Lender (and such participant) 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. Lender will use
its best efforts to give Borrower prompt notice after exercise of any offset
right; provided that Lender's failure to give such notice shall not result in
any liability of Lender to Borrower.
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SECTION 9. MISCELLANEOUS
9.1 GOVERNING LAW. THIS AGREEMENT, THE REVOLVING CREDIT NOTE, 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.
9.2 Integrated Agreement: The Revolving Credit Note, 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 Lender's rights and remedies. If, after applying the foregoing, an
express inconsistency still exists, the provisions of this Agreement shall
constitute an amendment thereto and shall control.
9.3 Waiver:
(a) No omission or delay by Lender in exercising 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 Lender and then only to the extent specified.
(b) Borrower releases and shall indemnify, defend and hold harmless
Lender, and its 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 or 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 from
acts or conduct of Lender constituting wilful misconduct or gross negligence.
9.4 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
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performance under all provisions of this Agreement and all related agreements
and documents.
9.5 Expenses of Lender: At Closing and from time to time thereafter,
Borrower will pay all reasonable expenses of Lender on demand (including,
without limitation, search costs, audit fees (as provided in Section 6.11), and
the reasonable fees and expenses of legal counsel for Lender) relating to this
Agreement, and all related agreements and documents, including, without
limitation, expenses incurred in the analysis, negotiation, preparation,
closing, administration and enforcement of this Agreement and the other Loan
Documents, the enforcement, protection and defense of the rights of Lender in
and to the Loans and Collateral or otherwise hereunder, and any reasonable
expenses relating to extensions, amendments, waivers or consents pursuant to the
provisions hereof, or any related agreements and documents or relating to
agreements with other creditors, or termination of this agreement (collectively,
the "Expenses").
9.6 Brokerage: This transaction was brought about and entered into by
Lender 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 Lender to the payment of any brokerage fee, commission or
charge in connection with this transaction.
9.7 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 Lender to: CoreStates Bank, N.A.
1339 Chestnut Street
Philadelphia, PA 19107
Attn: S. Scott Gates, AVP
Telecopy No.: 215/786-7704
If to Borrower to: T & W Funding Company VI, L.L.C.
c/o T & W Financial Corp.
6416 16th Street, E
Tacoma, Washington 98424
Attn: Michael A. Price, President
Telecopy No.: (206) 926-0739
(b) Any notice sent by Lender or Borrower by any of the above
methods shall be deemed to be given when so received.
(c) Lender 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
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otherwise) as being genuine and authorized.
9.8 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.
9.9 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 Lender, and shall
survive the delivery to Lender of the Revolving Credit Note regardless of any
investigation made by Lender or on their behalf. All statements in any such
certificate or other instrument prepared and/or delivered for the benefit of
Lender shall constitute warranties and representations 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.
9.10 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.
9.11 Counterparts: This Agreement may be executed in counterparts, all
of which counterparts taken together shall constitute one completed fully
executed document.
9.12 Modification: No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed by Borrower
and Lender.
9.13 Signatories: Each individual signatory hereto represents and
warrants that he is duly authorized to execute this Agreement on behalf of his
principal and that he executes the Agreement in such capacity and not as a
party.
9.14 Third Parties: No rights are intended to be created hereunder, or
under any related agreements or documents for the benefit of any third party,
creditor or incidental beneficiary of Borrower. Nothing contained in this
Agreement shall be construed as a delegation to Lender of Borrower's duty of
performance, including, without limitation, Borrower's duties under any Lease,
account or contract with any other Person.
9.15 Discharge of Taxes, Borrower's Obligations, Etc.: Lender, 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 Lender, to: (a) pay for the performance
of any of Borrower's obligations hereunder, and (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. Expenses and advances shall be added to the
Revolving Credit, bear interest at the same rate applied to the
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Revolving Credit, until reimbursed to Lender. Such payments and advances made by
Lender shall not be construed as a waiver by Lender of an Event of Default under
this Agreement.
9.16 Consent to Jurisdiction: Borrower and Lender hereby irrevocably
consent 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, under the Revolving Credit Note, or under any other agreement or
undertaking and irrevocably agree to service of process by certified mail,
return receipt requested to the address of the appropriate party set forth
herein.
9.17 Waiver of Jury Trial: EACH OF BORROWER AND LENDER HEREBY WAIVES
ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION
COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO OR UNDER THE LOAN DOCUMENTS.
9.18 WARRANT OF ATTORNEY: BORROWER HEREBY AUTHORIZES AND EMPOWERS ANY
ATTORNEY OR ATTORNEYS OR THE PROTHONOTARY OR CLERK OR ANY COURT OF RECORD IN THE
COMMONWEALTH OR PENNSYLVANIA, UPON THE FAILURE BY BORROWER TO PAY WHEN DUE ANY
SUM PAYABLE BY BORROWER PURSUANT TO THIS AGREEMENT, 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 JUDGEMENT AGAINST
BORROWER IN FAVOR OF THE LENDER FOR ALL SUMS DUE OR TO BECOME DUE BY BORROWER TO
LENDER 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 JUDGEMENT 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 LENDER BEFORE A JUDGMENT CAN BE ENTERED UNDER OR BEFORE
EXECUTION MAY BE LEVIED ON SUCH JUDGEMENT AGAINST ANY AND ALL PROPERTY OF
BORROWER, HEREBY WAIVES THESE
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RIGHTS AND AGREES AND CONSENTS TO JUDGEMENT BEING ENTERED BY CONFESSION IN
ACCORDANCE WITH THE TERMS HEREOF AND EXECUTION BEING LEVIED ON SUCH JUDGEMENT
AGAINST ANY AND ALL PROPERTY OF BORROWER, IN EACH CASE WITHOUT FIRST GIVING
NOTICE AND THE OPPORTUNITY TO BE BEARD ON THE VALIDITY OF THE CLAIM OR CLAIMS
UPON WHICH SUCH JUDGEMENT IS ENTERED.
9.19 Information to Participant: Lender may divulge 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, all information, and
furnish to 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 reassignee agrees to hold in confidence all confidential
or proprietary information provided to them by Borrower or Lender 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, co-lender 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.
This agreement amends, restates and supersedes the Master Loan and
Security Agreement dated October 30, 1996 between Borrower and Lender.
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement the day and year first above written.
T & W FUNDING COMPANY VI, L.L.C.
Witness: /s/ [SIG] By: /s/ MICHAEL A. PRICE
-----------------------------
Title: Member
--------------------------
CORESTATES BANK, N.A.
By:
-----------------------------
Title:
--------------------------
-38-
<PAGE> 44
EXHIBIT "2.1(d)"
CORESTATES BANK, N.A.
COMPUTATION OF BORROWING BASE AVAILABILITY
AS OF ___________, 19___ FOR
T & W FUNDING COMPANY VI, L.L.C.
- --------------------------------------------------------------------------------
1. 90% of Eligible Leases - Remaining Contractual Payments Pledged to
CoreStates (Collateral) $
2. 90% of Additional Eligible Leases to be Pledged
to CoreStates _____ Sch.#_____
_____ Sch.#_____
3. 90% of Eligible Mortgages - Remaining Contractual
Payments Pledged to CoreStates _____
4. 90% of Additional Eligible Mortgages to be Pledged
to CoreStates _____
5. Present Value* of Remaining
Contractual Payments Pledged to
CoreStates (Line 1, plus line 2, plus line
3, plus line 4) _____
6. Available Revolving Credit Loans
based on Collateral Pledged to
CoreStates (Lesser of 10MM. or
of line 5) (See Attached Schedule) _____
7. Aggregate Outstanding Balance Revolving
Credit Loans _____
8. Current Availability Excess of Available Advances
Over Actual Outstanding Balance
(Line 6, minus line 7) _____
*Present Value to be calculated using eight percent (8%) per annum.
**Sum of line 3, plus line 4 is limited to 5MM.
In the case of overadvance, Borrower must either reduce outstandings or submit
additional collateral.
Borrower submits this computation pursuant to a certain Loan and Security
Agreement dated __________("Loan Agreement") and certifies that all information
contained herein and representations and warranties made in the Loan Agreement,
all related agreements, instruments and documents, are true and correct as of
the date hereof.
T & W FUNDING COMPANY, VT, L.L.C.
DATE:__________ BY: /s/ MICHAEL A. PRICE
______________________________
<PAGE> 45
EXHIBIT "2.3(b)"
AGREEMENTTS
T & W FUNDING COMPANY VI, L.L.C. (hereinafter "Assignor"), does hereby
assign to CORESTATES BANK, N.A. (hereinafter "Assignee"), its successors and
assigns, all of the right, title and interest of Assignor in and to (i) certain
notes from various Mortgagors to Assignor, hereinafter ("Notes"), the sole
originals of which are contemporaneously being delivered and endorsed to the
order of Assignee by Assignor; (ii) the collateral security pledged by
Mortgagors as security for the obligations evidenced by the Note (i) and (ii)
are further identified on Schedule A hereto ; (iii) certain Leases and Leased
Property identified on Schedule B hereto, (iv) any and all guarantees, surety
agreements or other security for such obligations; and (iv) all cash and
non--cash proceeds of all of the foregoing, including without limitation the
proceeds of all insurance policies on the Mortgaged and Leased Property
(collectively "Collateral").
Assignee shall have the right to sue for, collect, and receive all
payments due or to become due under the Collateral, in accordance with that
certain Loan and Security. Agreement dated October 30, 1996, between Assignor
and Assignee (the "Agreement"), with the power to enforce in Assignee's own name
or in Assignor's name any and all rights given to Assignor under the Collateral.
This Assignment is hereby given as additional security for any and all
Obligations (as defined in the Agreement) of the Assignor to the Assignee. All
of the terms of the Agreement are incorporated herein by reference, and the Note
and the Collateral, and all related agreements, instruments and documents shall
constitute "Pledged Agreement" as defined therein.
Delivered herewith is the sole original of each of the Notes and the
Leases referenced on Schedules A and B hereto.
Assignor agrees that Assignee shall not assume any of Assignor's
obligations or liabilities to under the Notes, the Leases or any agreement,
document or instrument related thereto.
All of the representations and warranties contained in the Agreements
with respect to Assignor, and the Collateral are true, correct and complete as
of the date of this Assignment and no Event of Default has occurred under the
Agreements.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed by its duly authorized officer this day of
T & W FUNDING COMPANY VI, L.L.C.
Witness: /s/ [SIG] /s/ [SIG]
___________________ By:________________________
Title: Member
_____________________
<PAGE> 46
EXHIBIT 5.1
BORROWER'S STATE OF QUALIFICATION
Delaware (the Borrower's state of incorporation)
<PAGE> 47
EXHIBIT 5.2
PLACES OF BUSINESS
6416 16th St., E.
Tacoma, Washington 98424
<PAGE> 48
EXHIBIT 5.3
PENDING LITIGATION
Schedule of pending claims against Financial.
Financial.
<PAGE> 49
EXHIBIT 5.9
SUBSIDIARIES AND AFFILIATES
<PAGE> 50
EXHIBIT 5.10
EXISTING GUARANTEES, INVESTMENTS AND BORROWINGS
<PAGE> 51
EXHIBIT 5.12
NAMES
<PAGE> 52
EXHIBIT 5.13
OTHER ASSOCIATIONS
<PAGE> 53
EXHIBIT 5.14
ENVIRONMENTAL MATTERS
<PAGE> 54
EXHIBIT 6.10
OFFICER'S CERTIFICATE
CoreStates Bank, N.A.
1339 Chestnut Street, 11th Floor
Philadelphia, PA 19101
Attn: Scott Gates, Assistant Vice President
This certificate is given to you on behalf of the undersigned, and is
delivered pursuant to Section 6.10 of that certain Loan and Security Agreement
("Agreement") among undersigned ("Borrower") and CoreStates Bank, N.A. dated
October 30, 1996.
This will certify that:
1. Borrower is in compliance with all representations, warranties and
covenants set forth in the Agreement and in the Loan Documents as of the date
hereof.
2. No Event, of Default, or event which with the giving of notice of
this passage of time, or both, would become an Event of Default, has occurred
under the Agreement or under the Loan Documents.
3. The financial covenants contained in Section 6.8 of the Agreement
are, for the most recent fiscal period of Borrower ended, as follows:
(a) Tangible Net Worth:
(b) Adjusted Debt to Tangible Net Worth Ratio:
Very truly yours,
T & W FUNDING COMPANY VI, L.L.C.
By: /s/ [SIG]
______________________________
(Authorized Officer)
Dated:_____________
<PAGE> 55
AMENDED AND RESTATED
PROMISSORY NOTE
(CoreStates)
$10,000,000.00 October 30 , 1996
FOR VALUE RECEIVED, T & W Funding Company VI, LLC, a limited liability
corporation organized under the laws of the State of Delaware, the "Borrower",
promise to pay to the order of CoreStates Bank, N.A., a national banking
association (the "Lender") at its offices at Transportation, Leasing &
Construction Industry Services, 1339 Chestnut Street, Philadelphia, PA 19107,
the principal sum of Ten Million and No/100 Dollars ($10,000,000) (the
"Principal Sum"), or so much thereof as has been or may be advanced or
readvanced to or for the account of the Borrower pursuant to the terms and
conditions of the Financing Agreement (as hereinafter defined), together with
interest thereon at the rate or rates hereinafter provided, in accordance with
the following:
1. INTEREST. (a) The unpaid Principal Sum shall bear interest at the
"Eurodollar Rate" as hereinafter defined.
(b) The Borrower shall, by giving written notice to Lender by 11:00
a.m. (Eastern Time) three (3) Business Days in advance of the date (which must
be a Business Day) on which such rate is to be effective, so long as (i) not
more than six (6) different Eurodollar based advances shall be outstanding at
any time, and (ii) each advance shall be in increments of $100,000 or a multiple
thereof (each a "Eurodollar Loan"), elect a fixed interest rate for a Eurodollar
Period (as hereinafter defined) equal to the Eurodollar Rate (as hereinafter
defined) and with a maturity of one (1) month "Eurodollar Period", adjusted for
Federal Reserve Board reserve requirements imposed on the Lender from time to
time, plus 190 basis points per annum. "Eurodollar Rate" means, for any
Eurodollar Loan for any Eurodollar Period, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits in Dollars
at approximately 11:00 a.m. (London Time) two Business Days prior to the first
day of such Eurodollar Period for a term comparable to such Eurodollar Period.
If for any reason such rate is not available, the term "Eurodollar Rate" shall
mean, for any Eurodollar Loan for any Eurodollar Period, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London Time) two Business Days prior to the first day
of such Eurodollar Period for a term comparable to such Eurodollar Period;
PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates.
With respect to any interest rate election hereunder and any
transactions contemplated hereby,
1
<PAGE> 56
subsequent to an Event of Default shall be deemed to be a prepayment of the
Principal Sum subject to any prepayment fee due hereunder pursuant to Paragraph
1(b) hereof.
8. FINANCING AGREEMENT AND OTHER FINANCING AGREEMENT. This Note is the
"Note" described in a Master Loan and Security Agreement of even date herewith
by and between the Borrower and the Lender (as amended, modified, restated,
substituted, extended and renewed at any time and from time to time, the
"Financing Agreement"). The indebtedness evidenced by this Note is included
within the meaning of the term "Obligations" as defined in the Financing
Agreement. The term "Financing Agreement" as used in this Note shall mean
collectively this Note, the Financing Agreement, and any other instrument,
agreement, or document previously, simultaneously, or hereafter executed and
delivered by the Borrower and/or any other person, singularly or jointly with
any other person, evidencing, securing, guaranteeing, or in connection with the
Principal Sum, this Note and/or the Financing Agreement.
9. SECURITY. This Note is secured as provided in the Financing
Agreement.
10. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an "Event
of Default" and collectively, the "Events of Default") under the terms of this
Note:
(a) The failure of the Borrower to pay to the Lender when due an
and all amounts of interest payable by the Borrower to the Lender for the
account of the Lender under the terms of this Note, which failure continues for
fifteen (15) days; or
(b) The failure of the Borrower to pay to the Lender when due any
and all amounts of principal payable by the Borrower to Lender under the terms
of this Note; or
(c) The occurrence of an Event of Default (as defined therein)
under the terms and conditions of any of the Financing Agreement.
11. REMEDIES. Upon the occurrence of an Event of Default subject to the
terms of the Financing Agreement, at the option of the Lender (or in the case of
Events of Default occurring pursuant to Sections 8.1 (h), (i) and (j) of the
Financing Agreement, automatically), all amounts payable by the Borrower to the
Lender under the terms of this Note immediately shall become due and payable by
the Borrower to the Lender without notice to the Borrower or any other person,
and the Lender without notice to the Borrower or any other person, and the
Lender shall have all of the rights, powers, and remedies available under the
terms of this Note, the Financing Agreement and all applicable laws. The
Borrower and all endorsers, guarantors, and other parties who may now or in the
future be primarily or secondarily liable for the payment of the indebtedness
evidenced by this Note hereby severally waive presentment, protest and demand,
notice of protest, notice of demand and of dishonor and nonpayment of this Note
and expressly agree that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrower,
guarantors and endorsers.
5
<PAGE> 57
12. EXPENSES. The Borrower promises to pay the Lender, on demand by the
Lender, all costs and expenses incurred by the Lender in connection with the
collection and enforcement of this Note, including, without limitation,
reasonable attorney's fees and expenses and all court costs.
13. NOTICES. Any notice, request, or demand to or upon the Borrower,
the Lender shall be deemed to have been properly given or made when delivered in
accordance with the terms of the Financing Agreement.
14. MISCELLANEOUS. Each right, power, and remedy of the Lender as
provided for in this Note or any of the Financing Agreement, or now hereafter
existing under any applicable law or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power, or remedy
provided for in this Note or the Financing Agreement or now or hereafter
existing under any applicable law, and the exercise or beginning of the exercise
by the Lender of any one or more of such rights, powers, or remedies shall not
preclude the simultaneous or later exercise by the Lender of any or all such
other rights, powers, or remedies. No failure or delay by the Lender to insist
upon the strict performance of any term, condition, covenant, or agreement of
this Note or any of the other Financing Agreement, or to exercise any right,
power, or remedy consequent upon a breach thereof, shall constitute a waiver of
any such term, condition, covenant, or agreement or of any such breach, or
preclude the Lender from exercising any such right, power, or remedy at a later
time or times. By accepting payment after the due date of any amount payable
under the terms of this Note, the Lender shall not be deemed to waive the right
either to require prompt payment when due of all other amounts payable under the
terms of this Note or to declare an Event of Default for the failure to effect
such prompt payment of any such other amount. No course of dealing or conduct
shall be effective to amend, modify, waive, release, or change any provisions of
this Note.
15. PARTIAL INVALIDITY. In the event any provision of this Note (or any
part of any provision) is held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision (or remaining part of
the affected provision) of this Note; but this Note shall be construed as if
such invalid, illegal, or unenforceable provision (or part thereof) and not been
contained in this Note, but only to the extent it is invalid, illegal, or
unenforceable.
16. CAPTIONS. The captions herein set forth are for convenience only
and shall not be deemed to define, limit, or describe the scope or intent of
this Note.
17. APPLICABLE LAW. The Borrower acknowledge and agree that this Note
shall be governed by the laws of the State of Pennsylvania, even though for the
convenience and at the request of the Borrower, this Note may be executed
elsewhere. This Note amends and supersedes the Promissory Note executed as of
October 30, 1996 by Borrower.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
under the seal by its duly authorized officers as of the date first written
above.
6
<PAGE> 58
WITNESS OR ATTEST: T & W FUNDING COMPANY VI, LLC
/s/ [SIG] By: /s/ [SIG]
- ------------------------- ______________________________(SEAL)
Name:
Title:
7
<PAGE> 1
EXHIBIT 10.35
State of Washington
County of Pierce
This lease, made this 31st day of December, 1991, by and between Mike Price of
Tacoma, WA, hereinafter called the lessor, and T & W Leasing of Tacoma, WA,
hereinafter called the lessee witnesseth:
That, subject to the terms and conditions hereinafter set out, the lessor
hereby lets and leases unto the lessee that land and the building thereon known
as 6416 Pac. Hwy E., in the City of Tacoma, WA and more particularly described
on Schedule A attached.
1. Term and Rental. The term of this lease shall be three years from the 31st
day of December, 1991, at an annual rental of Thirty-six thousand dollars
($36,000) payable in equal monthly installments of Five thousand dollars
($5,000), in advance on the 1st day of each month, the first payment to be made
on the 1st day of January, 1955.
2. Covenants of Lessee. The lessee hereby covenants and agrees:
a. TO PAY RENT. That it will pay the said rent at the times and in the
manner set out above, except only in the case of fire or other
casualty as hereinafter provided.
b. TO PAY UTILITIES. That it will promptly pay all gas, electric, water
and telephone charges which may become payable during the term of
this lease for gas, electricity, water and telephone service
consumed on or rendered to the leased premises.
c. TO KEEP IN REPAIR AND IN GOOD CONDITION. That it will keep the
leased premises, excluding the parking lot and the walls, roof and
other structural members of the building including the heating and
air-conditioning equipment, in such repair as the same are at the
commencement of said term, reasonable wear and tear and damage by
fire or other unavoidable casualty excepted. It is explicitly agreed
that the duty of the lessee under this covenant shall include
furnishing all necessary janitorial and cleaning services, care and
maintenance of the grounds surrounding the building (excluding the
parking lot) and any interior renovation or redecoration not
involving structural changes.
<PAGE> 2
d. NOT TO INJURE OR DEFACE. That it will not injure, overload or
deface or allow to be injured, overloaded or defaced, the
premises or any part thereof.
e. NOT TO MAKE UNLAWFUL USE, ETC. That it will not make, or allow
to be made, any unlawful, improper or offensive use of the
premises which would be injurious to any person or property, or
which would violate the laws of the State of Washington or of
the United States, or any ordinance of the City of Tacoma, or
which would affect or endanger any insurance on said building
or increase the premium thereof.
f. NOT TO MAKE ALTERATIONS. That it will not make any alterations
or additions in and to the premises without the written consent
of the lessor.
g. NOT TO ASSIGN. That it will not assign, sublet or part with the
possession of all or any part of the leased premises without the
written consent of the lessor.
h. TO PERMIT LESSOR TO ENTER. That it will allow the lessor, at all
reasonable times to enter and view the premises and to make any
repairs which he or she may see fit to make.
i. TO YIELD UP PREMISES. That at the expiration of the terms of
this lease, it will peaceably yield up to the lessor the
premises and all buildings thereon, in good repair in all
respects, reasonable use and wear and damage by fire and other
unavailable casualties excepted.
j. TO INDEMNIFY AGAINST ACCIDENTS AND NEGLIGENCE. That it will save
harmless and indemnify the lessor from and against all loss,
liability or expense that may be incurred by reason of any claim
arising out of or in connection with lessee's occupancy and use
of the leased premises, including any accident with the
appliances and fixtures installed by the lessee or the gas,
water or other pipes or from any damage or neglect arising from
or in any way connected with the use, misuse or abuse of the
city water or from any neglect in not removing snow and ice from
the sidewalks or roof of the building.
k. TO BEAR RISK FOR CONTENTS. That all property of any kind that
may be on the premises during the continuance of this lease
shall at the sole risk of the lessee, and that the lessor shall
not be liable to the lessee or any other person for any injury,
loss or damage to property or to any person on the premises.
l. TO PAY TAXES. That it will pay the real estate and personal
property taxes assessed upon the premises during said term as
they shall fall due.
<PAGE> 3
m. TO PAY INSURANCE PAYMENTS. That it will pay all premiums on the
policies of fire and/or casualty insurance covering said premises
and in such amounts as may be required by lessor.
n. NO WAIVER. That no assent, expressed or implied, by the lessor to
any breach of any lessee's covenants shall be deemed to be a waiver
of any succeeding breach of the same covenant.
3. Covenants of Lessor. The lessor hereby covenants and agrees:
a. QUIET ENJOYMENT. That the lessee shall peaceably hold and enjoy
the leased premises.
b. FIXTURES. That it will allow the lessee to install such fixtures
and appliances as may be necessary for the proper conduct of its
business and, at the expiration of the term of this lease, that it
will allow the lessee a reasonable length of time (but not to
exceed thirty (30) days) to remove any and all such fixtures which
may be movable.
c. FIRE OR OTHER UNAVOIDABLE CASUALTY. In case the premises or any
part thereof shall at any time during the term of this lease be
destroyed or damaged by fire or other unavoidable casualty so as to
be unfit for occupancy and use and so that the premises cannot
be restored or rebuilt by the lessor within 60 days thereafter, this
lease shall terminate; but if said premises can be restored or
rebuilt within 90 days the lessor at its own expense and with due
diligence, shall so restore or build the premises, and a just and
proportionate part of the rent provided for herein shall be paid by
the lessee until the premises shall have been so restored.
d. RIGHT OF REENTRY. If the lessee shall neglect or fail to perform
any of its covenants, and in particular if any monthly installment
of rent be overdue and unpaid for 30 days, the lessor may,
immediately or at any time thereafter, after 10 days notice, enter
into the premises and repossess the same as of its former estate and
expel the lessee, but without prejudice to any remedies which might
otherwise be used by the lessor for arrears of rent or any other
breach of the lessee's covenants.
e. NOTICE. Whenever notice is required hereunder, it shall be
addressed as follows until written notice of change of address is
given to the other party:
Lessor Lessee
1411 Beach Drive N.E. 6416 Highway 99 East
Tacoma, WA 98422 Tacoma, WA 98424
<PAGE> 4
f. NUMBER; GENDER. As the context herein may require, the singular shall be
deemed to include the plural, and the masculine form shall be deemed to
include the feminine and neuter. In witness whereof, the lessor and
lessee have set their hands the day and year first written above.
Lessee: T&W Leasing, Inc.
/s/ M. A. PRICE
- ----------------------------- Date: 4-1-95
------------------------
Lessor: M. A. Price
/s/ M. A. PRICE
- ----------------------------- Date: 4-1-95
------------------------
<PAGE> 1
EXHIBIT 10.36
AMENDED AND RESTATED COMMERCIAL LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT is made and entered into as
of January 1, 1997, by and between MICHAEL A. PRICE (hereinafter "Landlord"),
and T&W FINANCIAL CORPORATION, formerly T&W LEASING, INC. (hereinafter
"Tenant").
BACKGROUND
On December 31, 1991, Landlord and Tenant, as T&W Leasing, Inc.,
entered into a lease agreement for the real property commonly referred to as
6416 Pacific Highway East, Tacoma, Washington 98424. The lease agreement was
subsequently amended on or about April 1, 1995 in order to reflect an increase
in the amount and restate the lease agreement in its entirety in order to
reflect, among other things, that the term of the lease shall expire on
December 31, 1997. By amending and restating this lease agreement, Landlord and
Tenant do not intend to terminate the lease and create a new lease, but rather
to amend and restate it in its entirety.
AGREEMENT
For and in consideration of the rental and of the covenants and
agreements hereinafter set forth to be kept and performed by the Tenant,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
premises herein described for the term, at the rental, and subject to and upon
all of the terms, covenants and agreements hereinafter set forth.
1. DEMISE.
1.1 Premises. Landlord hereby leases to Tenant and Tenant hereby
rents from Landlord the building and those premises (the "premises") located
upon the real property (the "Property") described in Exhibit A, which is
commonly known as 6416 Pacific Highway East, Tacoma, Pierce County, Washington,
98424.
2. TERM.
The term of this lease shall be for a period of six (6) years
commencing on the Date of Commencement. The "Date of Commencement" shall be
December 31, 1991.
3. RENT.
3.1 Base Monthly Rent. Tenant covenants and agrees to pay to
Landlord as Base Monthly Rent for the Premises the following amounts:
Lease Agreement Page 1
<PAGE> 2
(a) From January 1, 1992 through March 10, 1995, the sum of
Three Thousand and 00/100 Dollars ($3,000) per month;
(b) From April 1, 1995 through December 31, 1996, the sum of
Five Thousand and 00/100 Dollars ($5,000) per month; and
(c) From January 1, 1997 through December 31, 1997, the sum of
Eight Thousand Five Hundred and 00/100 Dollars ($8,500) per month.
All Base Monthly Rent shall be in advance on the first (1st) day of each
calendar month commencing on January 1, 1992 and continuing each month
thereafter during the balance of the term. All rent to be paid by Tenant to
Landlord shall be in lawful money of the United States of America and shall be
paid without deduction or offset, prior notice or demand, and at such place or
places as may be designated from time to time by Landlord by written notice to
Tenant.
3.2 Late Charge. Any installment of rent or any other charge hereunder
which is not paid within ten (10) days of the date when due shall incur a late
charge of five percent (5%) of the amount due. The late charge shall be due and
payable without notice or demand.
4. TAXES AND ASSESSMENTS.
4.1 Real Property Taxes and Assessments. In addition to the Base
Monthly Rent, Tenant agrees to pay semi-annually all real estate taxes and
assessments levied and assessed for any year upon the land and improvements
included in the Premises. If the tax or assessment statement does not apportion
the total amount due between the Premises and other land included in the tax
parcel or parcels on which the Premises are located, then and in that event the
taxes and assessments on the land included in the Premises shall be apportioned
according to the area of the Premises as it relates to the total area of the
parcel or parcels on which the Premises are located and which are included in
the tax or assessment statement. All such additional sums due based upon taxes
and assessments shall be payable by Tenant to Landlord in semi-annual
installments due on April 20 and October 20 of each year during the term
hereof. At least 30 days prior to the date on which an installment is due,
Landlord shall provide Tenant with written notice of the amount of the
installment and the method by which it was determined. Taxes for the first and
last years of the term shall be prorated between Landlord and Tenant as of the
commencement and expiration of the term.
4.2 Tenant's Right to Consent Real Estate Taxes. Tenant shall have
the right, at its own cost and expense, to initiate and prosecute any
proceedings permitted by law for the purpose of
Page 2
Lease Agreement
<PAGE> 3
obtaining an abatement of or otherwise contesting the validity or amount of
real estate taxes assessed or levied upon the Premises and related
improvements, if any, constructed on the Premises by Tenant. If required by
law, Tenant may take such action in the name of Landlord who shall cooperate
with Tenant to such extent as Tenant may reasonably require, provided, however,
that Tenant shall fully indemnify and save Landlord harmless from all loss,
cost, damage and expense incurred as a result thereof, and further provided
Tenant shall, at Landlord's request, escrow or post a bond for the full amount
of the real estate taxes claimed pending such proceedings.
4.3 New Taxes Payment Schedule. In addition to rent and other charges
to be paid by Tenant hereunder, Tenant shall pay, or reimburse Landlord within
thirty (30) days of receipt of a demand therefor, any and all taxes which are
not presently in effect but which may be hereafter levied, assessed or imposed
upon Landlord or the Premises if the taxes are based upon or arise out of the
ownership, use or operation of the Premises or the rent payable hereunder,
provided that this provision shall not apply to a net income, estate or
inheritance tax which may be imposed upon Landlord.
5. INSURANCE AND INDEMNIFICATION.
5.1 Fire and Extended Coverages. In addition to other payments to be
made by Tenant hereunder, Tenant shall reimburse and pay to Landlord within
thirty (30) days after being billed therefor by Landlord, Tenant's proportionate
share (based upon the ratio of the square footage of the Premises, to the square
footage of the total rentable floor area of the building in which the Premises
are located) of the premium payable for an insurance policy insuring the
building in which the Premises are located against loss or damage resulting from
the hazards covered by fire and extended coverage insurance, which policy shall
contain a replacement cost endorsement and shall be for the full insurable value
of said building. During the term of this Lease, Landlord shall maintain such
insurance on the building in which the Premises are located.
5.2 Liability Insurance. Tenant shall, during the entire term, keep
in full force and effect a policy or policies of commercial general liability
and property damage insurance with respect to the Premises and the business
operated by Tenant in which the limits of liability shall be not less than those
agreed upon by Landlord and Tenant. The policy shall name the Landlord as an
additional insured and shall contain a clause that the insurer will not cancel
or change the insurance without first giving Landlord thirty (30) days' prior
written notice. The insurance shall be in an insurance company or companies
licensed to do business in the State of Washington. A copy of each policy
Lease Agreement Page 3
<PAGE> 4
or certificate of insurance shall be delivered to Landlord upon written request
from Landlord.
5.3 Indemnification. Tenant shall, at all times, indemnify the
Landlord for, defend the Landlord against, and save the Landlord harmless from,
any liability, loss, cost, injury, damage or other expense that may occur or be
claimed by or with respect to any person or property on or about the Premises
and resulting from the deliberate and intentional acts or negligence of Tenant,
its agents, employees, licensees, invitees or guests. Tenant shall, at its own
cost and expense, defend against any and all such actions, claims, and demands
and shall indemnify Landlord for all reasonable costs and expenses which it may
incur in connection therewith. Landlord shall not, unless caused by the
negligence of Landlord, be liable for any injury or damage to the Premises, or
to Tenant or its agents, employees, licensees, invitees, or guests, or to any
property of any such persons.
5.4 Waiver of Subrogation. Landlord and Tenant hereby release one
another from every and all right, claim and demand or liability for any loss or
losses occasioned by fire and such items as are included under the normal
coverage clauses of fire insurance policies and any losses resulting from
business interruption at the Premises or loss of rental income from the
Premises occasioned by fire and such other items as are included under the
normal coverage of fire insurance policies, provided such releases do not in
any manner affect the fire insurance policies carried by the respective
parties. Each party shall exert its best efforts to cause its insurance
carriers to consent to such waiver and to waive all rights of subrogation
against the other party.
6. CONDUCT OF BUSINESS.
6.1 Use of the Premises. Tenant shall maintain and conduct on the
Premises continuously during the term an equipment leasing and specialized
finance business. Tenant shall not use or permit the use of the Premises for
any other business or purpose without the prior written consent of Landlord.
6.2 Specific Use, Restrictions. Tenant shall not do or permit
anything to be done to or about the Premises or bring or keep anything thereon
which will in any way increase the existing rate of or affect any fire or other
insurance on the building located on the Premises. Tenant shall not commit or
allow to be committed any waste in or upon the Premises.
6.3 Compliance with Law. Tenant shall not use or permit the Premises
or any part thereof to be used for any purpose in violation of any existing or
future municipal, county, state or federal law, ordinance or regulation.
Lease Agreement Page 4
<PAGE> 5
6.4 Liens and Encumbrances. Tenant shall keep the Premises free
and clear of all liens and encumbrances arising or growing out of the use or
occupancy of the Premises by Tenant, provided that Tenant may contest any lien
in the manner provided by law.
7. UTILITIES.
Tenant shall be liable for and shall pay throughout the term of this
Lease all utility installation, hook-up and disconnect fees and charges payable
for the Premises and all fees and charges for utility services provided to the
Premises. Utility services shall include, but not be limited to, electricity,
heat, oil, gas, water, sewer, and waste and garbage pick-up and disposal.
Landlord hereby grants to Tenant a non-exclusive easement during the term of
the Lease under the Property to tie into, use, repair and extend to the
Premises all underground utility lines including electrical lines, telephone
lines, gas lines, sanitary sewer lines and storm sewer lines.
8. MAINTENANCE OF PREMISES.
8.1 Maintenance. Tenant shall at all times throughout the Lease
term keep the Premises (including exterior doors and entrances, windows and
moldings and trim of all doors and windows, interior partitions and walls,
ceilings, floor coverings, door surfaces, fixtures, equipment, plumbing,
lighting, electrical systems) in good order, condition and repair.
8.2 Failure to Maintain. If Tenant fails to keep and preserve the
Premises as set forth in Section 8.1 then following thirty (30) days prior
written notice of repair deficiency given to Tenant, Landlord may, at its
option, put or cause the same to be put in the condition and state of repair
required by this Lease, and in such case upon receipt of a written statement
from Landlord, Tenant shall promptly pay the entire cost thereof to Landlord.
Landlord shall have the right to enter the Premises for the purpose of making
such repairs upon the failure of Tenant to do so.
8.3 Repairs by Landlord. Landlord shall keep the roof, exterior
walls, and foundations of the building in which the Premises are located in a
good state of repair, and shall accomplish such repairs as may be needed
promptly after receipt of written notice from Tenant. Should such repairs be
required by reason of Tenant's negligent acts or failure to notify Landlord of
the need for repair, Tenant shall promptly pay Landlord for the entire cost
thereof. Tenant shall immediately inform Landlord of any necessary repairs, and
Tenant shall make none of such repairs without Landlord's consent unless they
are of an emergency nature. Landlord shall also maintain, either directly or
through a service contract, the heating, ventilating and air conditioning
system which serves the Premises.
Lease Agreement Page 5
<PAGE> 6
9. ALTERATIONS.
Tenant shall not make any alterations, additions or improvements in or
to the Premises without the prior written consent of Landlord, which consent
may be subject to such conditions as Landlord may deem appropriate. Any such
alterations, additions or improvements consented to by Landlord shall be made
at Tenant's sole expense and shall be made in a prompt and good workmanlike
manner. Tenant shall secure any and all governmental permits required in
connection with any such work, and shall hold Landlord harmless from any and
all liability and expense and any and all liens resulting therefrom. All
alterations, additions and improvements (and expressly including all HVAC
equipment and systems and all light fixtures and floor coverings), except trade
fixtures and appliances and equipment which do not become a part of the
Premises, shall immediately become the property of Landlord without any
obligation to pay therefor, and shall not be removed by Tenant.
10. INSOLVENCY.
In the event Tenant becomes insolvent, voluntarily or involuntarily
bankrupt, or if a receiver, assignee or other liquidating officer is appointed
for the business of the Tenant, then the Landlord may terminate this Lease at
Landlord's option.
11. ASSIGNMENT AND SUBLETTING.
All assignments and subleases shall require the prior written consent
of Landlord, which consent shall not be unreasonably withheld. Any request by
Tenant for Landlord's consent to a proposed assignment or sublease as required
hereunder shall be accompanied by a copy of the proposed assignment or
sublease, the identity and address of the proposed assignee or subtenant,
details regarding the proposed use of the Premises by the proposed assignee or
subtenant, including any proposed changes or alterations to the Premises, and
current financial statements (balance sheet and income statement) for the
proposed assignee or subtenant. Following receipt of a written request and the
information required above, Landlord shall have thirty (30) days within which
to give or withhold its consent.
12. ACCESS.
Tenant shall allow Landlord free access at all reasonable times to the
Premises for the purpose of inspecting, maintaining or making repairs to the
Premises or the building located on the Premises, but this right shall not be
construed as an agreement on the part of the Landlord to make any repairs which
are required of Tenant under this Lease.
Lease Agreement Page 6
<PAGE> 7
13. DAMAGE OR DESTRUCTION.
In the event the Premises are damaged to such an extent as to render
them untenantable in whole or in a substantial part thereof, or are destroyed,
then Landlord shall rebuild or repair the Premises, provided that Landlord
shall not be required to repair or rebuild (a) if Tenant is then in default or
breach of this Lease, or (b) less than one (1) year remains in the term of this
Lease or any extension thereof, or (c) the loss is not covered by the fire and
extended coverage insurance which is required to be maintained by Landlord, or
(d) the insurance proceeds payable for the loss are paid to any mortgage lender
holding a mortgage or deed of trust upon the Property and are not made
available to Landlord for the purpose of repairing or rebuilding the Premises.
Tenant shall give Landlord or Landlord's agent immediate written notice of any
damage or loss. Landlord shall have not more than thirty (30) days after its
receipt of notification of the loss or damage, to notify the Tenant of the
existence of any of the above-stated conditions which would excuse Landlord
from repairing or rebuilding the Premises. If the Premises are to be rebuilt or
repaired, then within thirty (30) days following Landlord's receipt of notice
of the damage or loss Landlord shall commence the repairing or rebuilding and
shall prosecute the work without necessary delay, and during such period the
Base Monthly Rent shall be abated in the same ratio that that portion of the
Premises rendered for the time being unfit for occupancy bears to the whole of
the Premises. If Landlord elects not to repair or rebuild the Premises because
of the existence of any of the above-stated conditions, then this Lease shall
terminate as of the date of occurrence causing the damage. If it is reasonably
determined by Landlord's contractor that the repair or rebuilding of the
Premises shall take longer than ninety (90) days from commencement of the work,
then within thirty (30) days of Landlord's receipt of notice of the damage or
loss, Landlord shall provide Tenant with written notice of the estimated period
of time necessary to fully repair or rebuild the Premises, and during the ten
(10) day period following Tenant's receipt of such notice, Tenant shall have
the right and option to terminate this Lease.
14. SIGNS.
All signs, including but not limited to, signs attached to the exterior
of the building or the roof of the building in which the Premises are located
shall be subject to the prior written approval of the Landlord. Any signs
installed by Tenant shall be removed by Tenant at the termination of the term,
and Tenant shall repair any damage or injury to the Premises caused thereby. If
the signs are not removed by Tenant, then Landlord may have them removed at
Tenant's expenses.
Lease Agreement Page 7
<PAGE> 8
15. DEFAULT OR BREACH AND REMEDIES.
15.1 Default. Each of the following events shall constitute a
default or breach of this Lease by Tenant:
(a) Failure to Pay Rent. if tenant shall fail to pay, when
due, any installment of Base Monthly rent or any other rent or charge which is
Tenant's obligation hereunder and if the failure continues for ten (10) days
after written notice of delinquency to Tenant, provided no written notice of
delinquency shall be required if Landlord has previously given one (1)
written notice of delinquency during the one (1) year period preceding the
failure to pay.
(b) Failure to Perform Covenant. If Tenant shall fail to
perform or comply with any of the other terms, covenants or conditions of this
Lease and if the failure shall continue for a period of thirty (30) days after
written notice of non-compliance by Landlord to Tenant, or if the
non-compliance cannot be reasonably cured with the thirty-day period, Tenant
shall not in good faith have commenced the action necessary to effect a cure
within the thirty-day period, and shall not diligently proceed to the
completion of that action.
(c) Failure to Operate Business. If Tenant shall cease to
operate an equipment leasing business or any other business approved by
Landlord on the Premises.
(d) Wrongful Transfer. If this Lease shall be assigned or
transferred, or if the Premises shall be sublet, by Tenant to any other person
or party except in the manner herein permitted.
15.1 Remedies. In the event of any default or breach of this Lease
by Tenant, Landlord may exercise any one or more of the following remedies or
any other right or remedy available to it under law:
15.2.1 Cancellation of Lease. Landlord shall have the right to cancel
and terminate this Lease, as well as all of the right, title and interest of
the Tenant in and to the Premises, by giving the Tenant not less than ten (10)
days' notice of intent to cancel and terminate the Lease. On expiration of the
time fixed in the notice, this Lease and the right, title and interest of
Tenant in and to the Premises shall automatically terminate in the same manner
and with the same force and effect, as if the date fixed in the notice of
intent to cancel and terminate were the date originally fixed in this Lease for
the expiration hereof, provided however, Tenant shall remain liable for the rent
and other charges required by this Lease up to the date of termination and for
the additional rent and damages set forth in the following subsection.
Lease Agreement Page 8
<PAGE> 9
15.2.2 Rent and Damages Recoverable Upon Cancellation. In any action
brought by Landlord following a cancellation of the Lease, Landlord shall be
entitled to recover from Tenant the rent, taxes and other charges owing through
the date of cancellation (less any rent, taxes or other charges received by
Landlord pursuant to any actual reletting of the Premises) and the present
worth of the rent, taxes and other charges due during the balance of the term
(less the present worth of any rent, taxes or other charges due during the
balance of the term (less the present worth of any rent, taxes or other
charges to be received by Landlord pursuant to any actual and/or reasonably
estimated reletting of the Premises), provided that in no event shall the
recovery of rent and other charges for the period following cancellation of the
Lease, exceed a sum equal to the rent and real estate taxes which otherwise
would have been payable under the Lease for the three (3) year period
following the Landlord's notice of cancellation. The rate of interest to be
used in the determination of any discounted present worth shall be six
percent (6%) per annum. Subject to the limitation on recovery stated above,
Tenant shall also be liable for all reasonable costs and expenses incurred by
Landlord in the preservation and maintenance of the Premises prior to any
reletting; all reasonable costs and expenses, including reasonable attorneys'
fees incurred by Landlord in reentering and repossessing the Premises; and all
reasonable costs and expenses incurred by Landlord in connection with the
reletting of the Premises, including the cost of any repairs or alterations
performed in furtherance of the reletting.
15.2.3 Continuation of Lease. Landlord may treat this Lease as
subsisting and recover from Tenant all rent and other charges due hereunder
notwithstanding any repossession or reletting of the Premises.
15.2.4 Reentry and Reletting of Premises. Landlord may immediately or
at any time thereinafter reenter the Premises and recover the possession
thereof. Incidental thereto, Landlord may remove Tenant's property and store it
in a public warehouse, or at a place selected by Landlord, at the expense of
Tenant. After 30 days' storage Landlord may sell the property at public or
private sale, all expenses of the sale to be the obligation of Tenant to
Landlord under the terms of this Lease. Reentry and repossession of the Premises
may be accomplished by Landlord's self-help or by an action for unlawful
detainer or by any other appropriate action. Following reentry Landlord shall
make all reasonable efforts to relet the Premises. Landlord may make repairs and
alterations necessary or incidental to the reletting.
16. REIMBURSEMENT FOR PAYMENT OF Tenant'S OBLIGATIONS.
Landlord may elect, but shall not be obligated, to make any payment
required of Tenant herein, or comply with any term,
Lease Agreement Page 9
<PAGE> 10
covenant or condition required hereby to be performed by Tenant and Landlord
shall have the right to enter the Premises for the purpose of correcting or
remedying any such default and to remain until the default has been corrected or
remedied, but any expenditure for the correction by Landlord shall not be deemed
to waive or release the default of Tenant or the right of Landlord to take any
action as may be otherwise permissible hereunder in the case of default. Any sum
payable to Landlord under this Lease or any sum paid by Landlord which is the
obligation of Tenant shall bear interest until paid at the announced or
published annual rate (prime rate) at which Seafirst Bank, or its successor,
will loan money to its most credit-worthy customers plus two and one-half
percent (2.5%).
17. COSTS AND ATTORNEYS' FEES.
If Landlord brings a suit to recover any rent or other charge due
hereunder, or for breach of any provision of this Lease or to recover
possession of the Premises, or if Tenant shall bring any action for any relief
against Landlord, declaratory or otherwise, arising out of this Lease, then and
in any such event, the prevailing party, as determined by the court, shall
recover, a reasonable attorneys' fee and all its costs and expenses expended or
incurred in connection with such action.
18. NON-WAIVER.
The waiver by either party of, or the failure of either party to take
action with respect to, any breach of any term, covenant, or condition of this
Lease by the other party shall not be deemed to be a waiver of such term,
covenant, or condition, or subsequent breach of the same, or any other term,
covenant or condition herein contained. The subsequent acceptance of rent or
other charges hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant, or condition of this Lease,
other than the failure of Tenant to pay the particular rent or charge accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent or other charge.
19. HEIRS AND SUCCESSORS.
Subject to the provisions hereof pertaining to assignment and
subletting, the covenants and agreements of this Lease shall be binding upon
the heirs, legal representatives, successors and assigns of any or all of the
parties hereto.
20. SURRENDER OF PREMISES AND HOLDING OVER.
20.1 Surrender of Premises. Except as may be otherwise provided
herein, upon the expiration of the term, or any
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<PAGE> 11
extension hereof, as the case may be, or any sooner termination of the Tenant's
tenancy of the Premises, the Tenant shall quit and surrender the Premises in
good order, condition and state of repair, usual wear and tear excepted.
20.2 Holding over. If the Tenant shall, with the written consent of
Landlord, hold over after the expiration of the term or extended term of this
Lease, such tenancy shall be for an indefinite period of time on a
month-to-month tenancy, which tenancy may be terminated upon thirty (30) days'
prior written notice to Tenant. During such tenancy, Tenant agrees to pay to the
Landlord the same rent which was in effect at the termination or the term or
extended term, as the case may be, unless a different rent is agreed upon, and
to be bound by all of the terms, covenants, and conditions as herein specified.
21. PERSONAL PROPERTY AND TRADE FIXTURES.
If any of the furniture, fixtures, or equipment installed by Tenant on
the Premises are leased or purchased by Tenant from a conditional seller, then
such furniture, fixtures, and equipment shall at all times be and remain
personal property, regardless of the method in which the same is affixed to the
Premises, and shall remain the personal property of Tenant and/or such third
party.
22. CONDEMNATION.
22.1 If all of the Premises are taken by eminent domain or by
agreement between Landlord and those authorized to exercise such right, this
Lease shall terminate when Tenant is required to vacate the Premises and the
rent shall be apportioned and paid to that date. If by such taking or agreement
(a) the square footage of the Property is reduced by more than twenty-five
percent (25%), or (b) vehicular access to the building from an adjoining street
is totally eliminated, then this Lease may, at the option of either party, be
terminated as of the date Tenant is required to vacate the portion of the
Premises taken or the date that Landlord is required to vacate the building so
taken. Tenant may also terminate this Lease if such taking or agreement (a)
eliminates an entrance to the Premises and the entrance cannot be relocated in
the same exterior wall as the entrance taken or (b) reduces the square footage
of the Premises by more than ten percent (10.0%). Except as provided in this
section, this Lease shall not be terminated or otherwise affected by any
exercise of the right of eminent domain.
22.2 In the event of any taking of the Premises or the Property by
eminent domain or by agreement between Landlord and those authorized to
exercise such right, Landlord shall be entitled to all damages, consequential
damages, and compensation for such taking, and Tenant shall be entitled neither
to share in any such
Lease Agreement Page 11
<PAGE> 12
award nor to have any claim against Landlord for any part thereof, except to
the extent such award is based upon damage to Tenant's stock in trade or damage
to equipment or fixtures which Tenant may remove at the termination of the
Lease or the cost of Tenant's moving its fixtures and inventory to a new
location in the same general market area.
22.3 Whenever any portion of the Premises or the Property shall be taken
by any exercise of the right of eminent domain or by agreement in lieu thereof,
and if this Lease shall not be terminated in accordance with the provisions of
this section, Landlord shall at its expense, proceed with all reasonable
dispatch to do such work as may be required to restore the Premises or the
Property, or what remains thereof (not including Tenant's fixtures, furniture,
furnishings, and equipment) to as nearly as possible to the condition they were
in immediately prior to such taking; and Tenant shall, at its expense, proceed
with all reasonable dispatch to do such work to its fixtures, furnishings and
equipment as may be required to restore them to the same condition they were in
immediately prior to such taking. From the time that Tenant is deprived of the
right of possession of any portion of the Premises taken, the amount of Base
Monthly Rent shall be reduced by a percentage equal to the percentage reduction
in the area of the Premises as a result of the taking. During any restoration
work by Landlord the Base Monthly Rent shall be reduced by the same percentage
that the portion of the reconstructed Premises which is not usable due to
restoration work bears to the whole thereof.
23. NOTICES.
All notices or demands of any kind required or desired to be given by
Landlord or Tenant hereunder shall be in writing and shall be deemed delivered
seventy-two (72) hours after depositing the notice or demand in the United
States mail, certified or registered, return receipt requested, postage
prepaid, addressed to the Landlord or Tenant respectively at the addresses set
forth after their signature at the end of this Lease, or at such other address
which is specified in a notice given in accordance with this section.
24. TIME IS OF THE ESSENCE.
Time is of the essence of this Lease, and each and every covenant,
term, condition and provision hereof.
25. COVENANT OF QUIET POSSESSION.
Landlord covenants that Landlord has full right to make this Lease and
that upon Tenant's paying the rent and observing and performing all of the
terms, covenants and conditions contained herein on Tenant's part, Tenant may
peacefully and quietly enjoy
Lease Agreement Page 12
<PAGE> 13
the Premises during the entire term and any extensions thereof.
26. ENTIRE AGREEMENT.
This Lease contains the entire agreement between the parties, and
cannot be changed or amended except by a written instrument subsequently
executed by the parties hereto.
27. GOVERNING LAW.
This Lease shall be governed, construed and enforced in accordance with
the laws of the State of Washington.
28. CAPTIONS.
The captions to the sections of this Lease are reference guides only
and shall not be given substantive or interpretive meaning.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
date and year first above written.
LANDLORD: TENANT:
/s/ MICHAEL A. PRICE T & W FINANCIAL CORPORATION
- ---------------------------- formerly T & W LEASING, INC.
MICHAEL A. PRICE
/s/ MICHAEL A. PRICE
------------------------------------
Address: By: Michael A. Price
1411 Beach Dr. N.E. Its: Chief Executive Officer
Tacoma, WA 98422
Address:
6416 Pacific Highway East
Tacoma, WA 98424
Page 13
Lease Agreement
<PAGE> 14
STATE OF WASHINGTON )
)
COUNTY OF PIERCE ) ss
On this day personally appeared before me MICHAEL A. PRICE, to me
known to be the individual described in and who executed the within and
foregoing instrument, and acknowledged that he signed the same as his free and
voluntary act and deed, for the uses and purposes therein mentioned.
GIVEN, under my hand and official seal this _____ day of January, 1997.
/s/ [SIG]
-------------------------------------
NOTARY PUBLIC in and for the State of
Washington residing at Puyallup
---------------
My commission expires: 3-6-97
----------------
STATE OF WASHINGTON )
)
COUNTY OF PIERCE ) ss
On this day personally appeared before me MICHAEL A. PRICE, the Chief
Executive Officer of T & W FINANCIAL CORPORATION, to me known to be the
corporation described in and who executed the within and foregoing instrument,
and acknowledged that he was authorized to execute the same as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned.
GIVEN under by hand and official seal of this 2 day of January, 1997.
---
/s/ [SIG]
-------------------------------------
NOTARY PUBLIC in and for the State of
Washington residing at Puyallup
---------------
My commission expires: 3-6-97
----------------
Lease Agreement Page 14
<PAGE> 15
EXHIBIT A
Legal Description
Pierce County Assessor's Tax Parcel Number 0420064184
04-20-07-1-130 Parcel "B" of DBLR 86-09-04-0334 Described as follows:
Beginning on the North Line of the Northwest Corner of the Northeast
Corner of 07-220-04 East at a point 279 feet West of the Northeast
Corner of said subdivision and on the West Margin 65th Avenue East then
South 88 degrees 27 minutes 46 seconds West 5 feet along the said West
Margin then North 00 degrees 38 minutes 14 seconds West 47.74 feet along
said West Margin.
Situate in Pierce County, Washington.
Lease Agreement Page 15
<PAGE> 1
EXHIBIT 10.37
ASSIGNMENT OF LEASE
The undersigned as "Assignor" does hereby assign and transfer unto
T & W FUNDING COMPANY VI, L.L.C., a Washington corporation, as "Assignee", all
of Assignor's right, title and interest as Lessee in, under and to that certain
Commercial and Industrial Lease Agreement made and entered into November 1, 1996
by and between James R. Neese and Teri Neese, as Lessor, and Commercial Capital
Corporation, as Lessee, covering property described as office space in a
commercial building located at 7920 State Line, Prairie Village, Kansas. Dated
and effective this 2nd day of June, 1997.
COMMERCIAL CAPITAL CORPORATION
By: /s/ JAMES R. NEESE
-------------------------------------
James R. Neese, President
"Assignor"
CONSENT
The undersigned hereby consents to the above and foregoing Assignment
of Lease.
/s/ JAMES R. NEESE
-------------------------------------
James R. Neese
/s/ TERI NEESE
-------------------------------------
Teri Neese
<PAGE> 2
<TABLE>
<S> <C>
Real Estate Board of Kansas City, Missouri This is a legally binding contract. If not understood,
Approved by Legal Counsel seek competent advice.
</TABLE>
[REALTOR LOGO]
COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
THIS LEASE is made this 1st day of November, 1996, between
James R. Neese and Teri Neese, LESSOR, and
Commercial Capital Corporation
7920 State Line Suite 101
Prairie Village, KS 66208, LESSEE.
LESSOR hereby leases to LESSEE, and LESSEE hereby leases from LESSOR,
the following described premises, hereinafter referred to as "the premises," in
the City of Prairie Village, County of Johnson, State of Kansas, to wit; Office
Space in a Commercial Building located at 7920 State Line Road, Prairie
Village, Kansas as highlighted on attached exhibit "A"
to be used only for Business Purposes only for a term of Five (5) years and 0
months, beginning on the 1st day of November, 1996, and ending on the 31st day
of October, 2001 for which LESSEE agrees to pay to LESSOR a total of
ninety-seven thousand two hundred ($97,200.00), as rent, in monthly
installments, each due and payable on the first day of each and every month of
the term hereof, in advance, as follows:
$1,620.00 Monthly payable on or before the first day of each month.
at 7920 State Line Suite 101
or at such other place as LESSOR may designate from time to time in writing.
<PAGE> 3
IT IS ALSO AGREED, AS FOLLOWS, THAT:
1. POSSESSION AT BEGINNING OF TERM: LESSOR shall use due diligence to
give possession as nearly as possible at the beginning of the term of this
lease, and rent shall abate pro rata for the period of any delay in so doing.
LESSEE shall make no other claim against LESSOR for any such delay.
2. INSURANCE: LESSEE shall comply with all insurance regulations so the
lowest fire, lightning, explosion, extended coverage and liability insurance
rates may be obtained; and nothing shall be done or kept in or on the premises
by LESSEE which will cause an increase in the premium for any of such insurance
on the premises or on any building of which the premises are a part or on any
contents located therein, over the rate usually obtained for the proper use of
the premises permitted by this lease or which will cause cancellation of any
such insurance.
If during the term of this lease the rate for fire and what is commonly
known as extended coverage insurance should be changed so as to cause an
increase in premium, then LESSEE shall pay, as additional rent, the amount of
such increase, which amount shall be payable within fifteen days from the date
of LESSOR'S notice of an amount so due hereunder, should LESSEE occupy less
than the whole of the property insured, LESSEE'S obligation hereunder shall be
limited to a pro rata portion of such increase based on the area of the leased
premises to the total rentable space in the said property of which the leased
premises are a part.
3. INDEMNITY AND PUBLIC LIABILITY: LESSEE covenants at all times to
save LESSOR harmless from all loss, liability, cost, or damages that may occur
or be claimed with respect to any person or persons, corporation, property, or
chattels on or about the leased premises or to the property itself resulting
from any act done or omission by or through the LESSEE, its agents, employees,
invitees, or any person on the premises by reason of the LESSEE'S use or
occupancy or resulting from LESSEE'S non-??? or possession of said property and
any and all loss, cost, liability, or expense resulting therefrom; and at all
times to maintain said premises in a safe and careful manner. LESSEE further
covenants and agrees to maintain at all times, during the term of this lease,
comprehensive public liability insurance in a responsible insurance company,
licensed to do business in the state in which the premises are located and
satisfactory to LESSOR, properly protecting and indemnifying LESSOR in an
amount of not less than _____________________ DOLLARS for injury to or death of
any one person, ________________________ DOLLARS for injury to or death of any
two or more persons arising out of any one occurrence, and not less than
______________________ DOLLARS for property damage. LESSEE shall furnish LESSOR
with a certificate or certificates of insurance, covering such insurance so
maintained by LESSEE.
4. LESSEE shall not assign, transfer, or encumber this lease and shall
not sub-lease the premises or any part thereof or allow any other person to be
in possession thereof without the prior written consent of LESSOR.
5. SIGNS AND ADVERTISEMENTS: LESSEE shall not put upon nor permit to be
put upon any part of the premises, any signs, billboards or advertisements
whatever, without written consent of LESSOR.
6. ACCEPTANCE, MAINTENANCE, AND REPAIR: LESSEE has inspected and knows
the condition of the premises and accepts the same in their present condition
(subject to ordinary wear, tear, and deterioration in the event the term
commences after the date hereof and to the rights of present or former occupant
or occupants, if any, to remove movable property.)
LESSEE shall take good care of the premises and the equipment and
fixtures therein (including heating and air conditioning equipment) and shall
keep the same in good working order and condition, including particularly
protecting water pipes, heating and air conditioning equipment, plumbing,
fixtures, appliances, and sprinkler system from becoming frozen, and shall keep
the premises and the approaches, sidewalks, and the alleys adjacent thereto, if
any, clean and sightly and free from ice and snow (including policing the
grounds if they are included in the leased premises). At the expiration of the
term, LESSEE shall surrender the premises broom clean, in as good condition as
the reasonable use thereof will permit. All damage or injury to the leased
premises not caused by fire or other casualty, as set forth in Sec. 9 hereof,
and all damage to glass shall be promptly repaired by the LESSEE.
7. LESSOR'S RIGHT OF ENTRY: LESSOR or LESSOR'S agent may enter the
premises at reasonable hours to examine same and to do anything LESSOR may be
required to do hereunder or which LESSOR may deem necessary for the good of the
premises or any building of which they are a part; and, during the last sixty
days of this lease, LESSOR may display a "For Rent" sign on, and show the
premises.
8. MAINTENANCE AND REPAIR BY LESSOR: LESSOR shall keep in repair,
ordinary wear and tear excepted, the roof and exterior walls (exclusive of
inside surfaces), gutters and downspouts of the premises in any building of
which they are a part, except as to damage arising from the negligence of the
LESSEE, but nothing herein shall be construed as requiring LESSOR to repair any
front or other part installed by the LESSEE or glass in windows or doors.
LESSOR shall be under no obligation and shall not be liable for any failure to
make any such repairs until and unless LESSEE notifies LESSOR, in writing, of
the necessity therefor, in which event LESSOR shall have a reasonable time
thereafter to make such repairs. LESSOR reserves the right to the exclusive use
of the roof and exterior walls which LESSOR is so obligated to repair.
9. DAMAGE BY CASUALTY: In case, during the term created or previous
thereto, the premises hereby let, or the building of which said premises are a
part, shall be destroyed or shall be so damaged by fire or other casualty, as
to become untenantable, then in such event, at the option of the LESSOR, the
term hereby created shall cease, and this lease shall become null and void from
the date of such damage or destruction and the LESSEE shall immediately
surrender said premises and all interest therein to LESSOR, and LESSEE shall
pay rent within said term only to the time of such surrender; provided,
however, that LESSOR shall exercise such option to so terminate this lease by
notice in writing delivered to LESSEE within thirty days after such damage or
destruction. In
<PAGE> 4
case LESSOR shall not so elect to terminate this lease, in such event, this
lease shall continue in full force and effect and the LESSOR shall repair the
leased premises with all reasonable promptitude, placing the same in as good a
condition as they were at the time of the damage or destruction, and for that
purpose may enter said premises and rent shall abate in proportion to the
extent and duration of untenantability. In either event LESSEE shall remove all
rubbish, debris, merchandise, furniture, equipment and other of its personal
property, within five days after the request of the LESSOR. If the leased
premises shall be but slightly injured by fire or the elements, so as not to
render the same untenantable and unfit for occupancy, then the LESSOR shall
repair the same with all reasonable promptitude, and in that case the rent
shall not abate. No compensation or claim shall be made by or allowed to the
LESSEE by reason of any inconvenience or annoyance arising from the necessity
of repairing any portion of the building or the leased premises, however the
necessity may occur.
10. PERSONAL PROPERTY: LESSOR shall not be liable for any loss or
damage to any merchandise or personal property in or about the premises,
regardless of the cause of such loss or damage.
11. ALTERATIONS: LESSEE shall not make any alterations or additions
in or to the premises, without the prior written consent of LESSOR.
12. UTILITIES AND SERVICES: LESSEE shall furnish and pay for all
electricity, gas, water, fuel, and any services or utilities used in or assessed
against the premises, unless otherwise herein expressly provided.
13. PUBLIC REQUIREMENTS: LESSEE shall comply with all laws, orders,
ordinances and other public requirements now or hereafter affecting the
premises or the use thereof, and save LESSOR harmless from expense or damage
resulting from failure to do so.
14. FIXTURES: All buildings, repairs, alterations, additions,
improvements, installations, equipment and fixtures, by whomsoever installed or
erected (except such business trade fixtures belonging to LESSEE as can be
removed without damage to or leaving incomplete the premises or building) shall
belong to LESSOR and remain on and be surrendered with the premises as a part
thereof, at the expiration of this lease or any extension thereof.
15. INCREASE IN TAXES: In the event that the real estate taxes, both
general and special, payable with respect to the leased premises during any
lease year shall be greater than the amount of such taxes due and payable
during the calendar year of 1996, whether by reason of an increase in tax rate
or an increase in the assessed valuation or otherwise, LESSEE shall pay to
LESSOR the full amount of such increase as additional rent within thirty days
after notice that the same is due. Should LESSEE occupy less than the whole of
the property against which such taxes are assessed, LESSEE'S obligation
hereunder shall be limited to a pro rata portion of such increased tax based on
the area of the leased premises to the total rentable space in the property so
assessed and of which the premises are a part.
16. EMINENT DOMAIN: If the premises or any substantial part thereof
shall be taken by any competent authority under the power of eminent domain or
be acquired for any public or quasi-public use or purpose, the term of this
lease shall cease and terminate upon the date when the possession of said
premises or the part thereof so taken shall be required for such use or purpose
and without apportionment of the award, and LESSEE shall have no claim against
LESSOR for the value of any unexpired term of this lease. If any condemnation
proceeding shall be instituted in which it is sought to take or damage any
part of LESSOR's building or the land under it or if the grade of any street or
alley adjacent to the building is changed by any competent authority and such
change of grade makes it necessary or desirable to remodel the building to
conform to the changed grade, LESSOR shall have the right to cancel this lease
after having given written notice of cancellation to LESSEE not less than
ninety (90) days prior to the date of cancellation designated in the notice. In
either of said events rent at the then current rate shall be apportioned as of
the date of the termination. No money or other consideration shall be payable
by the LESSOR to the LESSEE for the right of cancellation and LESSEE shall
have no right to share in the condemnation award or in any judgment for damages
caused by the taking or the change of grade. Nothing in this paragraph shall
preclude an award being made to LESSEE for loss of business or depreciation to
and cost of removal of equipment or fixtures.
17. SUBROGATION: As part of the consideration for this lease, each of
the parties hereto does hereby release the other party hereto from all liability
for damage due to any act or neglect of the other party (except as hereinafter
provided) occasioned to property owned by said parties which is or might be
incident to or the result of a fire or any other casualty against loss for which
either of the parties is now carrying or hereafter may carry insurance;
provided, however, that the releases herein contained shall not apply to any
loss or damage occasioned by the willful, wanton, or premeditated negligence of
either of the parties hereto, and the parties hereto further covenant that any
insurance that they obtain on their respective properties shall contain an
appropriate provision whereby the insurance company, or companies, consent to
the mutual release of liability contained in this paragraph.
18. DEFAULT: If default is made in the payment of any installment of
rent on the due date thereof, or if LESSEE shall default in the performance of
any other agreement (other than payment of rent) and such default (other than
payment of rent) continues for ten days after written notice thereof, or if the
premises be vacated or abandoned in violation of the terms hereof, then in any
such event that this lease shall terminate, at the option of the LESSOR, and
LESSOR may re-enter the premises and take possession thereof, with or without
force or legal process and without notice or demand, the service of notice,
demand or legal process being hereby expressly waived, and upon such entry, as
aforesaid, this lease shall terminate and the LESSOR may exclude LESSEE from the
premises, changing the lock on the door or doors if deemed necessary, without
being liable to LESSEE for any damages or for prosecution therefor, LESSOR's
rights in such event may be enforced by action in unlawful detainer or other
proper legal action, and the LESSEE expressly agrees, notwithstanding
termination of this lease and re-entry by the LESSOR that the LESSEE shall
remain liable for a sum equal to the entire rent payable to the end of the term
hereof and shall pay any loss or deficiency sustained by the
<PAGE> 5
LESSOR on account of the premises being let for the remainder of the original
term for a less sum than before. LESSOR, as agent for LESSEE without notice,
may re-let the leased premises or any part thereof for the remainder of the
term or for any longer or shorter period as opportunity may offer, and at such
rental as may be obtained, and LESSEE agrees to pay the difference between a
sum equal to the amount of rent payable during the residue of the term and the
net rent actually received by the LESSOR during the term after deducting all
expenses of every kind for repairs, recovering possession and re-letting the
same, which difference shall accrue and be payable monthly.
All property of the LESSEE which is now or may hereafter be at any
time during the term of this lease in or upon said premises, whether exempt
from execution or not, shall be bound by and subject to a lien for the payment
of the rent herein reserved, and for any damages arising from any breach by the
LESSEE of any of the covenants or agreements of this lease to be performed by
LESSEE. In the event of default by LESSEE in the payment of rent or otherwise,
LESSOR may foreclose such lien and take possession of said property or any part
or parts thereof and sell or cause the same to be sold, at such place as LESSOR
may elect, at public or private sale, with or without notice, to the highest
bidder for cash, and apply the proceeds of said sale to pay the costs of taking
possession of and selling said property, and then toward the debt and/or
damages as aforesaid. Any excess of the proceeds of said sale over said costs,
debt, and/or damages shall be paid to LESSEE. Any such sale shall bar any right
of redemption by LESSEE.
19. WAIVER: The rights and remedies of the LESSOR under this lease, as
well as those provided or accorded by law, shall be cumulative, and none shall
be exclusive of any other rights or remedies hereunder or allowed by law. A
waiver by LESSOR of any breach or breaches, default or defaults, of LESSEE
hereunder shall not be deemed or construed to be a continuing waiver of such
breach or default nor as a waiver of or permission, expressed or implied, for
any subsequent breach or default, and it is agreed that the acceptance by LESSOR
of any installment of rent subsequently to the date the same should have been
paid hereunder, shall in no manner alter or affect the covenant and obligation
of LESSEE to pay subsequent installments of rent promptly upon the due date
thereof. No receipt of money by LESSOR after the termination in any way of this
lease shall reinstate, continue or extend the term above demised.
20.
In the event of any extension or renewal of this lease or the term
thereof, LESSOR agrees at the time thereof to pay REALTOR a commission of
21. NOTICES: Any notice hereunder shall be sufficient if sent by
registered or certified mail, addressed to LESSEE at the premises, and to
LESSOR where rent is payable.
22. SUBORDINATION: In the event LESSOR holds title to said premises by
virtue of a lease, then this sublease is and shall remain subject to all of the
terms and conditions of such underlying lease, so far as shall be applicable to
the premises herein leased. This lease shall also be subject and subordinate
in law and equity to any existing or future mortgage placed by LESSOR upon the
issued premises or the building of which the leased premises form a part.
23. SUCCESSORS: The provisions, covenants and conditions of this lease
shall bind and inure to the benefit of the legal representatives, heirs,
successors and assigns of each of the parties hereto, except that no assignment
or subletting by LESSEE without the written consent of LESSOR, shall vest any
right in the assignee or sublessee of the LESSEE.
24. QUIET POSSESSION: LESSOR agrees that so long as LESSEE fully
complies with all of the terms, covenants and conditions here contained on
LESSEE'S part to be kept and performed, LESSEE shall and may peaceably and
quietly have, hold and enjoy the said premises for the term aforesaid, it being
expressly understood and agreed that, however, the aforesaid covenant of quiet
enjoyment shall be binding upon the LESSOR only so long as LESSOR remains the
owner in fee or leasehold of the leased premises, anything to the contrary in
this instrument notwithstanding. LESSOR, however, covenants and represents that
LESSOR has full right, title, power and authority to make, execute and deliver
this lease.
<PAGE> 6
25. BANKRUPTCY: Neither this lease nor any interest therein nor any
estate hereby created shall pass to any trustee or receiver in bankruptcy or to
any other receiver or assignee for the benefit of creditors or otherwise by
operation of law during the term of this lease or any renewal thereof.
26. ENTIRE AGREEMENT: This lease contains the entire agreement
between the parties, and no modification of this lease shall be binding upon
the parties unless evidenced by an agreement in writing signed by the LESSOR
and the LESSEE after the date hereof. If there is more than one LESSEE named
herein, the provisions of this lease shall be applicable to and binding upon
such LESSEES, jointly and severally.
IN WITNESS WHEREOF, the parties have signed triplicate copies hereof.
James R. Neese Commercial Capital Corporation
- -------------------------------
/s/ JAMES R. NEESE /s/ LARRY E. RICE
- ------------------------------- -----------------------------
Larry E. Rice, Vice President
- ------------------------------- -----------------------------
Lessor Lessee
Copyright [date] - Real Estate Board of Kansas City, Missouri Page 5
<PAGE> 1
EXHIBIT 10.38
ASSIGNMENT OF LEASE
The undersigned as "Assignor" does hereby assign and transfer unto
T & W FUNDING COMPANY VI, L.L.C., a Washington corporation, as "Assignee", all
of Assignor's right, title and interest as Lessee in, under and to that
certain Commercial and Industrial Lease Agreement made and entered into
November 1, 1996 by and between James R. Neese and Teri Neese, as Lessor, and
Commercial Capital Corporation, as Lessee, covering property described as
office space in a commercial building located at 7920 State Line, Suite 200,
Prairie Village, Kansas.
Dated and effective this 2nd day of June, 1997.
COMMERCIAL CAPITAL CORPORATION
By: /s/ JAMES R. NEESE
--------------------------------------
James R. Neese, President
"Assignor"
CONSENT
The undersigned hereby consents to the above and foregoing Assignment
of Lease.
/s/ JAMES R. NEESE
--------------------------------------
James R. Neese
/s/ TERI NEESE
--------------------------------------
Teri Neese
<PAGE> 2
<TABLE>
<S> <C>
Real Estate Board of Kansas City, Missouri This is a legally binding contract. If not understood,
Approved by Legal Counsel seek competent advice.
</TABLE>
[REALTOR LOGO]
COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
THIS LEASE is made this 1st day of November, 1996, between
James R. Neese and Teri Neese, LESSOR, and
Commercial Capital Corporation
Broker Services
7920 State Line Suite 200
Prairie Village, KS 66208, LESSEE.
LESSOR hereby leases to LESSEE, and LESSEE hereby leases from LESSOR,
the following described premises, hereinafter referred to as "the premises," in
the City of Prairie Village, County of Johnson, State of Kansas, to wit; Office
space in a commercial building located at 7920 State Line Suite 200 Prairie
Village, KS as highlighted on attached exhibit "A"
to be used only for Business Purposes only for a term of Five (5) years and 0
months, beginning on the 1st day of November, 1996, and ending on the 31st day
of October, 2001 for which LESSEE agrees to pay to LESSOR a total of
Eighty-four Thousand & 00/100 DOLLARS ($84,000.00), as rent, in monthly
installments, each due and payable on the first day of each and every month of
the term hereof, in advance, as follows:
$1400.00 Monthly payable on or before the first day of each month
at 7920 State Line Suite 101
or at such other place as LESSOR may designate from time to time in writing.
<PAGE> 3
IT IS ALSO AGREED, AS FOLLOWS, THAT:
1. POSSESSION AT BEGINNING OF TERM: LESSOR shall use due diligence to
give possession as nearly as possible at the beginning of the term of this
lease, and rent shall abate pro rata for the period of any delay in so doing.
LESSEE shall make no other claim against LESSOR for any such delay.
2. INSURANCE: LESSEE shall comply with all insurance regulations so the
lowest fire, lightning, explosion, extended coverage and liability insurance
rates may be obtained; and nothing shall be done or kept in or on the premises
by LESSEE which will cause an increase in the premium for any of such insurance
on the premises or on any building of which the premises are a part or on any
contents located therein, over the rate usually obtained for the proper use of
the premises permitted by this lease or which will cause cancellation of any
such insurance.
If during the term of this lease the rate for fire and what is commonly
known as extended coverage insurance should be changed so as to cause an
increase in premium, then LESSEE shall pay, as additional rent, the amount of
such increase, which amount shall be payable within fifteen days from the date
of LESSOR'S notice of an amount so due hereunder, should LESSEE occupy less
than the whole of the property insured, LESSEE'S obligation hereunder shall be
limited to a pro rata portion of such increase based on the area of the leased
premises to the total rentable space in the said property of which the leased
premises are a part.
3. INDEMNITY AND PUBLIC LIABILITY: LESSEE covenants at all times to
save LESSOR harmless from all loss, liability, cost, or damages that may occur
or be claimed with respect to any person or persons, corporation, property, or
chattels on or about the leased premises or to the property itself resulting
from any act done or omission by or through the LESSEE, its agents, employees,
invitees, or any person on the premises by reason of the LESSEE'S use or
occupancy or resulting from LESSEE'S non-??? or possession of said property and
any and all loss, cost, liability, or expense resulting therefrom; and at all
times to maintain said premises in a safe and careful manner. LESSEE further
covenants and agrees to maintain at all times, during the term of this lease,
comprehensive public liability insurance in a responsible insurance company,
licensed to do business in the state in which the premises are located and
satisfactory to LESSOR, properly protecting and indemnifying LESSOR in an
amount of not less than _____________________ DOLLARS for injury to or death of
any one person, ________________________ DOLLARS for injury to or death of any
two or more persons arising out of any one occurrence, and not less than
______________________ DOLLARS for property damage. LESSEE shall furnish LESSOR
with a certificate or certificates of insurance, covering such insurance so
maintained by LESSEE.
4. LESSEE shall not assign, transfer, or encumber this lease and shall
not sub-lease the premises or any part thereof or allow any other person to be
in possession thereof without the prior written consent of LESSOR.
5. SIGNS AND ADVERTISEMENTS: LESSEE shall not put upon nor permit to be
put upon any part of the premises, any signs, billboards or advertisements
whatever, without written consent of LESSOR.
6. ACCEPTANCE, MAINTENANCE, AND REPAIR: LESSEE has inspected and knows
the condition of the premises and accepts the same in their present condition
(subject to ordinary wear, tear, and deterioration in the event the term
commences after the date hereof and to the rights of present or former occupant
or occupants, if any, to remove movable property.)
LESSEE shall take good care of the premises and the equipment and
fixtures therein (including heating and air conditioning equipment) and shall
keep the same in good working order and condition, including particularly
protecting water pipes, heating and air conditioning equipment, plumbing,
fixtures, appliances, and sprinkler system from becoming frozen, and shall keep
the premises and the approaches, sidewalks, and the alleys adjacent thereto, if
any, clean and sightly and free from ice and snow (including policing the
grounds if they are included in the leased premises). At the expiration of the
term, LESSEE shall surrender the premises broom clean, in as good condition as
the reasonable use thereof will permit. All damage or injury to the leased
premises not caused by fire or other casualty, as set forth in Sec. 9 hereof,
and all damage to glass shall be promptly repaired by the LESSEE.
7. LESSOR'S RIGHT OF ENTRY: LESSOR or LESSOR'S agent may enter the
premises at reasonable hours to examine same and to do anything LESSOR may be
required to do hereunder or which LESSOR may deem necessary for the good of the
premises or any building of which they are a part; and, during the last sixty
days of this lease, LESSOR may display a "For Rent" sign on, and show the
premises.
8. MAINTENANCE AND REPAIR BY LESSOR: LESSOR shall keep in repair,
ordinary wear and tear excepted, the roof and exterior walls (exclusive of
inside surfaces), gutters and downspouts of the premises in any building of
which they are a part, except as to damage arising from the negligence of the
LESSEE, but nothing herein shall be construed as requiring LESSOR to repair any
front or other part installed by the LESSEE or glass in windows or doors.
LESSOR shall be under no obligation and shall not be liable for any failure to
make any such repairs until and unless LESSEE notifies LESSOR, in writing, of
the necessity therefor, in which event LESSOR shall have a reasonable time
thereafter to make such repairs. LESSOR reserves the right to the exclusive use
of the roof and exterior walls which LESSOR is so obligated to repair.
9. DAMAGE BY CASUALTY: In case, during the term created or previous
thereto, the premises hereby let, or the building of which said premises are a
part, shall be destroyed or shall be so damaged by fire or other casualty, as
to become untenantable, then in such event, at the option of the LESSOR, the
term hereby created shall cease, and this lease shall become null and void from
the date of such damage or destruction and the LESSEE shall immediately
surrender said premises and all interest therein to LESSOR, and LESSEE shall
pay rent within said term only to the time of such surrender; provided,
however, that LESSOR shall exercise such option to so terminate this lease by
notice in writing delivered to LESSEE within thirty days after such damage or
destruction. In
<PAGE> 4
case LESSOR shall not so elect to terminate this lease, in such event, this
lease shall continue in full force and effect and the LESSOR shall repair the
leased premises with all reasonable promptitude, placing the same in as good a
condition as they were at the time of the damage or destruction, and for that
purpose may enter said premises and rent shall abate in proportion to the
extent and duration of untenantability. In either event LESSEE shall remove all
rubbish, debris, merchandise, furniture, equipment and other of its personal
property, within five days after the request of the LESSOR. If the leased
premises shall be but slightly injured by fire or the elements, so as not to
render the same untenantable and unfit for occupancy, then the LESSOR shall
repair the same with all reasonable promptitude, and in that case the rent
shall not abate. No compensation or claim shall be made by or allowed to the
LESSEE by reason of any inconvenience or annoyance arising from the necessity
of repairing any portion of the building or the leased premises, however the
necessity may occur.
10. PERSONAL PROPERTY: LESSOR shall not be liable for any loss or
damage to any merchandise or personal property in or about the premises,
regardless of the cause of such loss or damage.
11. ALTERATIONS: LESSEE shall not make any alterations or additions
in or to the premises, without the prior written consent of LESSOR.
12. UTILITIES AND SERVICES: LESSEE shall furnish and pay for all
electricity, gas, water, fuel, and any services or utilities used in or assessed
against the premises, unless otherwise herein expressly provided.
13. PUBLIC REQUIREMENTS: LESSEE shall comply with all laws, orders,
ordinances and other public requirements now or hereafter affecting the
premises or the use thereof, and save LESSOR harmless from expense or damage
resulting from failure to do so.
14. FIXTURES: All buildings, repairs, alterations, additions,
improvements, installations, equipment and fixtures, by whomsoever installed or
erected (except such business trade fixtures belonging to LESSEE as can be
removed without damage to or leaving incomplete the premises or building) shall
belong to LESSOR and remain on and be surrendered with the premises as a part
thereof, at the expiration of this lease or any extension thereof.
15. INCREASE IN TAXES: In the event that the real estate taxes, both
general and special, payable with respect to the leased premises during any
lease year shall be greater than the amount of such taxes due and payable
during the calendar year of 1996, whether by reason of an increase in tax rate
or an increase in the assessed valuation or otherwise, LESSEE shall pay to
LESSOR the full amount of such increase as additional rent within thirty days
after notice that the same is due. Should LESSEE occupy less than the whole of
the property against which such taxes are assessed, LESSEE'S obligation
hereunder shall be limited to a pro rata portion of such increased tax based on
the area of the leased premises to the total rentable space in the property so
assessed and of which the premises are a part.
16. EMINENT DOMAIN: If the premises or any substantial part thereof
shall be taken by any competent authority under the power of eminent domain or
be acquired for any public or quasi-public use or purpose, the term of this
lease shall cease and terminate upon the date when the possession of said
premises or the part thereof so taken shall be required for such use or purpose
and without apportionment of the award, and LESSEE shall have no claim against
LESSOR for the value of any unexpired term of this lease. If any condemnation
proceeding shall be instituted in which it is sought to take or damage any
part of LESSOR's building or the land under it or if the grade of any street or
alley adjacent to the building is changed by any competent authority and such
change of grade makes it necessary or desirable to remodel the building to
conform to the changed grade, LESSOR shall have the right to cancel this lease
after having given written notice of cancellation to LESSEE not less than
ninety (90) days prior to the date of cancellation designated in the notice. In
either of said events rent at the then current rate shall be apportioned as of
the date of the termination. No money or other consideration shall be payable
by the LESSOR to the LESSEE for the right of cancellation and LESSEE shall
have no right to share in the condemnation award or in any judgment for damages
caused by the taking or the change of grade. Nothing in this paragraph shall
preclude an award being made to LESSEE for loss of business or depreciation to
and cost of removal of equipment or fixtures.
17. SUBROGATION: As part of the consideration for this lease, each of
the parties hereto does hereby release the other party hereto from all liability
for damage due to any act or neglect of the other party (except as hereinafter
provided) occasioned to property owned by said parties which is or might be
incident to or the result of a fire or any other casualty against loss for which
either of the parties is now carrying or hereafter may carry insurance;
provided, however, that the releases herein contained shall not apply to any
loss or damage occasioned by the willful, wanton, or premeditated negligence of
either of the parties hereto, and the parties hereto further covenant that any
insurance that they obtain on their respective properties shall contain an
appropriate provision whereby the insurance company, or companies, consent to
the mutual release of liability contained in this paragraph.
18. DEFAULT: If default is made in the payment of any installment of
rent on the due date thereof, or if LESSEE shall default in the performance of
any other agreement (other than payment of rent) and such default (other than
payment of rent) continues for ten days after written notice thereof, or if the
premises be vacated or abandoned in violation of the terms hereof, then in any
such event that this lease shall terminate, at the option of the LESSOR, and
LESSOR may re-enter the premises and take possession thereof, with or without
force or legal process and without notice or demand, the service of notice,
demand or legal process being hereby expressly waived, and upon such entry, as
aforesaid, this lease shall terminate and the LESSOR may exclude LESSEE from the
premises, changing the lock on the door or doors if deemed necessary, without
being liable to LESSEE for any damages or for prosecution therefor, LESSOR's
rights in such event may be enforced by action in unlawful detainer or other
proper legal action, and the LESSEE expressly agrees, notwithstanding
termination of this lease and re-entry by the LESSOR that the LESSEE shall
remain liable for a sum equal to the entire rent payable to the end of the term
hereof and shall pay any loss or deficiency sustained by the
<PAGE> 5
LESSOR on account of the premises being let for the remainder of the original
term for a less sum than before. LESSOR, as agent for LESSEE without notice,
may re-let the leased premises or any part thereof for the remainder of the
term or for any longer or shorter period as opportunity may offer, and at such
rental as may be obtained, and LESSEE agrees to pay the difference between a
sum equal to the amount of rent payable during the residue of the term and the
net rent actually received by the LESSOR during the term after deducting all
expenses of every kind for repairs, recovering possession and re-letting the
same, which difference shall accrue and be payable monthly.
All property of the LESSEE which is now or may hereafter be at any
time during the term of this lease in or upon said premises, whether exempt
from execution or not, shall be bound by and subject to a lien for the payment
of the rent herein reserved, and for any damages arising from any breach by the
LESSEE of any of the covenants or agreements of this lease to be performed by
LESSEE. In the event of default by LESSEE in the payment of rent or otherwise,
LESSOR may foreclose such lien and take possession of said property or any part
or parts thereof and sell or cause the same to be sold, at such place as LESSOR
may elect, at public or private sale, with or without notice, to the highest
bidder for cash, and apply the proceeds of said sale to pay the costs of taking
possession of and selling said property, and then toward the debt and/or
damages as aforesaid. Any excess of the proceeds of said sale over said costs,
debt, and/or damages shall be paid to LESSEE. Any such sale shall bar any right
of redemption by LESSEE.
19. WAIVER: The rights and remedies of the LESSOR under this lease, as
well as those provided or accorded by law, shall be cumulative, and none shall
be exclusive of any other rights or remedies hereunder or allowed by law. A
waiver by LESSOR of any breach or breaches, default or defaults, of LESSEE
hereunder shall not be deemed or construed to be a continuing waiver of such
breach or default nor as a waiver of or permission, expressed or implied, for
any subsequent breach or default, and it is agreed that the acceptance by LESSOR
of any installment of rent subsequently to the date the same should have been
paid hereunder, shall in no manner alter or affect the covenant and obligation
of LESSEE to pay subsequent installments of rent promptly upon the due date
thereof. No receipt of money by LESSOR after the termination in any way of this
lease shall reinstate, continue or extend the term above demised.
20.
In the event of any extension or renewal of this lease or the term
thereof, LESSOR agrees at the time thereof to pay REALTOR a commission of
21. NOTICES: Any notice hereunder shall be sufficient if sent by
registered or certified mail, addressed to LESSEE at the premises, and to
LESSOR where rent is payable.
22. SUBORDINATION: In the event LESSOR holds title to said premises by
virtue of a lease, then this sublease is and shall remain subject to all of the
terms and conditions of such underlying lease, so far as shall be applicable to
the premises herein leased. This lease shall also be subject and subordinate
in law and equity to any existing or future mortgage placed by LESSOR upon the
issued premises or the building of which the leased premises form a part.
23. SUCCESSORS: The provisions, covenants and conditions of this lease
shall bind and inure to the benefit of the legal representatives, heirs,
successors and assigns of each of the parties hereto, except that no assignment
or subletting by LESSEE without the written consent of LESSOR, shall vest any
right in the assignee or sublessee of the LESSEE.
24. QUIET POSSESSION: LESSOR agrees that so long as LESSEE fully
complies with all of the terms, covenants and conditions here contained on
LESSEE'S part to be kept and performed, LESSEE shall and may peaceably and
quietly have, hold and enjoy the said premises for the term aforesaid, it being
expressly understood and agreed that, however, the aforesaid covenant of quiet
enjoyment shall be binding upon the LESSOR only so long as LESSOR remains the
owner in fee or leasehold of the leased premises, anything to the contrary in
this instrument notwithstanding. LESSOR, however, covenants and represents that
LESSOR has full right, title, power and authority to make, execute and deliver
this lease.
<PAGE> 6
25. BANKRUPTCY: Neither this lease nor any interest therein nor any
estate hereby created shall pass to any trustee or receiver in bankruptcy or to
any other receiver or assignee for the benefit of creditors or otherwise by
operation of law during the term of this lease or any renewal thereof.
26. ENTIRE AGREEMENT: This lease contains the entire agreement
between the parties, and no modification of this lease shall be binding upon
the parties unless evidenced by an agreement in writing signed by the LESSOR
and the LESSEE after the date hereof. If there is more than one LESSEE named
herein, the provisions of this lease shall be applicable to and binding upon
such LESSEES, jointly and severally.
IN WITNESS WHEREOF, the parties have signed triplicate copies hereof.
James R. Neese Commercial Capital Corporation
- -------------------------------
/s/ JAMES R. NEESE /s/ LARRY E. RICE
- ------------------------------- -----------------------------
Larry E. Rice, Vice President
- ------------------------------- -----------------------------
Lessor Lessee
Copyright [date] - Real Estate Board of Kansas City, Missouri Page 5
<PAGE> 1
EXHIBIT 10.39
[T&W FINANCIAL CORPORATION LETTERHEAD]
STOCK OPTION LETTER AGREEMENT
To: Paul B. Luke
From: Thomas W. Price, President
Re: T & W Financial Corporation Stock Option Plan
Date: June 30, 1996
Subject to the terms and conditions set forth below, and as partial
consideration of your employment by T & W Financial Corporation (the
"Company"), you are hereby granted a non-qualified stock option for the
purchase of up to 3% of the shares of the Company's common stock at an
exercise price equal to two (2) times the book value of the Company as of
June 30, 1996.
Term: The term of the option is ten (10) years from the date of this
Agreement and therefore, to the extent not exercised, will automatically
terminate on June 30, 2006, unless sooner terminated.
Exercise: During your lifetime, only you can exercised the option. You
may use the Notice of Exercise of Stock Option in the form attached to this
Agreement when you exercise the option.
Payment for Shares: The option may be exercised by the delivery of
cash, bank certified or cashier's check. At the Company's discretion, all or
part of the required payment may be in the form of a promissory note, the terms
of which we must mutually agree upon.
Vesting and Termination: Your option is 100% vested and, therefore,
may be exercised for up to three months following the termination of your
employment with the Company.
Transfer of Option: The option is not transferable except by will or
by the applicable laws of descent and distribution.
Taxation: The date of grant of this option is June 30, 1996. You
should obtain tax advise when exercising your option and before disposing of the
shares. The Company makes no representations concerning the tax affect of this
option or the subsequent exercise thereof.
<PAGE> 2
Paul B. Luke
June 30, 1996
Page -2-
Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
T & W FINANCIAL CORPORATION
/s/ THOMAS W. PRICE
----------------------------------
By: Thomas W. Price
Its: President
TWP/jt
Encl.
<PAGE> 3
ACCEPTANCE AND ACKNOWLEDGMENT
I, as a resident of the state of Washington, accept the nonqualified
stock option described above and acknowledge receipt of a copy of this
Agreement.
Dated as of: June 30, 1996.
/s/ PAUL B. LUKE
-------------------------------
Paul B. Luke
<PAGE> 4
NOTICE OF EXERCISE OF STOCK OPTION
To: Thomas W. Price, President
I, as a resident of the State of Washington, hereby exercise my stock
option granted by the Board of Directors of T&W Financial Corporation (the
"Company") pursuant to the Consent Resolution of the Board of Directors of the
Company dated June 30, 1996, and notify the Company of my desire to purchase the
number of shares of the Company that represents three percent (3%) of the common
stock of the Company as of June 30, 1996. I acknowledge that the exact number of
shares will be determined as soon as reasonably practicable. As stated in the
Consent Resolution, the exercise price shall be equal to two (2) times the book
value of the Company as of June 30, 1996.
I hereby represent that:
(a) the shares of Common Stock to be delivered to me pursuant to this
exercise are being acquired by me for my own account, for my own investment and
not with a view to resale or distribution;
(b) by virtue of my employment with the Company I am knowledgeable about
the Company's business, financial information and prospects, and as such, I am
capable of making an informed investment decision with regard to the Company;
and
(c) I am capable of bearing the risk of loss of my entire investment in
the Company.
Dated: July 3, 1997.
###-##-#### /s/ PAUL B. LUKE
- -------------------- ----------------------------------
Taxpayer I.D. Number Paul B. Luke
Address:
-------------------------
----------------------------------
----------------------------------
<PAGE> 5
AMENDED AND RESTATED
NOTICE OF EXERCISE OF STOCK OPTION
To: Thomas W. Price, President
The purpose of this instrument is to amend and restate the Notice of
Exercise of Option previously executed by the undersigned. I, as a resident of
the State of Washington, hereby exercise my stock option granted by the Board of
Directors of T&W Financial Corporation (the "Company"), and notify the Company
of my desire to purchase 2.55% of the total outstanding stock of T&W Financial
Corporation immediately prior to the closing of an initial public offering of
its common stock (i.e., 147,900 shares) (exclusive of shares sold pursuant to
the exercise of the Underwriters' over-allotment option as described in the
Company's Registration Statement on Form S-1 filed in connection with the
initial public offering). As stated in the Stock Option Letter Agreement, the
exercise price shall be equal to two (2) times the book value of the Company as
of June 30, 1996.
I hereby represent that:
(a) the shares of Common Stock to be delivered to me pursuant to this
exercise are being acquired by me for my own account, for my own investment and
not with a view to resale or distribution;
(b) by virtue of my employment with the Company I am knowledgeable about
the Company's business, financial information and prospects, and as such, I am
capable of making an informed investment decision with regard to the Company;
and
(c) I am capable of bearing the risk of loss of my entire investment in
the Company.
Dated as of August 15, 1997.
- ------------------------------ ------------------------------
Taxpayer I.D. Number Paul B. Luke
Address: _____________________
______________________________
______________________________
<PAGE> 1
Exhibit 10.40
ADDENDUM TO STOCK OPTION LETTER AGREEMENT
This Addendum to Stock Option Letter Agreement dated June 30, 1996 (the
"Agreement") is entered into by and between T & W Leasing, Inc., formerly known
as T & W Financial Corporation, (the "Company"), T & W Financial Corporation
("New T&W") and Paul B. Luke ("Luke").
BACKGROUND
The Company and Luke have entered into the Agreement which provides for
the issuance of an option to Luke to purchase certain shares of the Company's
common stock. The Company shall participate in a restructuring transaction in
order to accomplish an initial public offering of New T&W's common stock. As
part of the restructuring, shareholders of the Company shall contribute their
shares to New T&W in exchange for common stock of New T&W. The Company and Luke
desire to restate and clarify a portion of the Agreement to state the actual
percentage interest and number of shares of common stock of T&W Financial
Corporation represented by the grant of the option set forth in the Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
The text of the first paragraph of the Agreement (immediately preceding the
paragraph entitled "Term"), is hereby amended in its entirety to read as
follows:
Subject to the terms and conditions set forth below, you are hereby
granted a non-qualified stock option for the purchase of 2.55% of the
total outstanding stock of T&W Financial Corporation immediately prior
to the closing of an initial public offering of its common stock
(exclusive of shares sold pursuant to the exercise of the Underwriters'
over-allotment option as described in the Company's Registration
Statement on Form S-1 filed in connection with the initial public
offering). The per share exercise price of the option shall be equal to
two (2) times the book value of the Company as of June 30, 1996.
DATED as of August 15, 1997.
Company: T&W Leasing, Inc.
By: ________________________
Thomas W. Price, President
NEW T&W: T&W Financial Corporation
By: ________________________
Thomas W. Price, President
LUKE: ____________________________
Paul B. Luke
<PAGE> 1
EXHIBIT 10.41
[T&W FINANCIAL CORPORATION AND AFFILIATED COMPANIES LETTERHEAD]
STOCK OPTION LETTER AGREEMENT
To: Kenneth W. McCarthy, Jr.
From: Thomas W. Price, President
Re: T & W Financial Corporation Stock Option Plan
Date: June 30, 1996
Subject to the terms and conditions set forth below, and in partial
consideration of your employment by T&W Financial Corporation (the "Company"),
you are hereby granted a non-qualified stock option for the purchase of up to 3%
of the shares of the Company's common stock at an exercise price equal to two
(2) times the book value of the Company as of June 30, 1996.
Term: The term of the option is ten (10) years from the date of this
Agreement and therefore, to the extent not exercised, will automatically
terminate on June 30, 2006, unless sooner terminated.
Exercise: During your lifetime, only you can exercise the option. You
may use the Notice of Exercise of Stock Option in the form attached to this
Agreement when you exercise the option.
Payment for Shares: The option may be exercised by the delivery of cash,
bank certified or cashier's check. At the Company's discretion, all or part of
the required payment may be in the form of a promissory note, the terms of which
we must mutually agree upon.
Vesting and Termination: Your option is 100% vested and therefore, may
be exercised for up to three months following the termination of your employment
with the Company.
Transfer of Option: The option is not transferable except by will or by
the applicable laws of descent and distribution.
Taxation: The date of grant of this option is June 30, 1996. You should
obtain tax advice when exercising your option and before disposing of the
shares. The Company makes no representations concerning the tax effect of this
option or the subsequent exercise thereof.
<PAGE> 2
Kenneth W. McCarthy, Jr.
June 30, 1996
Page -2-
Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
T & W FINANCIAL CORPORATION
/s/ THOMAS W. PRICE
--------------------------
By: Thomas W. Price
Its: President
TWP/jt
Encl.
<PAGE> 3
ACCEPTANCE AND ACKNOWLEDGMENT
I, as a resident of the state of Washington, accept the nonqualified
stock option described above and acknowledge receipt of a copy of this
Agreement.
Dated as of: June 30, 1996.
/s/ Kenneth W. McCarthy, Jr.
--------------------------------
Kenneth W. McCarthy, Jr.
<PAGE> 4
NOTICE OF EXERCISE OF STOCK OPTION
To: Thomas W. Price, President
I, as a resident of the State of Washington, hereby exercise my stock
option granted by the Board of Directors of T&W Financial Corporation (the
"Company") pursuant to the Consent Resolution of the Board of Directors of the
Company dated June 30, 1996, and notify the Company of my desire to purchase the
number of shares of the Company that represents three percent (3%) of the common
stock of the Company as of June 30, 1996. I acknowledge that the exact number of
shares will be determined as soon as reasonably practicable. As stated in the
Consent Resolution, the exercise price shall be equal to two (2) times the book
value of the Company as of June 30, 1996.
I hereby represent that:
(a) the shares of Common Stock to be delivered to me pursuant to this
exercise are being acquired by me for my own account, for my own investment and
not with a view to resale or distribution;
(b) by virtue of my employment with the Company I am knowledgeable about
the Company's business, financial information and prospects, and as such, I am
capable of making an informed investment decision with regard to the Company;
and
(c) I am capable of bearing the risk of loss of my entire investment in
the Company.
Dated: July 3, 1997.
###-##-#### /s/ KENNETH W. MCCARTHY, JR.
- -------------------- ----------------------------------
Taxpayer I.D. Number Kenneth W. McCarthy, Jr.
Address: 4620-110th Avenue Apt. E
-------------------------
Puyallup, WA
----------------------------------
----------------------------------
<PAGE> 5
AMENDED AND RESTATED
NOTICE OF EXERCISE OF STOCK OPTION
To: Thomas W. Price, President
The purpose of this instrument is to amend and restate the Notice of
Exercise of Option previously executed by the undersigned. I, as a resident of
the State of Washington, hereby exercise my stock option granted by the Board of
Directors of T&W Financial Corporation (the "Company"), and notify the Company
of my desire to purchase 2.55% of the total outstanding stock of T&W Financial
Corporation immediately prior to the closing of an initial public offering of
its common stock (i.e., 147,900 shares) (exclusive of shares sold pursuant to
the exercise of the Underwriters' over-allotment option as described in the
Company's Registration Statement on Form S-1 filed in connection with the
initial public offering). As stated in the Stock Option Letter Agreement, the
exercise price shall be equal to two (2) times the book value of the Company as
of June 30, 1996.
I hereby represent that:
(a) the shares of Common Stock to be delivered to me pursuant to this
exercise are being acquired by me for my own account, for my own investment and
not with a view to resale or distribution;
(b) by virtue of my employment with the Company I am knowledgeable about
the Company's business, financial information and prospects, and as such, I am
capable of making an informed investment decision with regard to the Company;
and
(c) I am capable of bearing the risk of loss of my entire investment in
the Company.
Dated as of August 15, 1997.
- ------------------------------ ------------------------------
Taxpayer I.D. Number Kenneth W. McCarthy, Jr.
Address: _____________________
______________________________
______________________________
<PAGE> 1
Exhibit 10.42
ADDENDUM TO STOCK OPTION LETTER AGREEMENT
This Addendum to Stock Option Letter Agreement dated June 30, 1996 (the
"Agreement") is entered into by and between T & W Leasing, Inc., formerly known
as T & W Financial Corporation, (the "Company"), T & W Financial Corporation
("New T&W") and Kenneth W. McCarthy, Jr. ("McCarthy").
BACKGROUND
The Company and McCarthy have entered into the Agreement which provides
for the issuance of an option to McCarthy to purchase certain shares of the
Company's common stock. The Company shall participate in a restructuring
transaction in order to accomplish an initial public offering of New T&W's
common stock. As part of the restructuring, shareholders of the Company shall
contribute their shares to New T&W in exchange for common stock of New T&W. The
Company and Luke desire to restate and clarify a portion of the Agreement to
state the actual percentage interest and number of shares of common stock of T&W
Financial Corporation represented by the grant of the option set forth in the
Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
The text of the first paragraph of the Agreement (immediately preceding the
paragraph entitled "Term"), is hereby amended in its entirety to read as
follows:
Subject to the terms and conditions set forth below, you are hereby
granted a non-qualified stock option for the purchase of 2.55% of the
total outstanding stock of T&W Financial Corporation immediately prior
to the closing of an initial public offering of its common stock
(exclusive of shares sold pursuant to the exercise of the Underwriters'
over-allotment option as described in the Company's Registration
Statement on Form S-1 filed in connection with the initial public
offering). The per share exercise price of the option shall be equal to
two (2) times the book value of the Company as of June 30, 1996.
DATED as of August 15, 1997.
Company: T&W Leasing, Inc.
By: ________________________
Thomas W. Price, President
NEW T&W: T&W Financial Corporation
By: ________________________
Thomas W. Price, President
McCARTHY: ____________________________
Kenneth W. McCarthy, Jr.
<PAGE> 1
EXHIBIT 10.43
PROMISSORY NOTE
Tacoma, Washington
August 19, 1997
1. Promise To Pay. FOR VALUE RECEIVED, PAUL B. LUKE (hereinafter
"Maker") promises to pay to T & W FINANCIAL CORPORATION, a Washington
corporation, (hereinafter "Holder") or order at 6416 Pacific Highway East,
Tacoma, Washington, or at such other place as may be designated by the Holder
hereof from time to time, the principal sum of Five Hundred Eighty One Thousand
Seventy Nine Dollars ($581,079.00), with interest from the first day of August,
1997.
Maker and Holder acknowledge and agree that the principal amount of this
Promissory Note is equal to the amount payable by Maker in exchange for 147,900
shares of common stock issued by T & W FINANCIAL CORPORATION in its initial
public offering.
2. Interest Rate. The rate of interest on the unpaid principal balance
of this Promissory Note shall be eight percent (8%) per annum.
3. Payment. Maker shall pay the amount owed under this Note in full
upon closing of T & W FINANCIAL CORPORATION'S initial public offering.
4. Default Interest. This Promissory Note shall bear interest at the
rate of twelve percent (12%) per annum thirty (30) days after any installment
called for herein is not paid when due or after maturity.
5. Attorneys' Fees. In the event this Promissory Note is placed in the
hands of an attorney for collection or if suit shall be brought to collect any
of the principal or interest of this Promissory Note, Maker shall pay reasonable
attorneys' fees in addition to all costs of collection and expenses of suit.
6. Waiver of Presentment. Presentation for payment, notice of
dishonor, protest, and notice of protest are hereby waived.
7. Nonwaiver. Failure to exercise any right or option of Holder shall
not constitute a waiver of the right to exercise such right or option if Maker
is in default hereunder.
Promissory Note Page 1
<PAGE> 2
8. Collection Expenses. Maker agrees to reimburse Holder on demand
for all legal fees and other costs and expenses incurred in collecting or
enforcing this Note, together with interest at the default rate specified in
paragraph 6 above. Without limitation such shall include fees, costs and
expenses incurred with or without suit and in any appeal, any proceedings under
any present or future Federal Bankruptcy Act or state receivership, in any post
judgment collection proceedings. Payment of such fees, costs, expenses and
interest shall be a condition precedent to the curing of any default or the
satisfaction of this Promissory Note.
9. Governing Law, Venue and Jurisdiction. This Note shall be
construed, enforced and otherwise governed by the laws of the State of
Washington. In the event any action shall be brought by any party to this
Promissory Note, such action shall be brought in the Superior Court of the
State of Washington for Pierce County and all parties consent to the
jurisdiction of such court as to all such actions.
10. Notices. All notices, demands, requests, consents, approvals, and
other instruments required or permitted to be given pursuant to the terms of
this Promissory Note shall be in writing and shall be deemed to have been
properly given if sent by registered or certified mail, postage prepaid, return
receipt requested, to the addresses set forth below:
To Maker: Paul B. Luke
5326 Chinook Drive NE
Tacoma, WA 98422
To Holder: T & W Financial Corporation
P.O. Box 3028
Federal Way, WA 98063
Provided, however, that such address may be changed upon five (5) days' written
notice thereof similarly given to the other party. Such notice, demand, request,
consent, approval, and other instrument shall have been deemed to have been
served on the third (3rd) day following the date of mailing.
MAKER:
/s/ PAUL B. LUKE
--------------------------------
Paul B. Luke
Promissory Note Page 2
<PAGE> 1
EXHIBIT 10.44
PROMISSORY NOTE
Tacoma, Washington
August 18, 1997
1. Promise To Pay. FOR VALUE RECEIVED, KENNETH W. McCARTHY, JR.
(hereinafter "Maker") promises to pay to T & W FINANCIAL CORPORATION, a
Washington corporation, (hereinafter "Holder") or order at 6416 Pacific Highway
East, Tacoma, Washington, or at such other place as may be designated by the
Holder hereof from time to time, the principal sum of Five Hundred Eighty One
Thousand Seventy Nine Dollars ($581,079.00), with interest from the first day
of August, 1997.
Maker and Holder acknowledge and agree that the principal amount of
this Promissory Note is equal to the amount payable by Maker in exchange for
147,900 shares of common stock issued by T & W FINANCIAL CORPORATION in its
initial public offering.
2. Interest Rate. The rate of interest on the unpaid principal
balance of this Promissory Note shall be eight percent (8%) per annum.
3. Payment. Maker shall pay the amount owed under this Note in
full upon closing of T & W FINANCIAL CORPORATION'S initial public offering.
4. Default Interest. This Promissory Note shall bear interest at
the rate of twelve percent (12%) per annum thirty (30) days after any
installment called for herein is not paid when due or after maturity.
5. Attorneys' Fees. In the event this Promissory Note is placed
in the hands of an attorney for collection or if suit shall be brought to
collect any of the principal or interest of this Promissory Note, Maker shall
pay reasonable attorneys' fees in addition to all costs of collection and
expenses of suit.
6. Waiver of Presentment. Presentation for payment, notice of
dishonor, protest, and notice of protest are hereby waived.
7. Nonwaiver. Failure to exercise any right or option of Holder
shall not constitute a waiver of the right to exercise such right or option if
Maker is in default hereunder.
Promissory Note Page 1
<PAGE> 2
8. Collection Expenses. Maker agrees to reimburse Holder on demand
for all legal fees and other costs and expenses incurred in collecting or
enforcing this Note, together with interest at the default rate specified in
paragraph 6 above. Without limitation such shall include fees, costs and
expenses incurred with or without suit and in any appeal, any proceedings under
any present or future Federal Bankruptcy Act or state receivership, in any post
judgment collection proceedings. Payment of such fees, costs, expenses and
interest shall be a condition precedent to the curing of any default or the
satisfaction of this Promissory Note.
9. Governing Law, Venue and Jurisdiction. This Note shall be
construed, enforced and otherwise governed by the laws of the State of
Washington. In the event any action shall be brought by any party to this
Promissory Note, such action shall be brought in the Superior Court of the
State of Washington for Pierce County and all parties consent to the
jurisdiction of such court as to all such actions.
10. Notices. All notices, demands, requests, consents, approvals, and
other instruments required or permitted to be given pursuant to the terms of
this Promissory Note shall be in writing and shall be deemed to have been
properly given if sent by registered or certified mail, postage prepaid, return
receipt requested, to the addresses set forth below:
To Maker: Kenneth W. McCarthy, Jr.
4613 110th Avenue Court East
Puyallup, WA 98372
To Holder: T & W Financial Corporation
P. O. Box 3028
Federal Way, WA 98063
Provided, however, that such address may be changed upon five (5) days' written
notice thereof similarly given to the other party. Such notice, demand,
request, consent, approval, and other instrument shall have been deemed to have
been served on the third (3rd) day following the date of mailing.
MAKER:
/s/ KENNETH W. MCCARTHY, JR.
----------------------------------
Kenneth W. McCarthy, Jr.
Promissory Note Page 2
<PAGE> 1
EXHIBIT 10.45
AGREEMENT OF
T & W FINANCIAL SERVICES COMPANY L.L.C.
THIS AGREEMENT OF LIMITED LIABILITY COMPANY (the "Agreement") is made
and entered into as of October ___, 1997, by and among T&W FUNDING COMPANY VI
L.L.C., a Washington limited liability company and T&W FINANCIAL CORPORATION, a
Washington corporation. The undersigned desire to form and operate a limited
liability company under the laws of the State of Washington on the terms and
conditions set forth below.
RECITALS
In connection with a series of transactions to be completed prior to
the closing of T&W Financial Corporation's initial public offering, T&W
Financial Corporation will contribute all of its interests in T&W Funding
Company I, L.L.C., T&W Funding Company IV, L.L.C. and T&W Funding Company V,
L.L.C. to T&W Financial Services Company L.L.C.(the "Company"). It is
contemplated that T&W Financial Corporation will also contribute cash to the
Company following the closing of its initial public offering. T&W Funding
Company VI, L.L.C. will contribute all of its assets (other than its stock in
T&W Financial Corporation) to the Company.
The parties hereto agree as follows:
1. FORMATION.
1.1 NAME AND OFFICE. The Members hereby form and agree
to operate the Company to be known as "T&W Financial Services Company L.L.C."
in accordance with the Washington Limited Liability Company Act (the "Act")
under the terms and conditions set forth herein. Except as otherwise provided
herein, the rights and liabilities of the Members shall be governed by the Act.
The Company's initial principal place of business is:
6416 Pacific Highway East
Tacoma, Washington 98424
The initial registered office and the initial registered agent of the
Company for service of process, notice or demand is:
Registered Agent: Kenneth W. McCarthy, Jr.
Registered Office: 6416 Pacific Highway East
Tacoma, Washington 98424
The registered agent and registered office may be changed from time to time by
the Manager, and the Manager may from time to time elect to change the name of
the Company.
1.2 PURPOSE. The primary purposes of the Company are:
(a) to engage in the business of specialized
commercial finance and equipment leasing using products, programs,
services and other know-how of T&W Financial Corporation and its
Affiliates;
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(b) to acquire and hold a beneficial interest in
T&W Origination Trust; and
(c) to conduct any other business activities as may
be determined by the Manager in accordance with this Agreement. The
Company shall have the power to do all things necessary, incidental or
convenient to accomplish the foregoing purposes.
1.3 TERM. The term of the Company shall commence on the
filing of the Certificate of Formation with the Office of the Secretary of
State of Washington and shall continue until December 31, 2057, unless sooner
dissolved, wound up and terminated in accordance with the provisions of this
Agreement and the Act. The Manager may extend the term for an additional
twenty (20) years, at any time the Manager in its sole discretion deems it
advisable to do so, without the consent of the Members.
1.4 COMPANY CREDIT AND PROPERTY. The Company's credit
and Property shall be used solely for the benefit of the Company and its
Affiliates, and no Property of the Company shall be transferred or encumbered
for or in payment of any individual obligation of any Member unless otherwise
provided herein.
1.5 LEGAL EFFECT. Except as otherwise provided herein,
the rights and liabilities of the Members shall be governed by the Act. A
failure to observe any formalities or requirements of this Agreement, the
certificate of formation for the Company or the Act shall not be grounds for
imposing personal liability on the Members or the Manager for liabilities of
the Company.
1.6 PARTNERSHIP INTENDED FOR TAX PURPOSES ONLY. The
Members are forming the Company under the Act and expressly do not intend for
the Company to be a partnership under either the Washington Uniform Partnership
Act or the Washington Uniform Revised Limited Partnership Act or to be a
corporation under the Washington Business Corporation Act. The Company is to
be treated as a partnership solely for federal income tax purposes.
1.7 RIGHTS OF CREDITORS AND THIRD PARTIES. This
Agreement is entered into among the Company and the Members for the exclusive
benefit of the Company, its Members and their successors and assigns. The
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other person. Except and only to the extent provided by
applicable statute, no such creditor or third party shall have any rights under
the Agreement or any agreement between the Company and any Member with respect
to any contribution or otherwise.
1.8 TITLE TO PROPERTY. All Company Property shall be
owned by the Company as an entity. No Member shall have any ownership interest
in such Company Property in the Member's individual name or right, and each
Member's Interest in the Company shall be personal property for all purposes.
Except as otherwise provided in this Agreement, the Company shall hold all
Company Property in the name of the Company and not in the name or names of any
Member or Members. Nothing in this Agreement shall preclude the Company from
using the trade name of one of its Members in operating its business.
1.9 POWERS. Subject to the provisions of this
Agreement, the Company shall have the following powers:
(a) To conduct and operate the business of the
Company and to execute documents and instruments relating to the
Company business, including, but not limited to, notes, mortgages,
deeds of trust, leases, management agreements, contracts, instruments
related to securitizations and other documents.
(b) To procure and maintain insurance covering
the various risks to
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which the Company or its operations may be subject.
(c) To open bank accounts in the name of the
Company, designate the authorized signatures therefor and make
deposits and withdrawals from Company accounts on the signatures of
one or more designated individuals.
(d) To pay expenses incurred in performing the
business and purposes of the Company.
(e) To acquire and hold a beneficial interest
in T&W Origination Trust and any other Affiliate.
(f) To grant any lender(s) of T&W Financial
Corporation a security interest in the Company's assets as security
for any loans made to T&W Financial Corporation or any Affiliate
thereof excluding PLM Consulting Group, L.L.C. and T&W Funding Company
VI, L.L.C.
(g) To guaranty the payment of any indebtedness
of any Affiliate of the Company.
(h) To acquire interests in other entities.
(i) To issue additional Units in exchange for
other assets.
(j) To acquire, sell and exchange any assets
consistent with the Company's purposes.
(k) To do all things necessary, incidental or
convenient to the exercise of the foregoing powers and to the
accomplishment of the foregoing purposes.
2. DEFINITIONS.
The following terms used in the Agreement shall have the meanings
specified below:
2.1 "ACT" means the Washington Limited Liability Company
Act, Chapter 25.15 of the Revised Code of Washington ("RCW"), as amended from
time to time.
2.2 "AFFILIATE" of any Person means (a) any Person
controlling, controlled by or under common control with such Person, (b) any
Person owning or controlling 5% or more of the outstanding voting interests of
such Person, (c) any officer, director or general partner of such Person or (d)
any Person who is an officer, director, general partner, trustee or holder of
5% or more of the voting interests of any Person described in clauses (a)
through (b) of this sentence. For the purposes of this definition, the term
"CONTROLS," "IS CONTROLLED BY," or "IS UNDER COMMON CONTROL WITH" shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. In the case of the
Company, the term "Affiliate" shall not include T&W Funding Company VI, L.L.C.
or P.L.M. Consulting Group, L.L.C.
2.3 "AGREEMENT" means this Agreement of T&W Financial
Services Company L.L.C. as it may be amended from time to time.
2.4 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with
respect to any Member, the deficit balance, if any, in such Member's Capital
Account as of the end of the relevant taxable year, after giving effect to the
following adjustments:
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(1) decrease such deficit by any amounts that such
Member is obligated to restore pursuant to this Agreement or
by operation of law upon liquidation of such Member's
Membership Interest or is deemed to be obligated to restore
pursuant to the penultimate sentence of each of Treasury
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5); and
(2) increase such deficit by the items described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and
(6).
The foregoing definition of "Adjusted Capital Account Deficit" is intended to
comply with the provisions of Treasury Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
2.5 "ASSET VALUE" means, for any asset of the Company,
such asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market
value of such asset, as agreed upon by the Members and set forth on
Exhibit A;
(b) The Asset Value of all Company assets
immediately prior to the occurrence of any event described in clause
(i), clause (ii), clause (iii), clause(iv) or clause (v) hereof shall
be adjusted to equal their respective gross fair market values, as
determined by the Manager using such reasonable method of valuation as
it may adopt, as of the following times:
(i) the acquisition of an additional
interest in the Company (other than in connection
with the execution of this Agreement) by a new or
existing Member in exchange for more than a de
minimis Capital Contribution, if the Manager
reasonably determines that such adjustment is
necessary or appropriate to reflect the relative
economic interests of the Members in the Company;
(ii) the distribution by the Company to a
Member of more than a de minimis amount of Company
property as consideration for an interest in the
Company, if the Manager reasonably determines that
such adjustment is necessary or appropriate to
reflect the relative economic interest of the Members
in the Company;
(iii) the liquidation of the Company within
the meaning of Treasury Regulations Section 1.704-
1(b)(2)(ii)(g); and
(iv) at such other times as the Manager
shall reasonably determine to be necessary or
advisable in order to comply with Treasury
Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Asset Value of any Company asset distributed
to a Member shall be the gross fair market value of such asset on the
date of distribution as reasonably determined by the Manager.
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(d) the Asset Value of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that
Asset Value shall not be adjusted pursuant to this subsection (d) to
the extent that the Manager reasonably determines that an adjustment
is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this Subsection
(d).
(e) If the Asset Value of a Company asset has been
determined or adjusted pursuant to subsection (a), subsection (b) or
subsection (d) above, such Asset Value shall thereafter be adjusted by
the Depreciation taken into account with respect to such asset for
purposes of computing Net Income and Net Losses.
2.6 "BANKRUPTCY" means, with respect to any Person:
(a) the commencement of any proceeding against
a Person seeking reorganization, arrangements, composition,
readjustment, liquidation, dissolution, or similar relief under any
federal or state bankruptcy or insolvency law or other similar law
which proceeding is not dismissed within 60 days, or the appointment
without the Person's consent of a trustee, receiver or liquidator of
such Person of all or a substantial part of the Person's property,
which appointment is not vacated within 60 days after it is made;
(b) the filing by such Person of a petition or
answer or consent seeking relief under any federal or state bankruptcy
or insolvency law or other similar law, or the seeking or consent of
such Person to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment or taking possession
of a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of such Person or of any substantial part of
its property or the filing of an answer or other pleading admitting or
failing to contest the material allegations of a petition filed
against it or described in this clause;
(c) the making by such Person of a general
assignment for the benefit of creditors; or
(d) the taking of corporate or partnership
action by such Person in furtherance of any of the foregoing actions.
2.7 "CAPITAL ACCOUNT" means the account maintained for
each Member in accordance with Section 4. In the case of a transfer or
assignment of an Interest allowed under this Agreement, the person or entity
acquiring an Interest, i.e., the Assignee or Member as the case may be, shall
succeed to the Capital Account of the transferor or, in the case of a partial
transfer, a proportionate share thereof.
2.8 "CAPITAL CONTRIBUTION" means the total amount of
money and the fair market value of all property contributed to the Company by
each Member pursuant to the terms of the Agreement. Capital Contribution shall
also include any amounts paid directly by a Member to any creditor of the
Company in respect of any guarantee or similar obligation undertaken by such
Member in connection with the Company's operations. Any reference to the
capital contribution of a Member shall include the capital contribution made by
a predecessor holder of the interest of such Member.
2.9 "CASH AVAILABLE FOR DISTRIBUTION" means all cash
receipts (including sale and refinancing proceeds, but excluding proceeds
available upon the dissolution of the Company)
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<PAGE> 6
of the Company in excess of amounts reasonably required for payment of
operating expenses, repayment of current liabilities and the establishment of
and additions to the cash reserves established by the Manager for the operation
of the business, including, but not limited to, reserves for contingent or
unforeseen liabilities or obligations of the Company.
2.10 "CODE" means the United States Internal Revenue Code
of 1986, as amended from time to time. References to specific Code sections or
Treasury Regulations shall be deemed to refer to such Code sections or Treasury
Regulations as they may be amended from time to time or to any successor Code
sections or Treasury Regulations if the Code section or Treasury Regulation
referred to is repealed.
2.11 "COMPANY" means T&W Financial Services Company
L.L.C. created and governed by this Agreement.
2.12 "COMPANY PROPERTY" or "PROPERTY" means all the real
and personal (tangible and intangible) property owned by the Company.
2.13 "DEPRECIATION" means, for each year or other
applicable period, an amount equal to the federal income tax depreciation,
amortization or other cost recovery deduction allowable with respect to an
asset for such year or other period, except that if the Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the
beginning of such year or period. Depreciation shall be in an amount that bears
the same ratio to such beginning Asset Value as the federal income tax
deduction for such year or other period bears to such beginning adjusted tax
basis; provided, however, that if the federal income tax depreciation,
amortization or other cost recovery deduction for such year or period is zero.
Depreciation shall be determined with reference to such beginning Asset Value
using any reasonable method selected by the Manager.
2.14 "INTEREST" or "MEMBER INTEREST" means the Units of a
Member, including the right of such Member to any and all benefits to which
such Member may be entitled as provided in the Agreement and in the Act,
together with the obligations of such Member to comply with all the terms and
provisions of the Agreement and the Act.
2.15 "MANAGER" means the Member who is appointed in
accordance with this Agreement to exercise the authority of Manager under this
Agreement and the Act. No Person may be appointed a Manager of the Company who
is not also a Member of the Company owning at least a one percent (1%)
Percentage Interest. If at any time a Member who is a Manager ceases to be a
Member for any reason, or ceases to own at least a one percent (1%) Percentage
Interest, that Member shall simultaneously cease to be a Manager. The initial
Manager is T&W Financial Corporation.
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<PAGE> 7
2.16 "MANDATORY OBLIGATION" means the sum of (i) the
amount of a Member's remaining contribution obligation, if any, (including the
amount of any Capital Account deficit such Member is obligated to restore upon
the liquidation of the Company, if any) provided that such contribution must be
made in all events within ninety (90) days of liquidation of the Member's
interest as determined under Treasury Regulation Section 1.704-1(b)(2)(ii)(g),
and (ii) the additional amount, if any, such Member would be obligated to
contribute as of year end to retire indebtedness of the Company if the Company
were to liquidate as of such date and dispose of all of its assets at book
value.
2.17 "MEMBER(S)" means those persons who own an Interest
in the Company and execute this Agreement or a counterpart of this Agreement.
Except as otherwise provided in this Agreement, a Member shall not be entitled
to vote or otherwise participate in any decision with respect to the Company.
2.18 "MINIMUM GAIN" means the amount determined by
computing, with respect to each nonrecourse liability of the Company, the
amount of gain, if any, that would be realized by the Company if it disposed of
an item of Company Property subject to such nonrecourse liability in full
satisfaction thereof in a taxable transaction, and then by aggregating the
amounts so determined. Such gain shall be determined in accordance with
Treasury Regulation Section 1.704-2(d). Each Member's share of Minimum Gain at
the end of any taxable year of the Company shall be determined in accordance
with Treasury Regulation Section 1.704-2(g)(l). Notwithstanding the foregoing,
in the event the Company incurs "partner nonrecourse debt," appropriate
adjustments shall be made to conform to the requirements of the Treasury
Regulations governing partner nonrecourse debt.
2.19 "NOTICE" means a writing, containing the information
required by this Agreement to be communicated to any Person, and given in
accordance with Section 14.1.
2.20 "PERCENTAGE INTEREST" for each Member means the
ratio that the Units held by each Member bears to the number of Units held by
all Members.
2.21 "PERSON" means any individual, partnership, limited
liability company, corporation, trust or other entity.
2.22 "PROFITS" or "LOSSES" means, for each fiscal year,
an amount equal to the Company's taxable income or taxable loss under Section
703(a) of the Code (including all items of income, gain, loss or deduction
required to be stated separately under Section 703(a)(1) of the Code), with the
following adjustments:
(a) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in computing
Profits (or Losses) pursuant to this definition of "Profits" or
"Losses" shall be added to (or subtracted from, as the case may be)
such taxable income (or loss);
(b) Any expenditure of the Company described in Code
Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B)
expenditure pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits (or Losses) pursuant to this definition of "Profits"
or "Losses," shall be subtracted from (or added to, as the case may
be) such taxable income (or loss);
(c) In the event the Asset Value of any Company
asset is adjusted pursuant to subsection (b) or subsection (c) of the
definition of "Asset Value," the
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amount of such adjustment shall be taken into account as gain or loss
from the disposition of such assets for purposes of computing Profits
or Losses;
(d) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized from federal
income tax purposes shall be computed by reference to the Asset Value
of the property disposed of, notwithstanding that the adjusted tax
basis of such property differs from its Asset Value;
(e) In lieu of the depreciation, amortization and
other cost recovery deductions that would otherwise be taken into
account in computing such taxable income or loss, there shall be taken
into account Depreciation from such Company year;
(f) To the extent that an adjustment to the adjusted
tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in
liquidation of a Member's interest in the Company, the amount of such
adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases
the basis of the asset) from the disposition of the asset and shall be
taken into account for purposes of computing Profits or Losses; and
(g) Notwithstanding any other provision of this
definition of "Profits" or "Losses," any item that is specifically
allocated pursuant to Section 6.2 or Section 6.3 hereof shall not be
taken into account in computing Profits and Losses. The amounts of
the items of Company income, gain, loss or deduction available to be
specially allocated pursuant to Section 6.2 or Section 6.3 hereof
shall be determined by applying rules analogous to those set forth in
the definition of "Profits" or "Losses."
2.23 "UNITS" means ownership interest in the Company as
expressed as a number of Units in the Company, as provided in Section 3.1
below. Each Unit owned by a Member shall carry one vote. Units owned by an
Assignee shall not entitle the owner to vote or otherwise entitle the owner to
any right or benefit of a Member except the right to distributions as provided
under this Agreement.
3. UNITS AND LOANS.
3.1 UNITS. As a result of each Member's initial capital
contributions to the Company as set forth on Exhibit A attached, which shall
include the contribution by T & W Financial Corporation of all or part of the
net proceeds received by T & W Financial Corporation in its initial public
offering, each Member shall have the specified number of Units and Percentage
Interest in the Company as set forth below:
<TABLE>
<CAPTION>
Member Units Percentage Int.
----- ---------------
<S> <C> <C>
T&W Financial Corp. 8,500 85%
T&W Funding Company VI 1,500 15%
----- --
LLC
Total: 10,000 100%
====== ===
</TABLE>
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. From time to
time, the Members may
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make additional capital contributions to the Company if approved by the
Manager. If such contributions are made, the Company shall issue additional
Units to the contributing Member in exchange therefor and each Member's
Percentage Interest in the Company shall be adjusted accordingly. Unless
mutually agreed by the Members, no Member shall be required to make any
additional Capital Contributions to the Company.
3.3 MEMBER LOANS. The Members or an Affiliate thereof
may elect to loan funds to the Company for Company purposes. Such Member loans
shall be made on commercially reasonable terms and conditions as determined by
the Manager.
3.4 NO INTEREST ON CAPITAL. No Member shall be entitled
to receive interest on its capital contributions or its Capital Account.
3.5 NO WITHDRAWAL OF CAPITAL. Except as otherwise
provided in this Agreement, no Member shall have the right to withdraw or
demand a return of any or all of its capital. It is the intent of the Members
that no distribution (or any part of any distribution) made to any Member
pursuant to Section 5 hereof shall be deemed a return or withdrawal of capital,
even if such distribution represents (in full or in part) a distribution of
revenue offset by depreciation or any other non-cash item accounted for as an
expense, loss or deduction from, or offset to, the Company's income, and,
except as provided in this Agreement, no Member shall be obligated to pay any
such amount to or for the account of the Company or any creditor of the
Company.
4. CAPITAL ACCOUNTS.
4.1 ESTABLISHMENT OF CAPITAL ACCOUNTS. The Company
shall establish and maintain a Capital Account for each Member in accordance
with Treasury Regulations issued under Code Section 704. The Capital Account of
each Member shall be INCREASED to reflect (i) such Member's cash contributions,
(ii) the fair market value of property contributed by such Member (net of
liabilities securing such contributed property that the Company is considered
to assume or take subject to under Code Section 752) and (iii) such Member's
share of Profits (including all gain as calculated pursuant to Section 1001 of
the Code) of the Company. The Capital Account of each Member shall be REDUCED
to reflect (a) the amount of money and the fair market value of property
distributed to such Member (net of liabilities securing such distributed
property that the Member is considered to assume or take subject to under
Section 752), (b) such Member's share of Losses of the Company and any deduction
specially allocated pursuant to Section 6.2 or Section 6.3 and (c) such Member's
share of amounts paid or incurred to organize the Company to the extent that an
election under Code Section 709(b) has not properly been made for such amounts.
The Members shall determine mutually the fair market value of all property which
is distributed in kind, and the Capital Accounts of the Members shall be
adjusted as though the property had been sold for its fair market value and the
gain or loss attributable to such sale allocated among the Members in accordance
with Section 6. In the event of a contribution of property with a fair market
value which is not equal to its adjusted basis (as determined for federal income
tax purposes) or a reevaluation of the Members' Capital Accounts upon the
admission of new Members to the Company, the Company shall maintain separate
Capital Accounts and "tax" capital accounts in accordance with the rules
prescribed in Treasury Regulations promulgated under Code Section 704.
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4.2 ADJUSTMENT TO CAPITAL ACCOUNTS.
(a) If the Asset Values of the Company's assets
are adjusted pursuant to Section 2.5(b), then the Capital Accounts of
all Members shall also be adjusted as though (i) there were a taxable
disposition of the Company's assets for their fair market value on the
date of such adjustment, (ii) the resulting income, gain, loss or
deduction was allocated between the Members (to the extent that such
income, gain, loss or deduction has not previously been reflected in
the Capital Accounts of the Members) and (iii) the Members'
distributive shares of depreciation, amortization and gain or loss
with respect to such asset were determined so as to take into account
the variation between the adjusted tax basis and the fair market value
of such assets in the same manner as such variation is taken into
account under Section 704(c) of the Code.
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(b) If the Company distributes an asset to a
Member in kind, and the fair market value of such asset differs from
its adjusted basis for federal income tax purposes, the Capital
Accounts of both Members shall be adjusted as though the Company had
sold such asset for its fair market value on the date of such
distribution and the resulting income, gain, loss or deduction had
been allocated to the Members to the extent that such income, gain,
loss or deduction had not previously been reflected in the Members'
Capital Accounts.
(c) If the Asset Value of an item of Company
Property differs from its adjusted basis for federal income tax
purposes, and Section 704(c) of the Code applies to such Company
Property, the Capital Accounts of the Members will be adjusted for
allocations of depreciation or amortization computed in accordance
with Section 2.23(d) and allocations of gain or loss computed in
accordance with Section 2.23(d) in the manner set forth in Treasury
Regulation Section 1.704-1(b)(2)(iv)(g).
4.3 DEFICIT RESTORATION ELECTION.
(a) Each Member may, prior to, or at, the time
prescribed by law for the filing of the Company Federal income tax
return for the taxable year in question (not including extensions),
elect to be unconditionally obligated to restore all or a portion of
any deficit in such Member's Capital Account upon liquidation of its
interest in the Company. Any such election shall be evidenced by
written notice to the Manager, delivered prior to such time,
specifying the amount of any deficit for which the Member elects. Any
amount owing pursuant to a deficit restoration obligation shall be
payable upon the later of (i) the end of the year in which a Member's
interest is liquidated or (ii) 90 days after the date of such
liquidation.
(b) The amount of any such election shall
automatically be reduced to the extent the deficit in such Member's
Capital Account is subsequently reduced. If an allocation or
distribution thereafter increases the deficit in such Member's Capital
Account, unless a Member elects otherwise under paragraph (a) above,
such Member will be obligated to restore the deficit only to the extent
of the lesser of (i) the deficit amount such Member has previously
elected to restore or (ii) the smallest deficit balance in such
Member's Capital Account at any time after such election. For purposes
of determining the amount referred to in clause (ii) of this
Section 4.3(b), the income, gain, losses and deductions of the Company
shall be prorated on a daily basis (except for income, gain, losses and
deductions from the sale or disposition of capital assets, which items
will be allocated under an interim closing of the books method).
5. DISTRIBUTION OF CASH AVAILABLE FOR DISTRIBUTION.
5.1 GENERAL. Cash Available for Distribution shall be
distributed to the Members in accordance with their respective Percentage
Interests.
5.2 PRIORITY OF T&W FINANCIAL CORPORATION INDEBTEDNESS.
Distributions of Cash shall be subordinate to payments of principal and
interest on any indebtedness of the Company to T&W Financial Corporation or any
one of its Affiliates.
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5.3 TAX DISTRIBUTIONS. Notwithstanding the provisions
of Section 5.1, on or before the end of the third month following each calendar
year, the Company shall make cash distributions to each Member equal to the
excess of the taxable income allocated to such Member for such preceding
calendar year over the amount of cash distributions made to such Member during
such preceding calendar year (not including cash distributed pursuant to this
Section 5.3), multiplied by the highest individual marginal federal income tax
rate in effect for such preceding calendar year.
6. ALLOCATIONS.
6.1 ALLOCATION OF PROFITS AND LOSSES. Except as
otherwise provided in this Section 6 and in Section 11.4, Profits and Losses of
the Company shall be allocated as follows:
(a) Losses. Losses of the Company shall be
allocated to the Members in proportion to their Percentage Interests.
(b) Profits. Profits of the Company shall
be allocated to the Members in proportion to their Percentage
Interests.
6.2. RECOURSE DEDUCTIONS. Any item of deduction or loss
that is not included as a nonrecourse deduction under Treasury Regulation
Section 1.704-2(c ) shall be allocated 99% to T&W Funding Company VI L.L.C.
and 1% to T&W Financial Corporation.
6.3 ADDITIONAL ALLOCATION PROVISIONS. Notwithstanding
the foregoing provisions of this Article 6:
(a) REGULATORY ALLOCATIONS.
(i) Minimum Gain Chargeback. Except as otherwise
provided in Treasury Regulations Section 1.704-2(f), notwithstanding
the provisions of Section 6.2 hereof, or any other provision of this
Article 6, if there is a net decrease in Company Minimum Gain during
any Company year, each Member shall be specifically allocated items of
Company income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Member's share of the net decrease
in Company Minimum Gain, as determined under Treasury Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be allocated
shall be determined in accordance with Treasury Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3(a)(i) is intended
to qualify as a "minimum gain chargeback" within the meaning of
Treasury Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
(ii) Member Minimum Gain Chargeback. Except as
otherwise provided in Treasury Regulations Section 1.704-2(I)(4) or in
Section 6.3(a)(i) hereof, if there is a net decrease in Member Minimum
Gain attributable to a Member Nonrecourse Debt during any Company
year, each Member who has a share of the Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance
with Treasury Regulations Section 1.704-2(i)(5), shall be specifically
allocated items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Member's share
of the net decrease in Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations
Section 1.704-2(i)(4). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be
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<PAGE> 13
allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with Treasury Regulations
Section 1.704-2(I)(4) and 1.704-2(j)(2). This Section 6.3(a)(ii) is
intended to qualify as a "chargeback of partner nonrecourse debt
minimum gain" within the meaning of Treasury Regulations Section
1.704-2(i) and shall be interpreted consistently therewith.
(iii) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions for any Company year shall be specially
allocated to the Member(s) who bears the economic risk of loss with
respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable, in accordance with Treasury
Regulations Section 1.704-2(i).
(iv) Qualified Income Offset. If any Member
unexpectedly receives an adjustment, allocation or distribution
described in Treasury Regulations Section 1.704-1(b) (2) (ii) (d) (4),
(5) or (6), items of Company income and gain shall be allocated in
accordance with Treasury Regulations Section 1.704-1(b) (2) (ii) (d),
to such Member in an amount and manner sufficient to eliminate, to the
extent required by such Treasury Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as possible, provided that
an allocation pursuant to this Section 6.3(a)(iv) shall be made if and
only to the extent that such Member would have an Adjusted Capital
Account Deficit after all other allocations provided in this Article 6
have been tentatively made as if this Section 6.3(a)(iv) were not in
the Agreement. It is intended that this Section 6.3(a)(iv) qualify
and be construed as a "qualified income offset" within the meaning of
Treasury Regulations Section 1.704-1(b) (2) (ii) (d) and shall be
interpreted consistently therewith.
(v) Gross Income Allocation. In the event that
any Member has a deficit Capital Account at the end of any Company
year that is in excess of such Member's Adjusted Capital Account
Deficit, each such Member shall be specially allocated items of
Company income and gain in the amount of such excess to eliminate such
deficit as quickly as possible, provided that an allocation pursuant
to this Section 6.3(a)(v) shall be made if and only to the extent that
such Member would have a deficit Capital Account in excess of such sum
after all other allocations provided in this Article 6 have been
tentatively made as if this Section 6.3(a)(v) and Section 6.3(a)(iv)
hereof were not in the Agreement.
(vi) Limitation on Allocation of Net Loss. To the
extent that any allocation of loss under Section 6.1 or Section 6.2
would cause or increase an Adjusted Capital Account Deficit as to any
Member, such allocation of loss shall be reallocated among the other
Members in accordance with their respective Percentage Interests,
subject to the limitations of this Section 6.3(a)(vi).
(vii) Section 754 Adjustment. To the extent that
an adjustment to the adjusted tax basis of any Company asset pursuant
to Code Section 734(b) or Code Section 743(b) is required, pursuant to
Treasury Regulations Section 1.704-1(b) (2) (iv) (m) (2) or Treasury
Regulations Section 1.704-1(b) (2) (iv) (m) (4), to be taken into
account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its interest in
the Company, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis),
and such gain or loss shall be specially allocated to the Members in
accordance with their Percentage Interests in the event that Treasury
Regulations Section 1.704-1(b) (2) (iv) (m) (2) applies, or to the
Members to whom such distribution was made in the event that Treasury
Regulations Section 1.704-1(b) (2) (iv) (m) (4) applies.
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<PAGE> 14
(viii) Curative Allocations. The allocations set
forth in Sections 6.3(a)(i), (ii), (ii), (iv), (v), (vi) and (vii)
hereof (the "Regulatory Allocations") are intended to comply with
certain regulatory requirements, including the requirements of
Treasury Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding
the provisions of Section 6.1 or hereof, the Regulatory Allocations
shall be taken into account in allocating other items of income, gain,
loss and deduction among the Member so that to the extent possible
without violating the requirements giving rise to the Regulatory
Allocations, the net amount of such allocations of other items and the
Regulatory Allocations to each Member shall be equal to the net amount
that would have been allocated to each such Member if the Regulatory
Allocations had not occurred.
(c) ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. For
purposes of determining a Member's proportional share of the "excess
nonrecourse liabilities" of the Company within the meaning of Treasury
Regulations Section 1.752-3(a) (3), each Member's interest in Company
profits shall be such Member's Percentage Interest.
6.4 TAX ALLOCATIONS.
(a) IN GENERAL. Except as otherwise provided in this
Section 6.4, for income tax purposes under the Code and the Treasury
Regulations each Company item of income, gain, loss and deduction
(collectively, "Tax Items") shall be allocated among the Members in
the same manner as its correlative item of "book" income, gain , loss
or deduction is allocated pursuant to Sections 6.1, 6.2 and 6.3
hereof.
(b) ALLOCATIONS RESPECTING SECTION 704 (C ) REVALUATIONS.
Notwithstanding Section 6.4(a) hereof, Tax Items with respect to
Property that is contributed to the Company with an Asset Value that
varies from its basis in the hands of the contributing Member
immediately preceding the date of contribution shall be allocated
among the Members for income tax purposes pursuant to Treasury
Regulations promulgated under Code Section 704(c ) so as to take into
account such variation. The Company shall account for such variation
under any method approved under Code Section 704(c ) and the
applicable Treasury Regulations as chosen by the Manager, including,
without limitation, the "remedial allocation method" as described in
Treasury Regulations Section 1.704-3(d), except that the "traditional
method" as described in Treasury Regulations Section 1.704-3(b) shall
be used for all assets contributed by T & W Funding Company VI L.L.C.
In the event that the Asset Value of any Company asset is adjusted
pursuant to subsection (b) of the definition of "Asset Value"
(provided in Article 2 hereof), subsequent allocations of Tax Items
with respect to such asset shall take account of the variation, if
any, between the adjusted basis of such asset and its Asset Value in
the same manner as under Code Section 704(c ) and the applicable
Treasury Regulations.
7. MANAGEMENT.
7.1 MANAGER. The business and affairs of the Company
shall be managed under the direction of the Manager. Initially, T&W Financial
Corporation shall be the Manager. All powers of the Company shall be exercised
by or under the direction of the Manager. The Manager shall perform its duties
in good faith, in a manner it reasonably believes to be in the best interest of
the Company, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances. The Manager shall receive such
compensation, if any, as may be approved by the unanimous vote of the Members.
The other Members shall have no right or authority to remove or replace T&W
Financial Corporation as the Manager.
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<PAGE> 15
7.2 LIABILITY OF MANAGER. The Manager shall not be
liable, responsible, or accountable in damages or otherwise to the Company for
any acts performed by the Manager within the scope of the authority conferred
upon it by this Agreement and under the laws of the State of Washington, unless
the Manager is found guilty of intentional misconduct or a knowing violation of
law or has personally received a benefit in money, property or services to
which it is not legally entitled.
7.3 INDEMNIFICATION OF MANAGER. Except for actions of
intentional misconduct or knowing violations of law, the Company shall
indemnify and hold harmless the Manager from and against any and all claims and
demands, causes of action for injury or death to persons; or damage to property
(including all costs and reasonable attorneys' fees incurred in defending any
claim, demand, or cause of action) and shall exonerate and hold harmless the
Manager for and from any liability expense incurred by the member while acting
within the scope of the authority conferred on the member by this Agreement or
the Act.
7.4 RESTRICTIONS ON AUTHORITY OF MANAGER. Without the
approval of the Members owning at least fifty-one percent (51%) of the Units of
the Company, the Manager shall not have the authority to:
(a) do any act in contravention of this
Agreement which affects the rights or obligations of the Members;
(b) do any act which would make it impossible
to carry on the ordinary business of the Company;
(c) possess Company property for other than a
Company purpose;
(d) cause the Company to voluntarily take any
action that would cause a Bankruptcy of the Company; or
(e) dissolve the Company, otherwise than as
provided in this Agreement.
8. BOOKS AND RECORDS, ACCOUNTING, REPORTS AND STATEMENTS AND TAX
MATTERS.
8.1 BOOKS AND RECORDS. The Manager shall, at the
expense of the Company, keep and maintain, or cause to be kept and maintained,
the books and records of the Company.
8.2 ANNUAL ACCOUNTING PERIOD. All books and records of
the Company shall be kept on the basis of an annual accounting period ending
December 31 of each year, except for the final accounting period which shall
end on the date of termination of the Company. All references herein to the
"fiscal year of the Company" are to the annual accounting period described in
the preceding sentence, whether the same shall consist of twelve months or
less.
8.3 MANAGER'S REPORTS TO MEMBERS.
(a) Within ninety (90) days after the end of each
fiscal year of the Company, the Manager shall send at Company expense
to the Members (i) a copy of the Company federal and state income tax
returns for such fiscal year, and (ii) such information as shall be
necessary for the preparation by the Members of their federal income
tax returns
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<PAGE> 16
which shall include a computation of the distributions to each Member
and the allocation to each Member of Profits or Losses, as the case
may be.
(b) The Manager shall deliver to the Members on or
about sixty (60) days following the end of each calendar quarter an
unaudited balance sheet of the Company as of the end of the preceding
calendar quarter, an unaudited sources and uses of funds for such
quarter, an unaudited statement of the Company's income and expenses
for such quarter and for the period since the end of the preceding
fiscal year, and other accounting reports which are prepared for the
Manager, all prepared in accordance with generally accepted accounting
principles consistently applied (without footnotes), subject to usual
year-end audit adjustments.
8.4 RIGHT TO EXAMINE AND/OR AUDIT RECORDS. Each Member
shall be entitled, upon written request directed to the Company, to review the
records of the Company at all reasonable times and at the location where such
records are kept by the Company. In addition, Members holding a majority of
the Units may at any time (but not more frequently than annually), by giving
the Company at least two weeks written notice, elect to conduct, at their
expense, an independent audit of Company financial records.
8.5 TAX MATTERS PARTNER.
(a) Should there be any controversy with the
Internal Revenue Service or any other taxing authority involving the
Company, the Manager may expend such funds as it deems necessary and
advisable in the interest of the Company to resolve such controversy
satisfactorily, including, without being limited thereto, attorneys'
and accounting fees. The Manager is hereby designated as the "Tax
Matters Partner" as referred to in Section 6231(a)(7)(A) of the Code,
and is specially authorized to exercise all of the rights and powers
now or hereafter granted to the Tax Matters Partner under the Code.
(b) Any cost incurred in the audit by any
governmental authority of the income tax returns of a Member (as
opposed to the Company) shall not be a Company expense.
8.6 TAX RETURNS. The Manager shall, at Company expense,
cause the Company to prepare and file a United States Partnership Return of
Income and all other tax returns required to be filed by the Company for each
fiscal year of the Company.
8.7 TAX ELECTIONS. The Manager may make one or more
elections pursuant to Section 754 of the Code to adjust the basis of the assets
of the Company. Each of the Members will, upon request, supply any information
necessary to properly give effect to any such election. The Manager, in its
sole discretion, shall be authorized to cause the Company to make and revoke
any other elections for federal income tax purposes as they deem appropriate,
necessary, or advisable.
9. TRANSFERS.
9.1 TRANSFER PROHIBITED. Without the prior written
consent of both Members (which consents may be arbitrarily withheld), neither
Member may directly or indirectly sell, transfer, assign, pledge or otherwise
encumber, voluntarily or involuntarily, all or any part of its Interest in the
Company unless the requirements of this Section 9 are complied with. Any
other transfer or encumbrance shall be void. Notwithstanding the above, T&W
Financial Corporation shall be entitled to grant any creditors of T & W
Financial Corporation or the Company a security interest in its Company
Interest as security for any obligations owed by T & W Financial Corporation or
the
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<PAGE> 17
Company or any Affiliate thereof excluding PLM Consulting Group, L.L.C. and T&W
Funding Company VI, L.L.C.
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<PAGE> 18
9.2 RIGHT OF FIRST REFUSAL. A Member may sell its entire
Interest in and withdraw from the Company upon compliance with the following
conditions:
(a) In the event either Member ("SELLING MEMBER")
desires to sell its entire Interest in the Company and receives a
written offer ("OFFER") therefor which the Selling Member intends to
accept, the Selling Member before accepting such Offer shall first
give Notice to the other Member and provide it with a copy of the
Offer. The Offer must contain all material terms relating to the
purchase and sale (including the name of the transferee), the
consideration must be entirely monetary, and the Offer must contain a
provision that the transferee agrees to be bound by all the terms and
conditions of this Agreement.
(b) After receiving a copy of the Offer, the
other Member shall have ninety (90) days within which to elect to
purchase the Interest of the Selling Member upon the terms and
conditions set forth in the Offer. If the other Member responds or
does not elect to purchase the Interest of the Selling Member within
ninety (90) days, the Selling Member may effect the purchase and sale
to the purchaser identified in the Offer and upon the terms and
conditions set forth in the Offer, but not otherwise.
(c) In the event the other Member elects to
purchase all (but not less than all) of the Interest of the Selling
Member, the purchasing Member shall close the purchase and sale within
the time period set forth in the Offer or within ninety (90) days
after receipt of the Offer, whichever is later.
9.3 ADMISSION OF TRANSFEREES AS MEMBERS.
(a) No transferee of a Member shall be admitted
as a Member unless all of the following conditions have been
satisfied:
(i) The transfer complies with Section
9.1 and 9.2;
(ii) The prospective transferee has
executed an instrument, in form and substance satisfactory to
the Manager, accepting and agreeing to be bound by all the
terms and conditions of this Agreement, including the power of
attorney set forth in Article 12 hereof, and has paid all
expenses of the Company in effecting the transfer;
(iii) All requirements of the Act
regarding the admission of a transferee Member have been
complied with by the transferee, the transferring Member, and
the Company; and
(iv) Such transfer is effected in
compliance with all applicable state and federal securities
laws.
(b) In the event of a transfer complying with all
the requirements of Sections 9.1 and 9.2 hereof and the transferee
being admitted as a Member pursuant to this Section 9.3, the Members
shall execute an amendment to this Agreement. Unless named in this
Agreement, as amended from time to time, no person shall be considered
a Member; and the Company, each Member, and any other person having
business with the Company need deal only with Members so named and
shall not be required to deal with any other person by reason of a
transfer by, or by reason of the death of, a Member, except as
otherwise expressly provided herein.
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<PAGE> 19
10. DEFAULT.
10.1 EVENTS OF DEFAULT. A Member shall be in default
("DEFAULTING MEMBER") hereunder upon the occurrence of any of the following
events:
(a) An event of Bankruptcy occurs with respect to
such Member;
(b) If either Member transfers its Interest in
violation of Section 9 hereof; or
(c) If either Member breaches or fails to perform
any other provision of this Agreement and such breach or failure is
not cured within thirty (30) days after Notice of the breach and a
demand to cure is given by a non-breaching Member.
10.2 REMEDIES. Upon a Member becoming a Defaulting
Member, the other Member (the "Non-Defaulting Member") may:
(a) Dissolve and terminate the Company as
provided in Section 11 below and offset against any amount to be
distributed to the Defaulting Member the damages caused the Company by
the Defaulting Member; or
(b) Pursue any remedy at law or in equity against
the Defaulting Member.
A Defaulting Member shall have no right to participate in management
of the Company. The foregoing shall apply whether or not the Non- Defaulting
Member has commenced to exercise any available remedies.
11. DISSOLUTION AND TERMINATION.
11.1 DISSOLUTION. The Company shall be dissolved upon the
occurrence of any of the following events:
(a) Unanimous agreement of the Members;
(b) Sale or disposition of all or substantially
all of the Company assets;
(c) Expiration of the term of the Company stated
in Section 1.3 hereof;
(d) Election of the Non-Defaulting Member
pursuant to Section 10.2(a) hereof; or
(e) The Bankruptcy, resignation or dissolution of
the Manager shall cause a dissolution of the Company, unless within
ninety (90) days of the happening of any such aforementioned event,
the remaining Member elects to continue the Company. If the election
is made to continue the Company, the business of the Company shall be
carried on by the remaining Member and the disassociated Member shall
be an assignee with no rights in the management of the Company.
No Member shall have the right to dissolve or terminate the Company
for any reason other than as set forth above or to withdraw from the Company
other than as set forth in Section 9.1 hereof.
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<PAGE> 20
11.2 WINDING UP. Upon dissolution of the Company for any
reason, the Manager or, such person or entity as designated by the Manager (in
either case, the "LIQUIDATOR") shall commence to wind up the affairs of the
Company and to liquidate its assets. The Liquidator shall have the full right
and authority to determine the time, manner and terms of any sale or sales of
Company property pursuant to such liquidation. Pending such sales, the
Liquidator shall have the right to continue to operate or otherwise deal with
the assets of the Company. A reasonable time shall be allowed for the orderly
winding up of the business of the Company and the liquidation of its assets and
the discharge of its liabilities to creditors so as to enable the Liquidator to
minimize the normal losses attendant upon a liquidation, having due regard to
the activity and condition of the relevant markets for the Company properties
and general financial and economic conditions. Any Member may be a purchaser
of any properties of the Company upon liquidation of the Company's assets,
including, without limitation, any liquidation conducted pursuant to a judicial
dissolution or otherwise under judicial supervision; provided, however, that,
except in the case of a judicially supervised sale, the purchase price and
terms of sale shall be approved by the non-purchasing Member.
11.3 DISTRIBUTION OF CASH UPON DISSOLUTION. Prior to
making distributions in dissolution to the Members, the Liquidator shall first
pay or make provision for all debts and liabilities of the Company and all
expenses of liquidation. Subject to the right of the Liquidator to set up such
cash reserves as it may deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Company, the proceeds of
liquidation and any other funds of the Company shall be distributed to the
Members in accordance with the positive balances of their respective Capital
Accounts after taking into account all allocations under this Agreement. There
shall be deducted or added to the foregoing, as the case may be, any final
adjustments between the Members by reason of any default offsets as provided in
this Agreement.
11.4 ALLOCATION OF GAIN AND LOSS UPON LIQUIDATION. Any
Profits or Losses upon dissolution of the Company or from the sale, conversion,
disposition or taking of all or substantially all of the Company's property,
including, but not limited to the proceeds of any eminent domain proceeding,
insurance awards, or similar capital events) ("Gain on Sale" or "Loss on Sale,"
respectively) shall be allocated between the Members as follows:
(a) Loss on Sale shall be allocated between the
Members as follows: first, proportionately to those Members having
positive Capital Account balances until all positive Capital Accounts
have been reduced to zero; and thereafter, to the Members in
proportion to their Percentage Interests.
(b) Gain on Sale to the extent available shall be
allocated between the Members as follows: first, proportionately to
those Members having negative Capital Account balances until all
negative balances are eliminated; second, to the Members until the
positive balances of the respective Capital Accounts are in the same
ratio as such Member's Percentage Interest and thereafter, to the
Members in proportion to their Percentage Interests.
This Section 11.4 is intended to comply with the economic effect
equivalence provisions of Treasury Regulation Section 1.704- 1(b)(2)(ii)(i) and
the provisions of this Agreement shall be construed and interpreted to give
effect to such intention.
(c) Installment Method Reporting. In the event
of a sale of all or substantially all of the Company Property where
payment of a portion of the sales price is deferred and the Company
uses the installment sale method to report such gain, the Capital
Accounts of the Members shall be fully adjusted upon closing of the
sale in accordance with Sections 11.4(a) and (b) as though the full
sales price had been received by the Company
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<PAGE> 21
in cash at closing. Upon ultimate receipt of such deferred sales
proceeds, gain shall be allocated among the Members in proportion to
the amount of the excess, if any, of the gain credited to each
Member's Capital Account at the time of the sale over the amount of
gain recognized for federal income tax purposes at the time of such
sale, but such allocation of gain upon receipt of proceeds shall not
increase (again) the Members' Capital Accounts. Notwithstanding any
other provision of this Agreement, interest income earned or accrued
by the Company on an installment obligation subsequent to the closing
of an installment sale shall be allocated among the Members in
proportion to their relative positive Capital Account balances after
adjustment of such accounts in accordance with this Section 11.4(c)
and as such balances are reduced, from time to time, for cash
distributions made by the Company to the Members.
11.5 CERTIFICATE OF CANCELLATION; REPORT; TERMINATION.
Upon the dissolution and commencement of winding up of the Company, the
Liquidator shall execute and file a certificate of cancellation of the Company.
Within a reasonable time following the completion of the liquidation of the
Company's assets, the Liquidator shall prepare and furnish to each Member, at
the expense of the Company, a statement which shall set forth the assets and
liabilities of the Company as of the date of complete liquidation and the
amount of each Member's distribution pursuant to Section 11.3 hereof. Upon
completion of the liquidation and distribution of all Company funds, the
Company shall terminate and the Liquidator shall have the authority to execute
and file all documents required to effectuate the termination of the Company.
11.6 DEFICIT RESTORATION OBLIGATION. Upon the
liquidation of the Company, all Members with a deficit balance in their Capital
Account following the final allocations and distributions under this Agreement
shall be obligated to contribute to the Company an amount equal to such deficit
balance to the extent provided in Section 4.3. Any Member whose interest in
the Company is liquidated shall also be obligated to contribute to the Company
an amount equal to the deficit balance in such Member's Capital Account to the
extent provided in Section 4.3.
12. SPECIAL AND LIMITED POWER OF ATTORNEY.
12.1 POWER OF ATTORNEY. The Chief Executive Officer of
the Manager, with full power of substitution, shall at all times during the
existence of the Company have a special and limited power of attorney as the
authority to act in the name and on the behalf of the Members to make, execute,
swear to, verify, acknowledge and file the following documents and any other
documents deemed by the Manager to be necessary for the business of the
Company:
(a) This Agreement, any Certificate of Formation,
fictitious business name statements, as well as any amendments to the
foregoing which, under the laws of any state, are required to be filed
or which the Manager deems advisable to file;
(b) Any other instrument or document which may be
required to be filed by the Company under the laws of any state or by
an governmental agency, or which the Manager deems advisable to file;
and
(c) Any instrument or document which may be
required to effect the continuation of the Company or the dissolution
and termination of the Company (provided such continuation, admission
or dissolution and termination are in accordance with the terms of
this Agreement).
12.2 NATURE OF APPOINTMENT. The special and limited
power of attorney granted to the Chief Executive Officer of the Manager:
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(a) Is a special and limited power of attorney
coupled with an interest, is irrevocable, and is limited to those
matters herein set forth;
(b) May be exercised by the Chief Executive
Officer of the Manager for the Members by listing the Members
executing any instrument with a single signature acting as
attorney-in-fact for all Members;
(c) Shall survive a transfer by a Member of such
Member's Interest in the Company for the sole purpose of enabling the
Chief Executive Officer of the Manager to execute, acknowledge and
file any instrument or document necessary or appropriate to admit a
transferee as an assignee or Member; and
(d) Notwithstanding the foregoing, in the event
that the Manager ceases to be the Manager of the Company, the power of
attorney granted by this Section 12 shall terminate immediately with
respect to the Chief Executive Officer of the Manager.
13. AMENDMENTS.
Except as otherwise provided by law, this Agreement may be amended
only upon the agreement of Members owning at least fifty-one percent (51%) of
the Units of the Company. Any such amendment shall be in writing, dated, and
signed by all Members.
14. MISCELLANEOUS.
14.1 NOTICES. Any Notice to the Company or any of the
Members required or permitted under this Agreement shall be deemed to have been
duly given and received (i) on the date of service, if served personally or
sent by telex or facsimile transmission to the party to whom notice is to be
given, or (ii) on the fourth day after mailing, if mailed by first class
registered or certified mail, postage prepaid, and addressed to the party to
whom notice is to be given at the address stated opposite its name set forth
below or at the most recent address specified by Notice given to the Company,
or (iii) on the next day if sent by a nationally recognized courier for the
next day service and so addressed and if there is evidence of acceptance by
receipt. Notices to the Company shall be similarly given and addressed to it
at its principal place of business.
To Member/Manager: T&W Financial Corporation
6416 Pacific Highway East
Tacoma, WA 98424
Attn: Mr. Thomas W. Price
Tel.: (253) 922-5164
Fax: (253) 926-0739
To Member: T&W Funding Company VI, L.L.C.
P.O. Box 3028
Federal Way, WA 98063
Attn: Mr. Michael A. Price
Tel.: (253) 926-5202
Fax: (253) 922-0453
14.2 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties and supersedes any prior agreement or
understandings among them, oral or written, all of which are hereby canceled.
This Agreement may not be modified or amended other than pursuant to Section 13
hereof.
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14.3 AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS. This
Agreement shall be binding upon the successors and assigns of the Members.
14.4 CAPTIONS; PRONOUNS. The paragraph titles or captions
contained in this Agreement are inserted only as a matter of convenience of
reference. Such titles and captions in no way define, limit, extend or
describe the scope of this Agreement nor the intent of any provision hereof.
All pronouns and any variation thereof shall be deemed to refer to the
masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
14.5 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the state of Washington.
14.6 FINANCIAL MATTERS. If, upon the final dissolution
and termination of the Company and after taking into account all allocations
under this Agreement, the distributions to be made in accordance with positive
Capital Account balances would result in a distribution that would be different
from a distribution under Section 5.1 of this Agreement, then notwithstanding
any provision to the contrary in this Agreement, gross items of income, gain,
loss, deduction and credit under this Agreement for such taxable year (and, to
the extent permitted by Section 761(c ) of the Code, gross items of income,
gain, loss, deduction and credit under this Agreement for the immediately
preceding taxable year) shall be allocated to the Members to increase or
decrease Capital Account balances, as the case may be, so that the final
distribution under this Agreement will occur in the same manner as set forth in
Section 5.1 of this Agreement.
14.7 COUNTERPARTS. This Agreement may be executed in one
or more 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.
IN WITNESS WHEREOF the Parties have executed this Agreement.
MEMBERS: T&W FUNDING COMPANY VI, L.L.C.
By: P.L.M. CONSULTING GROUP, L.L.C.
----------------------------------
By:
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Thomas W. Price, Member
T&W FINANCIAL CORPORATION
By:
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Thomas W. Price, President
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EXHIBIT 10.46
T & W FINANCIAL CORPORATION
1997 STOCK OPTION PLAN
1. Purpose. T & W FINANCIAL CORPORATION, a Washington corporation
("Company"), believes that its continued growth and success will depend upon its
ability to obtain and retain the services of employees of the highest skills and
competence. In order to obtain and retain such employees, and in order to
provide incentives for effective service and high-level performance, the Company
desires to adopt this 1997 Stock Option Plan (the "Plan"). The purpose of the
Plan is to provide selected employees, directors (subject to the restrictions
contained in Sections 2 and 4), officers, consultants and independent
contractors of the Company or of any parent or subsidiary (as defined in
subsection 5.7 and referred to herein as "related corporations") thereof
incentive stock options and/or nonqualified stock options to purchase the Common
Stock (as defined in Section 3) of the Company, in order to attract, motivate,
and retain the services of such employees, directors, officers, consultants and
independent contractors and to provide added incentive to them by encouraging
stock ownership in the Company.
2. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board"), or in the event the Board shall appoint
and/or authorize a committee of the Board to administer the Plan, by such
committee. The Board may designate two or more of its members of the Board as
Plan Administrator. The administrator of the Plan shall hereinafter be referred
to as the "Plan Administrator."
In the event a member of the Board (or the committee) may be eligible,
subject to the restrictions set forth in Section 4, to participate in or receive
or hold options under the Plan, no member of the Board or the committee shall
vote with respect to the granting of an option hereunder to himself or herself.
2.1 Procedures. The Plan Administrator may hold meetings at such times
and places as it shall determine. The acts of a majority of the members of the
Plan Administrator present at meetings which a quorum exists, or acts reduced to
or approved in writing by all Plan Administrator members, shall be valid acts of
the Plan Administrator.
2.2 Authority and Responsibilities. Except for the terms and conditions
explicitly set forth in the Plan, the Plan Administrator shall have the
authority, in its discretion, to determine all matters relating to the options
to be granted under the Plan, including (a) selection of the individuals to be
granted options, (b) determine whether the option is an Incentive Stock Option
or Non-Qualified Stock Option, (c) the number of shares to be subject to each
option, (d) the exercise price, (e) the
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term of each option, (f) the vesting schedule of each option and (g) all other
terms and conditions of the options. Grants under the Plan need not be identical
in any respect, even when made simultaneously. The interpretation and
construction by the Plan Administrator of any terms or provisions of the Plan or
any option issued hereunder, or of any rule or regulation promulgated in
connection herewith, shall be conclusive and binding on all interested parties,
so long as such interpretation and construction with respect to incentive stock
options satisfy the requirements of Internal Revenue Code (the "Code") Section
422, the regulations thereunder, and any amendments thereto. The Plan
Administrator shall have the exclusive authority, in its discretion, to correct
any defect, omission or inconsistency in the Plan.
3. Stock Subject To the Plan. The Shares subject to options under the
Plan shall be shares of the Company's Common Stock (the "Common Stock"),
authorized but unissued or subsequently acquired by the Company. Subject to the
adjustments described in Section 7 hereof, the aggregate amount of Common Stock
to be delivered upon the exercise of all options granted under the Plan shall
not exceed 1,000,000 shares as such Common Stock was constituted on the
effective date of the Plan. If any option granted under the Plan shall expire,
be surrendered, exchanged for another option, canceled or terminated for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall thereupon again be available for purposes of the Plan, including
for replacement options which may be granted in exchange for such surrendered,
canceled or terminated options.
4. Eligibility. An incentive stock option may be granted only to an
individual who, at the time the option is granted, is an employee of the
Company, T&W Financial Company, L.L.C. or any related corporation. A
nonqualified stock option may be granted to any employee, director, officer,
consultant or independent contractor of the Company, T&W Financial Company,
L.L.C. or any related corporation, whether an individual or an entity. Any party
to whom an option is granted under the Plan shall be referred to as an
"Optionee."
5. Terms and Conditions of Options. Options granted under the Plan
shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with the Plan. Notwithstanding the
foregoing, options shall include the following terms and conditions:
5.1 Number of Shares and Exercise Price. The maximum number of
shares that may be purchased pursuant to the exercise of each option and the
price per share at which such option is exercisable (the "exercise price") shall
be as established by the Plan Administrator, provided that the Plan
Administrator shall act
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in good faith to establish the exercise price which shall be not less than the
fair market value per share of the Common Stock at the time the option is
granted with respect to incentive stock options, and also provided that with
respect to incentive stock options granted to greater than 10 percent
shareholders, the exercise price shall be at least 110% of the fair market value
on the date the incentive stock option is granted.
5.2 Type of Option. The Plan Administrator shall determine
whether the option granted is intended to be an Incentive Stock Option or a
Non-Qualified Stock Option. In the absence of action to the contrary by the Plan
Administrator in connection with the grant of an Option, each Option shall be a
Non-Qualified Stock Option.
5.3 Term and Vesting Schedule. Subject to the restrictions
contained in Section 6 with respect to granting incentive stock options to
greater than 10 percent shareholders, the term of each incentive stock option
shall be as established by the Plan Administrator, and if not so established,
shall be ten years from the date it is granted but in no event shall the term of
any incentive stock option exceed ten years. The term of each nonqualified stock
option shall be as established by the Plan Administrator, and if not so
established, shall also be ten years. To ensure that the Company or related
corporation will achieve the purposes and receive the benefits contemplated in
the Plan, any option granted to any Optionee hereunder shall be exercisable
according to the schedule and any restrictions, if any, set forth in each option
agreement, or if no schedule is set forth in the individual agreement, then
according to the following schedule:
<TABLE>
<CAPTION>
Period of Continuous
Employment with the Company,
T&W Financial Corporation, LLC
or other affiliated entity
After the Date the Option is Portion of Option
Granted Which is Vested
------------------------------ -----------------
<S> <C>
After 1st year 20%
After 2nd year 40%
After 3rd year 60%
After 4th year 80%
After 5th year 100%
</TABLE>
5.4 Exercise. Subject to the vesting schedule described in
subsection 5.3 above and to any additional holding period required by applicable
law, each option may be exercised in whole or in part as determined by the Plan
Administrator and as further described in the written option agreement. During
an
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Optionee's lifetime, any stock options granted under the Plan are personal to
him or her and are exercisable solely by such Optionee. Options shall be
exercised by delivery to the Company of notice of the number of shares with
respect to which the option is exercised, together with payment of the exercise
price.
5.5 Payment of Exercise Price and Withholding Tax. Payment of
the option exercise price shall be made in full at the time the notice of
exercise of the option is delivered to the Company and shall be in cash, check
or other consideration acceptable to the Plan Administrator. As long as the
Common Stock is registered under the Securities Exchange Act of 1934, as
amended, and to the extent permitted by the Plan Administrator and applicable
laws and regulations, an Option may also be exercised by delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale proceeds to pay the exercise
price.
The Company or T&W Financial Corporation, LLC shall have the right to
retain and withhold from any payment of cash or Common Stock under the Plan the
amount of taxes required by any governmental entity to be withheld or otherwise
deducted and paid with respect to such payment. At its discretion, the Company
may require an Optionee receiving shares of Common Stock to reimburse the
Company for any such taxes required to be withheld by the Company and withhold
any distribution in whole or in part until the Company is so reimbursed.
5.6 Nontransferability; Restriction on Shares. No options
granted under the Plan or any of the rights and privileges thereby conferred
shall be transferred, assigned, pledged, or hypothecated in any manner other
than by a valid will or by the laws of descent or distribution, and no such
option, right, or privilege shall be subject to execution, attachment, or
similar process. Upon any attempt so to transfer, assign, pledge, hypothecate,
or otherwise dispose of the option, or of any right or privilege conferred
thereby, contrary to the provisions hereof, or upon the levy of any attachment
or similar process upon such option, right, or privilege, the option and such
rights and privileges shall immediately become null and void.
5.7 Termination of Relationship. If the Optionee's employment
or contractual relationship with the Company or T&W Financial Corporation, LLC
ceases for any reason other than termination for cause, death or total
disability, and unless by its terms the option sooner terminates or expires,
then the Optionee may exercise, for a three-month period, that portion of the
Optionee's option which is exercisable at the time of such cessation, but the
Optionee's option shall terminate at the end of such period following such
cessation as to all shares of Common Stock for which it has not theretofore been
exercised, unless such provision is waived in the agreement evidencing the
option or by resolution adopted by the Plan
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Administrator. If, in the case of an incentive stock option, an Optionee's
employment or contractual relationship with the Company or T&W Financial
Corporation, LLC changes (i.e., from employee to nonemployee) such change shall
constitute a termination of any Optionee's employment and the Optionee's
incentive stock option shall terminate in accordance with this subsection. Prior
to the expiration of the three-month period following cessation of employment,
the Plan Administrator shall have sole discretion in a particular circumstance
to extend the exercise period following such cessation beyond the period
specified above but not later than the expiration date of the option. If,
however, in the case of an incentive stock option, the Optionee does not
exercise the Optionee's option within three months after cessation of
employment, the option will no longer qualify as an incentive stock option under
the Code.
If an Optionee is terminated for cause, which shall be determined
exclusively by the Company in its sole discretion, any option granted hereunder
shall automatically terminate as of the date of termination for cause, and such
Optionee shall thereupon have no right to purchase any shares pursuant to such
option. "Termination for cause" shall mean dismissal for dishonesty, conviction
or confession of a crime, fraud, misconduct or disclosure of confidential
information. If any Optionee's relationship with the Company or T&W Financial
Corporation, LLC or any related entity is suspended pending an investigation of
whether or not the Optionee shall be terminated for cause, all Optionee's rights
under any option granted hereunder shall be suspended during the period of
investigation.
If an Optionee's relationship with the Company or any related
corporation ceases because of total disability, the Optionee's option shall not
terminate or, in the case of an incentive stock option, cease to be treated as
an incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates and expires). As used in the
Plan, the term "total disability" refers to a mental or physical impairment of
the Optionee which is expected to result in death or which has lasted or is
expected to last for a continuous period of 12 months or more and which causes
the Optionee to be unable, in the opinion of the Company and a physician, to
perform his or her duties for the Company and to be engaged in any substantial
gainful activity. Total disability shall be deemed to have occurred on the first
day after the Company and a physician have furnished their opinion of total
disability to the Plan Administrator.
For purposes of this subsection 5.7, a transfer of relationship between
or among the Company or T&W Financial Corporation, LLC and/or any related entity
shall not be deemed to constitute a cessation of relationship with the Company
or any of its related corporations. For purposes of this subsection 5.7, with
respect to incentive stock options, employment shall be deemed to continue while
the Optionee is on military leave, sick leave or other bona fide leave of
absence (as
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determined by the Plan Administrator). The foregoing sentence notwithstanding,
employment shall not be deemed to continue beyond the first 90 days of such
leave.
As used herein, the term "related corporation," means T&W Financial
Company L.L.C. and when referring to a subsidiary corporation, shall mean any
corporation (other than Company) in, at the time of the granting of the option,
an unbroken chain of corporations ending with the Company, if stock possessing
50% or more of the total combined voting power of all classes of stock of each
of the corporations other than Company is owned by one of the other corporations
in such chain.
5.8 Death of Optionee. If an Optionee dies while he or she has
an employment or contractual relationship with the Company or any related
corporation or within the three-month period (or twelve-month period in the case
of totally disabled Optionees) following cessation of such relationship, any
option held by such Optionee to the extent that the Optionee would have been
entitled to exercise such option may be exercised within 12 months after his or
her death by the personal representative of his or her estate or by the person
or persons to whom the Optionee's rights under the option shall pass by will or
by the applicable laws of descent and distribution.
5.9 Status of Shareholder. Neither the Optionee nor any party
to which the Optionee's rights and privileges under the option may pass shall
be, or have any of the rights or privileges of, a shareholder of the Company
with respect to any of the shares issuable upon the exercise of any option
granted under the Plan unless and until such option has been exercised and such
Optionee becomes a record holder of such shares.
5.10 Continuation of Employment. Nothing in the Plan or in any
option granted pursuant to the Plan shall confer upon any Optionee any right to
continued employment with the Company, T&W Financial Corporation, LLC or of a
related entity, or to interfere in any way with the right of the Company or of
any such related corporation to terminate his or her employment or other
relationship with the Company at any time.
5.11 Modification and Amendment of Option. Subject to the
requirements of Code Section 422 with respect to incentive stock options and to
the terms and conditions and within the limitations of the Plan, the Plan
Administrator may modify or amend outstanding options granted under the Plan
with the consent of the Optionee. Except as otherwise provided in the Plan, no
outstanding option shall be amended or terminated without the consent of the
Optionee. Unless the Optionee agrees otherwise, any changes or adjustments
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made to outstanding incentive stock options granted under the Plan shall be made
in such a manner so as not to constitute a "modification" as defined in Code
Section 425(h) and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as defined
in Code Section 422(b).
5.12 Limitation on Value for Incentive Stock Options. As to
all incentive stock options granted under the terms of the Plan, to the extent
that the aggregate fair market value (determined at the time the incentive stock
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the Optionee during any calendar year
(under the Plan and all other incentive stock option plans of the Company, a
related corporation or a predecessor corporation) exceeds $100,000, such options
shall be treated as nonqualified stock options. The previous sentence shall not
apply if the Internal Revenue Service (a) rules publicly, (b) issues a private
letter ruling to the Company, any Optionee, or any legatee or personal
representative of Optionee or (c) issues regulations changing or eliminating
such annual limit.
Section 6. Greater Than 10 Percent Shareholders.
6.1 Exercise Price and Term of Incentive Stock Options. If incentive
stock options are granted under the Plan to employees who own more than 10
percent of the total combined voting power of all classes of stock of the
Company or any related corporation, the term of such incentive stock options
shall not exceed five years and the exercise price shall not be less than 110
percent of the fair market value of the Common Stock at the time the incentive
stock option is granted. This provision shall control notwithstanding any
contrary terms contained in an option agreement or any other document.
6.2 Attribution Rule. For purposes of subsection 6.1, in determining
stock ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
limited liability company, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners, members or beneficiaries.
If an employee or a person related to the employee owns an unexercised option or
warrant to purchase stock of the Company, the stock subject to that portion of
the option or warrant which is unexercised shall not be counted in determining
stock ownership. For purposes of this Section 6, stock owned by an employee
shall include all stock actually issued and outstanding immediately before the
grant of the incentive stock option to the employee.
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Section 7. Adjustments Upon Changes in Capitalization. The Aggregate
number and class of shares for which options may be granted under the Plan, the
number and class of shares covered by each outstanding option and the exercise
price per share thereof (but not the total price), and each such option, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a split-up or consolidation of
shares or any like capital adjustment or the payment of any stock dividend.
7.1 Effect of Liquidation, Reorganization or Change in Control.
7.1.1 Cash, Stock or Other Property For Stock. Except as
provided in subsection 7.1.2, upon a merger (other than a merger of the Company
in which the holders of Common Stock immediately prior to the merger have the
same proportionate ownership of Common Stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation, reorganization (other than a mere reincorporation or creation of a
holding company) or liquidation of the Company, as a result of which the
shareholders of the Company receive cash or other property in exchange for or in
connection with their shares of Common Stock, any option granted hereunder shall
terminate, but the Optionee shall have the right immediately prior to any such
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise such optionee's option in whole or in
part whether or not the vesting requirements set forth in the option agreement
have been satisfied.
7.1.2 Conversion of Options on Stock for Stock Exchange. If
the shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation,
reorganization (other than a mere reincorporation or creation of a holding
company), all options granted hereunder shall be converted into options to
purchase shares of Exchange Stock unless the Company and the corporation issuing
the Exchange Stock, in their sole discretion, determine that any or all such
options granted hereunder shall not be converted unto options to purchase shares
of Exchange Stock by instead shall terminate in accordance with the provisions
of subsection 7.1.1. The amount and price of converted options shall be
determined by adjusting the amount and price of the options granted hereunder in
the same proportion as used for determining the number of shares of Exchange
Stock the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization. Unless
accelerated by the Plan
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Administrator or the Board, the vesting schedule set forth in the option
agreement shall continue to apply for the Exchange Stock.
7.1.3 Acceleration Upon Change in Control. If at any time any
"person" as such term is used in Sections 13(d) and 14(d) of the Securities &
Exchange Act of 1934, as amended (other than (i) a fiduciary holding Common
Stock under an employee benefit plan of the Company or (ii) beneficial owners of
Common Stock as of August 1, 1997) becomes, after the effective date of the
Plan, the beneficial owner, directly or indirectly, of more than 40% of the
Common Stock then all Options granted under the Plan shall accelerate and become
vested and exercisable for the duration of the term of the Option.
7.2 Fractional Shares. In the event of any adjustments in the number of
shares covered by any option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.
7.3 Determination of Plan Administrator to Be Final. All Section 7
adjustments shall be made by the Plan Administrator, and its determination as to
what adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive. Unless an Optionee agrees otherwise, any change or adjustment
made to an incentive stock option granted under the Plan shall be made in such a
manner so as not to constitute a "modification" as defined in Code Section
425(h) and so as not to cause his or her incentive stock option issued hereunder
to fail to continue to qualify as an incentive stock option as defined in Code
Section 422(b).
Section 8. Securities Regulation. Shares shall not be issued with
respect to an option granted under the Plan unless the exercise of such option
and the issuance and delivery of such shares pursuant thereto shall comply with
all relevant provisions of law, including any applicable state securities laws,
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed.
As a condition to the exercise of an option, the Company may require
the Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of Company's counsel, such
a representation is required by any relevant provisions of the aforementioned
laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF
THE OPTIONS OR STOCK HEREUNDER.
Section 9. Amendment and Termination.
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9.1 Board Action. The Board may at any tine alter, amend, suspend, or
terminate the Plan, provided that except as set forth in Section 7, the approval
of the Company's shareholders is necessary within 12 months before or after the
adoption by the Board of any amendment which will:
(a) increase the number of shares which are reserved for the
issuance of options under the Plan; or
(b) materially modify the requirements as to eligibility for
participation in the Plan.
Any amendment made to the Plan which would constitute a "modification"
to incentive stock options outstanding on the date of such amendment shall not
be applicable to such outstanding incentive stock options, but shall have
prospective effect only, unless the Optionee agrees otherwise.
9.2 Automatic Termination. Unless sooner terminated by the Board, the
Plan shall terminate ten years from the day the Company becomes a "public
company" (as defined under the Washington Business Corporation Act). No option
may be granted after such termination or during any suspension of the Plan. The
amendment or termination of the Plan shall not, without the consent of the
option holder, alter or impair any rights or obligations under any option
theretofore granted under the Plan.
Section 10. Effectiveness of the Plan. The Plan shall become effective
on the day the Company becomes a "public company" (as defined under the
Washington Business Corporation Act) provided that the Plan has been approved by
the Company's shareholders.
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EXHIBIT 10.47
T&W FINANCIAL CORPORATION
1997 DIRECTOR STOCK GRANT PLAN
1. Purpose. The purpose of this Director Stock Grant Plan (the "Plan")
is to enable T&W Financial Corporation, a Washington corporation (the
"Company"), to attract and retain as non-employee directors individuals with
superior training, experience and ability and to provide additional incentive to
such non-employee directors by giving them an ownership interest in the Company.
2. Shares Subject to the Plan. The maximum number of shares covered
under the Plan shall not exceed 10,000 shares of the Company's common stock, par
value $.01 per share (the "Common Stock").
3. Administration. Subject to the express provisions of the Plan, the
Plan shall be administered by the Board of Directors of the Company. The Board
of Directors shall have the power to construe the provisions of the Plan, to
determine all questions arising thereunder, to adopt rules and regulations for
the administration of the Plan, and to otherwise carry out the terms of the
Plan. The interpretation of any provisions of the Plan by the Board of Directors
shall be final.
The Board of Directors shall have no authority or discretion as to (i)
the eligibility of persons who are to receive stock under the Plan, (ii) the
number of shares under the Plan, or (iii) the timing of grants of stock under
the Plan. All of these matters are specifically governed by the provisions of
the Plan.
3.1 Delegation to a Committee. The Board of Directors may
delegate to a committee of the Board of Directors any or all of its authority
for administration of the Plan and, if such delegation occurs, all references to
the Board of Directors in this Plan shall be deemed references to the committee
to the extent provided in the resolution establishing the committee.
4. Duration of the Plan. The Plan shall be effective as of the date the
Plan is approved by the Company's Board of Directors ("Board"), provided that
the Plan is approved by the shareholders of the Company. The Plan shall continue
in effect until the earlier of (a) ten years from the date of the first grant of
Common Stock hereunder or (b) the termination of the Plan by action of the
Board. The Board shall have the right to suspend or terminate the Plan at any
time.
5. Grants of Common Stock. Each individual who is a director of the
Company at each special, quarterly or annual meeting of the Company's Board, and
who attends such meeting in its entirety, and who has not been acting as an
officer of the Company or any of its subsidiaries during the 12 months preceding
such
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special or annual meeting date (such a director, an "Eligible Director") shall
be granted fifty (50) shares of Common Stock (the "Shares") effective as of the
date of such meeting. The Company shall issue and deliver, not less frequently
than annually, a certificate registered in the name of the Eligible Director
evidencing the Shares.
6. Amendment of Plan. The Board may at any time and from time to time
modify or amend this Plan in such respect as it shall deem advisable because of
changes in the law while the Plan is in effect or for any other reason,
provided, however, that the provisions of Section 5 hereof with respect to the
number of shares of Common Stock granted to directors shall not be amended more
than once every six months.
7. Approvals. The obligations of the Company under this Plan shall be
subject to the approval of such state or federal authorities or agencies, if
any, as may have jurisdiction in the matter. Shares shall not be issued unless
the issuance and delivery of the shares shall comply with all relevant
provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, the Internal Revenue Code of 1986, as amended, the
respective rules and regulations promulgated thereunder, and the requirements of
any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance. Inability of the Company to obtain from any regulatory body having
jurisdiction authority deemed by the Company's counsel to be necessary to the
lawful issuance of any shares hereunder shall relieve the Company of any
liability for the nonissuance or sale of such shares. The Board may require any
action or agreement by a director receiving a grant of Common Stock pursuant to
the Plan as may from time to time be necessary to comply with the federal and
state securities laws. The Company shall not be obligated to register Common
Stock granted under the Plan.
8. Limitation as to Directorship. Neither the Plan, nor the granting of
Common Stock under the Plan, nor any other action taken pursuant to the Plan
shall constitute or be evidence of any agreement or understanding, express or
implied, that a nonemployee director has a right to continue as a director of
the Company for any period of time.
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EXHIBIT 10.48
T&W FINANCIAL CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
1: PURPOSE
The purpose of this 1997 Employee Stock Purchase Plan (the "Plan") is to
advance the interests of T&W Financial Corporation, a Washington corporation
(the "Company"), by enabling Eligible Employees (as defined in Article 3) to
acquire a personal proprietary interest in the Company. The Plan is also
designed to encourage Eligible Employees to remain in the employ of the Company
or any other affiliated entity, a majority of the voting stock or ownership
interests of which are directly or indirectly owned by the Company (each, an
"Affiliate" and collectively, the "Affiliates"), and to have an economic
interest in the success of the Company and its Affiliates. The Plan is intended
to constitute an "employee stock purchase plan," as such term is defined in
Section 423(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
and shall be interpreted and administered to further that intent.
2: ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), as the
Committee may be constituted from time to time. Subject to the provisions of the
Plan, the Committee shall have the complete authority, in its sole and absolute
discretion, to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, and to make all of the determinations
necessary or advisable for the administration of the Plan. All such
interpretations, rules, regulations and determinations shall, in the absent of
fraud or patent mistake, be conclusive and binding on all persons with any
interest in the Plan.
A majority of the members of the Committee shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its members.
Any decision or determination of the Committee reduced to writing and signed by
all members of the Committee shall be as fully effective as if it had been made
at a meeting duly called and held.
3: ELIGIBLE EMPLOYEES
As used in the Plan, the term "Eligible Employees" means all common law
employees of the Company and its Affiliates, except the following: (a) employees
who have been employed for less than 6 months; (b) employees whose customary
employment is 20 hours or less per week; and (c) employees whose customary
employment is for not more than 5 months in any calendar year. Except as
otherwise expressly provided in the Plan and permitted by Section 423 of the
Code, all Eligible Employees shall have the same rights and obligations under
the Plan.
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Notwithstanding the foregoing provisions of this Article 3, an employee
will not be an Eligible Employee for purposes of the Plan if the employee owns
stock possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company. For purposes of this 5% limitation, an employee
shall be treated as owning any stock the ownership of which is attributed to him
or her pursuant to Section 424(d) of the Code, as well as any stock that, in the
absence of this paragraph, the employee could purchase under the Plan with his
or her payroll deductions held pursuant to Article 6 but not yet applied to the
purchase of shares of Common Stock under the Plan.
The right of an Eligible Employee to participate in the Plan shall not
be affected by any change in the Eligible Employee's employment, so long as he
or she continues to be an employee of the Company or one of its Affiliates. If
an Eligible Employee is employed by an Affiliate of the Company that ceases to
be an Affiliate, such event shall be deemed to constitute a termination of the
Eligible Employee's employment.
4: STOCK SUBJECT TO THE PLAN
The stock subject to the Plan shall be shares of the Company's
authorized but unissued Common Stock (the "Common Stock"). The aggregate number
of shares of Common Stock that may be purchased by Eligible Employees pursuant
to the Plan is 100,000, subject to adjustment as provided in Article 13.
5: PAYMENT PERIODS
The Plan will be administered based on calendar quarters (the "Payment
Periods"). The Committee will determine the first Payment Period. Thereafter,
the Payment Periods will begin on the first Business Day (as defined in Article
8) and end on the last Business Day of each calendar quarter.
6: PARTICIPANTS; PAYROLL DEDUCTIONS
Any person who is an Eligible Employee at the beginning of a Payment
Period may elect, in accordance with procedures prescribed by the Committee, to
have the Company deduct a specified percentage of the employee's Compensation
(as defined below) for the purchase of shares of Common Stock pursuant to the
Plan. Each Eligible Employee who elects to have such deductions made will be
referred to in the Plan as a "Participant."
As used in the Plan, the term "Compensation" means all monetary salary,
wages, bonuses, commissions and other remuneration paid to or on behalf of a
Participant for services performed or on account of holidays, vacation, sick
leave or other similar events, including any amounts by which such remuneration
is reduced, at the election of a Participant, pursuant to a cafeteria plan
described in Section 125 of the Code, a dependent care assistance program
described in
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Section 129 of the Code, a cash or deferred arrangement described in Section
401(k) of the Code, or any similar plan, program or arrangement, but excluding
the value of any noncash benefits under any employee benefit plans of the
Company or any of its Affiliates.
The maximum rate of deduction from Compensation that a Participant may
elect for any Payment Period is 10% (the "Elected Percentage"). An amount equal
to the Elected Percentage shall be deducted on each regular pay day falling
within the Payment Period. The Committee may set such minimum level of payroll
deductions as the Committee determines to be appropriate. Any minimum level of
deductions mandated by the Committee shall apply equally to all Eligible
Employees. No interest will be paid on payroll deductions accumulated under the
Plan.
7: PURCHASE OF SHARES
At the end of a Payment Period, a Participant's accumulated payroll
deductions for the Payment Period will, subject to the limitations in Article 9
and the termination provisions of Article 16, be applied toward the purchase of
shares of Common Stock at a purchase price (the "Purchase Price") equal to the
lesser of --
(a) 85% of the Market Price (as defined in Article 8) of the
Common Stock on the first Business Day of the Payment Period; or
(b) 85% of the Market Price for the Common Stock on the last
Business Day of the Payment Period;
in either event rounded to the nearest whole cent.
Shares of Common Stock may be purchased under the Plan only with a
Participant's accumulated payroll deductions. Fractional shares cannot be
purchased. Any portion of a Participant's accumulated payroll deductions for a
Payment Period that is not used for the purchase of Common Stock shall be
applied to the purchase of Common Stock in the next Payment Period, if the
Participant is participating in the Plan during that Payment Period, otherwise,
such accumulated payroll deductions shall be returned to the Participant.
Each Participant who purchases shares of Common Stock under the Plan
shall thereby be deemed to have agreed that the Company or the Affiliate that
employs the Participant shall be entitled to withhold, from any other amounts
that may be payable to the Participant at or around the time of the purchase,
such federal, state and local income, employment and other taxes as may be
required to be withheld under applicable laws. In lieu of such withholding, the
Company or such Affiliate may require the Participant to remit such taxes to the
Company or such Affiliate as a condition of the purchase.
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8: MARKET PRICE
For purposes of the Plan, the term "Market Price" on any day means, if
the Common Stock is publicly traded, the last sales price (or, if no last sales
price is reported, the average of the high bid and low asked prices) for a share
of Common Stock on that day as reported by the principal exchange on which the
Common Stock is listed or, if the Common Stock is publicly traded but not listed
on an exchange, as reported by The Nasdaq Stock Market or, if such prices or
quotations are not reported by The Nasdaq Stock Market, as reported by any other
available source of prices or quotations selected by the Committee.
For purposes of the Plan, the term "Business Day" means a day on which
prices or quotations for the Common Stock are reported by a national securities
exchange, The Nasdaq Stock Market, or any other available source of prices or
quotations selected by the Committee, whichever is applicable pursuant to the
preceding paragraph.
If the Market Price of the Common Stock must be determined for purposes
of the Plan at a time when the Common Stock is not publicly traded, then the
term "Market Price" shall mean the fair market value of the Common Stock as
determined by the Committee, after taking into consideration all factors that it
deems appropriate, including, without limitation, recent sale and offer prices
of the Common Stock in private transactions negotiated at arm's length.
9: LIMITATIONS ON SHARE PURCHASES
During any calendar year, the maximum value of the Common Stock that may
be purchased by a Participant under the Plan is $25,000, said value to be
determined on the basis of the Market Price of the Common Stock on the first
Business Day of each Payment Period that ends in the calendar year. The
foregoing limitation is intended to and shall be interpreted in such a manner as
will comply with Section 423(b)(8) of the Code. Notwithstanding the foregoing,
the Committee may establish a more restrictive limit on the number of shares
that a Participant may purchase during any calendar year.
10: NO CHANGE IN PAYROLL DEDUCTIONS
Payroll deductions for a Payment Period may not be increased or
decreased by a Participant during the Payment Period. However, the Participant
may withdraw in full from the Plan, in accordance with Article 11 of the Plan.
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11: WITHDRAWAL FROM THE PLAN
At any time prior to the last day of a Payment Period, a Participant may
elect, in accordance with procedures prescribed by the Committee, to withdraw
from the Plan for that Payment Period. No such election to withdraw will be
effective unless the Committee receives written notice thereof prior to the end
of the Payment Period for which withdrawal is elected. If a Participant
withdraws effective prior to the end of a Payment Period, all of the
Participant's payroll deductions for that Payment Period will be promptly
returned to the Participant, and the Participant will not be eligible to
participate in the Plan again until the first Payment Period of the following
calendar year. If a Participant withdraws effective for a Payment Period that
has not yet commenced, the Participant may elect to participate in any
subsequent Payment Period. If a Participant's payroll deductions are interrupted
by any legal process, the Participant will be deemed to have elected to withdraw
from the Plan for the Payment Period in which such interruption occurs.
12: ISSUANCE OF COMMON STOCK
Certificates for the shares of Common Stock purchased by Participants
will be delivered by the Company's transfer agent as soon as practicable after
each Payment Period. Common Stock purchased under the Plan will be issued only
in the name of the Participant (or, if his or her authorization so designates,
in the name of the Participant and another person of legal age as joint tenants
with rights of survivorship). In lieu of issuing certificates directly to
Participants (and their designees), the Company shall be entitled to have the
shares of Common Stock purchased by Participants issued to a bank, broker-dealer
or similar custodian that has agreed to hold such shares for the accounts of the
respective Participants. Fees and expenses of the bank, broker-dealer or similar
custodian shall be paid by the Company or allocated among the respective
Participants in such manner as the Committee determines.
13: CHANGES IN CAPITALIZATION
Upon the happening of any of the following described events, a
Participant's right to purchase shares of Common Stock under the Plan shall be
adjusted as hereinafter provided:
(a) If the shares of Common Stock are subdivided or combined
into a greater or lesser number of shares of Common Stock or if, upon a
recapitalization, split-up or other reorganization of the Company, the
shares of Common Stock are exchanged for other securities of the
Company, the rights of each Participant shall be modified so that the
Participant is entitled to purchase, in lieu of the shares of Common
Stock that the Participant would otherwise have been entitled to
purchase for the Payment Period in progress at the time of such
subdivision, combination or exchange (the "Payment Period Shares"), such
number of shares of Common Stock or such number and type of other
securities as the Participant would have received if such Payment Period
Shares had been issued and outstanding at the time of such subdivision,
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combination or exchange (unless in the case of an exchange the Committee
determines that the nature of the exchange is such that it is not
feasible or advisable that the rights of Participants be so modified, in
which event the exchange shall be deemed a Terminating Event under
Article 14); and
(b) If the Company issues any of its shares as a stock dividend
upon or with respect to the Common Stock, each Participant who purchases
shares of Common Stock under the Plan at the end of the Payment Period
in progress on the record date for the stock dividend shall be entitled
to receive the shares so purchased (the "Purchased Shares") and shall
also be entitled to receive, at no additional cost, the number of shares
of the class of stock issued as a stock dividend, and the amount of cash
in lieu of fractional shares, that the Participant would have received
if he or she had been the holder of the Purchased Shares on the record
date for the stock dividend.
Upon the happening of an event specified in clause (a) or (b) above, the
class and aggregate number of shares available under the Plan, as set forth in
Article 4, shall be appropriately adjusted to reflect the event. Notwithstanding
the foregoing, such adjustments shall be made only to the extent that the
Committee, based on advice of counsel for the Company, determines that such
adjustments will not constitute a change requiring shareholder approval under
Section 423(b)(2) of the Code.
The Committee shall make all determinations necessary or advisable in
connection with this Article 13, and its determinations shall, in the absent of
fraud or patent mistake, be conclusive and binding on all persons with any
interest in the Plan.
14: TERMINATING EVENTS
Upon (a) the dissolution or liquidation of the Company, (b) a merger or
other reorganization of the Company with one or more corporations as a result of
which the Company will not be a surviving corporation, (c) the sale of all or
substantially all of the assets of the Company or a material division of the
Company, (d) a sale or other transfer, pursuant to a tender offer or otherwise,
of more than fifty percent (50%) of the then outstanding shares of Common Stock
of the Company, (e) an acquisition by the Company resulting in an extraordinary
expansion of the Company's business or the addition of a material new line of
business, or (f) any exchange that is subject to this Article 14 in accordance
with the provisions of Article 13 (any of such events is herein referred to as a
"Terminating Event"), the Committee may but shall not be required to --
(a) make provision for the continuation of the Participants'
rights under the Plan on such terms and conditions as the Committee
determines to be appropriate and equitable, including where applicable,
but not limited to, an arrangement for the substitution on an equitable
basis, for each share of Common Stock that could otherwise be purchased
at the end of the Payment Period in progress at the time of
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the Terminating Event, of any consideration payable with respect to
each then outstanding share of Common Stock in connection with the
Terminating Event; or
(b) terminate all rights of Participants under the Plan for such
Payment Period and --
(i) return to the Participants all of their payroll
deductions for such Payment Period; and
(ii) for each share of Common Stock, if any, that could
otherwise be purchased under the Plan by a Participant at the
end of such Payment Period (determined by assuming that payroll
deductions at the rate elected by the Participant were continued
to the end of the Payroll Period and used to purchase shares
based on the Market Price of the Common Stock on the first
Business Day of the Payment Period) and with respect to which
(A) the Purchase Price at which such share could be purchased
(determined with reference only to the Market Price of the
Common Stock on the first Business Day of the Payment Period) is
exceeded by (B) the Market Price on the date of the Terminating
Event of a share of Common Stock, as determined by the
Committee, pay to the Participant an amount equal to such
excess.
The Committee shall make all determinations necessary or advisable in
connection with Terminating Events and its determinations shall, in the absent
of fraud or patent mistake, be conclusive and binding on all persons with any
interest in the Plan.
15: NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS
An Eligible Employee's rights under the Plan are the Eligible Employee's
alone and may not be voluntarily or involuntarily transferred or assigned to, or
availed of by, any other person other than by will or the laws of descent and
distribution. An Eligible Employee's rights under the Plan are exercisable
during his or her lifetime by the Eligible Employee alone.
16: TERMINATION OF EMPLOYEE'S RIGHTS
Subject to the provisions of the next paragraph, a Participant's rights
under the Plan will terminate if he or she for any reason (including death,
disability or voluntary or involuntary termination of employment) ceases to be
an employee of the Company or one of its Affiliates.
Notwithstanding the foregoing, if a Participant ceases to be an employee
of the Company or one of its Affiliates, the termination of the Participant's
rights under the preceding paragraph shall not apply to any right the
Participant may have to purchase shares of Common Stock at the end of the
Payment Period in progress when the Participant ceases to be an employee. Such
purchases of shares of Common Stock shall, to the extent of payroll deductions
accumulated for
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the Payment Period, occur automatically at the end of the Payment Period, unless
the Participant or his or her personal representative withdraws from the Plan
for the Payment Period in the manner described in Article 11.
To the extent that the rights of a Participant terminate in accordance
with this Article 16, any of the Participant's payroll deductions not used to
purchase shares of Common Stock will be promptly returned to the Participant or
his or her personal representative.
17: TERMINATION AND AMENDMENTS TO PLAN
The Plan may be terminated at any time by the Board, but, except as
provided in Article 14, such termination shall not affect the rights of
Participants under the Plan for the Payment Period in progress at the time of
termination. The Plan will terminate in any case when all or substantially all
of the unissued shares of Common Stock reserved for the purposes of the Plan
have been purchased. If at any time shares of Common Stock reserved for the
purpose of the Plan remain available for purchase but not in sufficient number
to satisfy all then unfilled purchase requirements, the available shares shall
be apportioned among Participants in proportion to the respective amounts of
their accumulated payroll deductions, and the Plan shall terminate. Upon such
termination or any other termination of the Plan, all payroll deductions not
used to purchase shares of Common Stock will be refunded to the Participants
entitled thereto.
The Committee or the Board may from time to time adopt amendments to the
Plan; PROVIDED, HOWEVER, that, without the approval of the shareholders of the
Company, no amendment may increase the number of shares that may be issued under
the Plan or change the class of employees eligible to participate under the
Plan.
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18: LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN
The Plan is intended to provide shares of Common Stock for investment
and not for resale. The Company does not, however, intend to restrict or
influence any Participant in the conduct of his or her own affairs. A
Participant may, therefore, sell shares of Common Stock purchased under the Plan
at any time the Participant chooses, subject to compliance with any applicable
federal or state securities or other laws; PROVIDED, HOWEVER, that because of
certain federal income tax requirements, each Participant agrees by purchasing
shares of Common Stock under the Plan at the end of a Payment Period that (a)
the Participant will promptly give the Company notice of any disposition of such
shares that occurs within two (2) years after the beginning of the Payment
Period or within one (1) year after the Participant has purchased such shares,
showing the number of such shares disposed of and the consideration received
therefor; (b) the Company shall be entitled to withhold, from any other amounts
that may be payable to the Participant by the Company at or around the time of
such disposition, such federal, state and local income, employment and other
taxes as the Company may be required to withhold under applicable law; and (c)
in lieu of such withholding, the Participant will, upon request of the Company,
promptly remit such taxes to the Company. EACH EMPLOYEE PURCHASING SHARES OF
COMMON STOCK UNDER THE PLAN ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE
PRICE THEREOF.
19: NO SHAREHOLDER RIGHTS; INFORMATION TO PARTICIPANTS
A Participant in the Plan shall not have any rights as a shareholder of
the Company (other than the right to receive stock dividends under Article 13)
on account of shares of Common Stock that may be purchased under the Plan prior
to the time such shares are actually purchased by and issued to the Participant.
Notwithstanding the foregoing, the Company shall deliver to each Participant
under the Plan who does not otherwise receive such materials (a) a copy of the
Company's annual financial statements (which shall be delivered annually as
promptly as practical following each fiscal year of the Company and review or
audit of such statements by the Company's auditors), together with management's
discussion and analysis of financial condition and results of operations for the
fiscal year, and (b) a copy of all reports, proxy statements and other
communications distributed to the Company's security holders generally.
20: GOVERNMENTAL REGULATIONS
The Company's obligation to sell and deliver shares of the Common Stock
under the Plan is subject to the approval, if any, of any governmental authority
required in connection with the authorization, issuance or sale of such shares,
including the Securities and Exchange Commission, the securities administrators
of the states in which Participants reside, and the Internal Revenue Service.
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21: MISCELLANEOUS PROVISIONS
(a) Nothing contained in the Plan shall obligate the Company to employ a
Participant for any period, nor shall the Plan interfere in any way with the
right of the Company to reduce a Participant's compensation.
(b) The provisions of the Plan shall be binding upon each Participant
and, subject to the provisions of Article 15, the heirs, successors and assigns
of each Participant.
(c) Where the context so requires, references in the Plan to the
singular shall include the plural, and vice versa, and references to a
particular gender shall include either or both additional genders.
(d) The Plan shall be construed, administered and enforced in accordance
with the laws of the United States, to the extent applicable thereto, as well as
the laws of the State of Washington.
22: APPROVAL OF SHAREHOLDERS
The Plan shall be effective on the first day of the month following the
closing of the Company's initial public offering.
Executed this ____ day of _________, 1997.
T&W FINANCIAL CORPORATION
By: ________________________________
Its: _______________________________
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EXHIBIT 10.49
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AGREEMENT is entered into effective as of June 2, 1997, between
JAMES NEESE (herein referred to as "Employee") and T & W FINANCIAL CORPORATION,
a Washington corporation (herein referred to as "T&W").
In consideration of the mutual covenants herein contained, the parties
agree as follows:
1. EMPLOYMENT.
T&W employs Employee and Employee accepts employment effective as of
the effective date of this Agreement upon the following terms and conditions.
2. TERM OF EMPLOYMENT.
Employment under this Agreement shall be for a period of six (6) years
commencing on the effective date of this Agreement and terminating on the
earlier to occur of the following:
(a) June 1, 2003;
(b) Employee's death;
(c) at the option of T&W upon thirty (30) days prior written
notice to Employee in the event of the inability of Employee
to perform his duties hereunder by reason of injury or illness
incapacitating Employee for a continuous period exceeding one
hundred eighty (180) days;
(d) upon the termination of Employee's employment by the Board of
Directors of T&W for cause in accordance with Section 10.1; or
(e) upon Employee voluntarily terminating employment in accordance
with Section 10.2.
At the expiration of the initial term of this Agreement, this Agreement
shall be automatically renewed for two (2) succeeding terms of two (2) years
each, unless either party
Employment and
Noncompetition Agreement Page l
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shall, at least sixty (60) days prior to the expiration of the initial term, or
any extended term give written notice of that party's intention not to renew
this Agreement.
2.2 T&W's Personnel Policies. T&W has implemented and adopted a Policy
and Procedure Manual which contains general policies regarding dress and
grooming, attendance and work rules and regulations. Employee acknowledges that
he has received a copy of T&W's Policy and Procedure Manual and agrees to follow
all rules therein pertaining to Employee's employment at T&W. HOWEVER, THE
POLICY AND PROCEDURE MANUAL MAY BE MODIFIED BY T&W AT ANY TIME WITHOUT NOTICE
AND ANYTHING CONTAINED IN THE MANUAL, OR ANY MODIFICATION TO THE MANUAL, SHALL
NOT CONSTITUTE A MODIFICATION OF THIS AGREEMENT. In the event of a conflict
between this Agreement and the Policy and Procedure Manual, this Agreement
controls.
3. DUTIES AND EXTENT OF SERVICES.
3.1 Employee's principal duties on behalf of T&W at the effective date
of this Agreement shall be to perform sales and marketing services at T&W's
Prairie Village location.
3.2 Employee will devote substantially his entire time and attention to
the business of T&W, and shall not, during such employment, engage in any other
business activity which interferes with Employee's duties and responsibilities
under this Agreement. Employee shall not directly or indirectly engage or
participate in any activities at any time during the term of this Agreement in
conflict with the best interest of T&W.
4. COMPENSATION.
In addition to other benefits referred to herein, T&W shall pay
Employee for all services rendered by Employee under this Agreement a salary of
$14,583.33 per month. Employee's salary shall be paid in semi-monthly
installments on the 15th and last day of each month, commencing on June 15, 1997
and shall be subject to normal payroll withholding. Unless changed by agreement
of the parties, the annual salary to Employee shall remain the same as provided
herein. Employee's annual salary shall be subject to annual review and may be
increased but shall not be decreased.
Employment and
Noncompetition Agreement Page 2
<PAGE> 3
5. STOCK OPTIONS.
In consideration for entering into this Agreement, and in the event
that T&W completes an initial public offering of its common stock, T&W shall
grant Employee an option to purchase shares of common stock of T&W in an amount
equal to one percent (1%) of the issued and outstanding shares of stock in T&W
as of the effective date of the initial public offering at a per share price
equal to the initial public offering price. Under the terms of such option, the
option shall vest ratably over a five-year period (i.e., at the rate of twenty
percent (20%) per year), so that the option shall be fully exercisable five (5)
years from the date of the grant. The other terms and conditions of the option
shall be set forth in a Stock Option Plan to be adopted by T&W prior to the
completion of the initial public offering.
6. ADDITIONAL BENEFITS.
T&W agrees at all times during Employee's employment to provide and
maintain for Employee, and Employee shall be entitled to participate in, all
fringe benefits in effect which are available for salaried employees of the T&W
or as introduced by T&W during Employee's employment. To the extent that it has
the right to do so with its other salaried employees, T&W reserves the right to
modify, suspend or discontinue any or all of such benefits at any time. In
addition to the compensation provided in Section 4, Employee shall have the
following additional benefits during the term herein.
6.1 QUARTERLY BONUS. In addition to the salary described above, Employee
shall be entitled to receive a bonus through participation in T&W's return on
equity ("ROE") incentive program (the "ROE Program"). Employee shall receive
twenty-five percent (25%) of any ROE in excess of twenty-five percent (25%) on
an annual pre-tax basis relative to beginning acquisition equity of $_________.
The operation of the ROE Program is illustrated on the attached Exhibit "A." The
bonus shall be paid to Employee every April 30, July 30, October 30, and January
30 during the term of this Agreement. The bonus payable on July 30, 1997 shall
be calculated for the initial period beginning January 1, 1997, but prorated as
of June 1, 1997. In the event that a major recapitalization of T&W occurs, the
ROE Program will be restructured to produce a basically equivalent incentive
bonus program.
Employment and
Noncompetition Agreement Page 3
<PAGE> 4
6.2 EXPENSES. T&W will reimburse Employee for or pay for Employee all
reasonable and necessary business related expenses incurred by him in carrying
out his duties and responsibilities under this Agreement. The Employee shall
present to T&W from time to time an itemized account of such expenses in such
form as may be required by T&W.
6.3 CLUB DUES. T&W will reimburse Employee for or pay for Employee
social or athletic club dues as it relates to business purposes of T&W.
7. NONCOMPETITION/NONDISCLOSURE.
As a condition of employment with T&W, and in consideration of
continuing employment, the compensation of Employee by T&W during the term of
this Agreement, the use and enjoyment by Employee of T&W's facilities and
equipment, the ongoing disclosure to Employee of T&W's confidential and
proprietary information, the opportunity for Employee to serve T&W's customers,
and the mutual covenants contained herein, T&W and Employee recognize and agree
as follows:
(a) Confidential Information. Employee recognizes and
acknowledges that during the course of his employment hereunder, he will have
access to certain information not generally known to the public, relating to
products, sales, services or business of T&W, which may include without
limitation data, programs, customer or contact lists, contact with T&W's
customers, acquisition of information as to the nature and character of the
business and the names and requirements of the customers, prospects or
projections, techniques, processes, research, work in process, intellectual
property, including but not limited to any patents, trademarks, service marks,
copyrights, ideas, creations, and properties invented, created, written,
developed, furnished, produced, or disclosed by Employee, in the course of
rendering services to T&W except for items in the public domain or items
obtained by Employee from third parties not affiliated with T&W (collectively
the "Confidential Information").
(b) Possession. Employee agrees that upon request by T&W, and
in any event upon termination of employment, except for items in the public
domain or items obtained by Employee from third parties not affiliated with T&W,
Employee shall turn over to T&W all documents, notes, papers, data, files,
customer lists, office supplies or other materials or work product in Employee's
possession or under his control which were created pursuant to,
Employment and
Noncompetition Agreement Page 4
<PAGE> 5
or connected with or derived from Employee's services to T&W, or which are
related in any manner to T&W's business activities, whether or not such
materials are at the date of this Agreement in Employee's possession.
(c) Non-Disclosure of Confidential Information. Employee
agrees that for and during the entire time he is employed by T&W, any
Confidential Information shall be considered and kept as private and privileged
records of T&W and will not be divulged to any person or entity. Further, upon
termination of this Agreement for any reason, Employee agrees that he will
continue to treat as private and privileged any Confidential Information and
will not release any such Confidential Information to any person or entity,
either by statement, disposition, or as a witness, except upon the issuance of a
proper subpoena from a court of competent jurisdiction, and T&W shall be
entitled to an injunction by any competent court to enjoin and restrain the
unauthorized disclosure of such information. Employee hereby agrees to notify
T&W of any request for such information, whether by subpoena or otherwise.
(d) Covenant Not to Divulge Confidential Information. Employee
further recognizes and acknowledges that because the goodwill of T&W's business
is a valuable asset, and because the solicitation of T&W's customers by Employee
after Employee has ceased to be employed by or associated with T&W will cause
irreparable harm to the goodwill of T&W, T&W would not offer employment to
Employee unless Employee assures that such solicitation would not occur.
Employee therefore agrees and covenants that during Employee's employment by T&W
and for a period of thirty-six (36) months after termination of such employment
for any reason, Employee shall not disclose any Confidential Information about
the business of T&W as presently conducted, or as it may evolve in the ordinary
course of business between the date of this Agreement and the expiration of this
covenant.
(e) Non-Competition Agreement. Employee hereby agrees that,
during the term of employment with T&W and for a period of thirty-six (36)
months thereafter, Employee shall not, directly or indirectly, provide any
competitor or potential competitor of T&W doing or planning to do business in
the same business as T&W with any information relating in any way to T&W's
Confidential Information. Employee agrees that he shall not, whether as an
employee, agent, proprietor, partner, officer, director, member, shareholder,
independent contractor, or in any other capacity whatsoever, and in any fashion
in which he is
Employment and
Noncompetition Agreement Page 5
<PAGE> 6
beneficially interested, render any services or engage in any activities in the
United States and Canada in the business of equipment leasing and related
financial services, or in any business then competitive with the business of
T&W, or any of its affiliated companies (collectively, the "Business"), during
the term of employment with T&W and for a period of thirty-six (36) months after
Employee leaves T&W's employment for any reason. Ownership of a state chartered
or national bank is not prohibited. The period of time during which Employee is
prohibited from engaging in certain activities pursuant to the terms of this
section shall be extended by the length of time during which any such party is
in breach of the terms of this section. Provided, however, if T&W defaults in
payment of the Notice evidencing T&W payment obligations to Seller, Shareholders
or Employee given as part of the consideration under that certain Asset Purchase
Agreement dated as of June 2, 1997 between T&W as "Purchaser" and Commercial
Capital Corporation as "Seller," and at that time, Employee is no longer
employed by T&W, then this Covenant Not-to-Compete shall be void and of no force
or effect whatsoever.
(f) Because of the difficulty in determining the magnitude of damages
or potential damages to T&W in the event of solicitation of an existing customer
of T&W, or competition in violation of this Agreement, Employee will pay to T&W
liquidated damages equal to the net income Employee derives in noncompliance
with this noncompetition provision. Such liquidated damages shall be due
immediately upon the rendering of the prohibited activity or services and shall
bear interest at the rate of twelve percent (12%) per annum thereafter.
8. REASONABLENESS OF RESTRICTIONS.
8.1 T&W and Employee agree and stipulate that the agreements and
covenants contained in this Agreement, including the covenant not to divulge
Confidential Information, is fair and reasonable for the protection of T&W's
Confidential Information, goodwill and other protectable interests, in light of
all the facts and circumstances of the relationship between Employee and T&W. In
the event a court of competent jurisdiction should decline to enforce any
provision of this Agreement, such provision shall be deemed to be modified or
eliminated as required by the court's order, but all remaining provisions shall
remain in full force and effect.
8.2 Employee further acknowledges, agrees and stipulates that, in the
event of the termination of employment with T&W,
Employment and
Noncompetition Agreement Page 6
<PAGE> 7
Employee's experience and capabilities are such that Employee can obtain
employment in business activities which are of a different and non-competing
nature with his activities as an employee of T&W, and that the enforcement of a
remedy hereunder by way of injunction shall not prevent Employee from earning a
reasonable livelihood.
9. INJUNCTIVE RELIEF.
Employee acknowledges that disclosure of any Confidential Information
or breach or threatened breach of any of the covenants or other agreements
contained herein would give rise to irreparable injury to T&W or customers of
T&W, which injury would be inadequately compensable in monetary damages.
Accordingly, T&W may seek and obtain injunctive relief from the breach or
threatened breach of any provision, requirement, or covenant of this Agreement,
in addition to and not in limitation of any other legal remedies which may be
available. Employee further acknowledges, agrees and stipulates that the
covenants and agreements contained herein are necessary for the protection of
T&W's legitimate business interests and are reasonable in scope and content. Any
breach by Employee of this Agreement (specifically including the covenant not to
compete) may cause irreparable injury to T&W. Upon breach or threatened breach,
T&W may obtain temporary restraining orders, injunctions, or other equitable
relief from a court in addition to, and not in lieu of, damages and any other
available remedy.
10. TERMINATION.
10.1 Termination by T&W for Cause. Without limiting in any way other
provisions of this Agreement, Employee may be terminated for cause upon ten (10)
days' prior written notice. In such event, Employee shall be entitled to
compensation only to the date of such termination. For purposes of this
Agreement, cause is defined as:
(a) Conviction of Employee for any felony involving moral
turpitude, or the charging of Employee with any
felony involving moral turpitude which results in a
suspended sentence or deferred prosecution;
(b) Fraud, embezzlement or conversion of T&W's property;
(c) Employee's sexual harassment of T&W's employees if
admitted by Employee in writing or determined by
Employment and
Noncompetition Agreement Page 7
<PAGE> 8
arbitration as provided below;
(d) Engaging in competition with T&W during the period of
Employee's employment with T&W;
(e) Material breach of this Agreement by Employee, if
Employee fails to cease and desist from such conduct
within the ten (10) day notice period provided above;
or
(f) Divulging T&W trade secrets or other breach of
confidentiality.
In the event T&W terminates Employee's employment for cause as provided
for in this Section 10, and Employee disagrees with the T&W's determination that
just cause for termination exists, then the Employee and T&W agree to seek a
fair and prompt negotiated resolution. However, if this is not successful, the
dispute shall be resolved by binding arbitration in accordance with arbitration
procedures agreed to by Employee and T&W or, if they are unable to agree, by a
court of competent jurisdiction.
10.2 Termination by Employee Without Cause. Employee may terminate his
employment by giving at least ninety (90) days' written notice to T&W.
10.3 Termination by Employee With Cause. In the event that T&W defaults
in any of its obligations to Employee under this Employment and Noncompetition
Agreement, and T&W fails to cure such default within ten (10) days after
receiving written notice thereof, Employee may terminate his employment and seek
any damages available to Employee at law or in equity as a result of such breach
with it being specifically understood and agreed that Employee shall be relieved
from the non-competition provisions hereof.
11. MISCELLANEOUS.
11.1 Assignment. This Agreement shall not be assignable by Employee.
11.2 Amendment and/or Modification. Neither this Agreement nor any term
or provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by the parties hereto.
Employment and
Noncompetition Agreement Page 8
<PAGE> 9
11.3 Binding Effect. Subject to the restrictions on assignment
described above, this Agreement shall be binding upon and inure to the benefit
of the respective parties, their successors and assigns and Employee's heirs and
personal representative.
11.4 Section Headings. The section headings are for convenience only
and in no way define, limit, extend or interpret the scope of this Agreement or
of any particular paragraph hereof.
11.5 Interpretation and Fair Construction of Contract. This Agreement
has been reviewed and approved by each of the parties. Both T&W and Employee
have received independent legal advice in connection with the negotiation,
execution and performance of their respective obligations under this Agreement.
In the event a court of competent jurisdiction determines that any provision of
this Agreement is ambiguous, the language in all parts of this Agreement shall
be construed as a whole according to its fair meaning and not strictly construed
for nor against either party.
11.6 Validity. If any term of this Agreement shall be determined by a
court of competent jurisdiction to be invalid, illegal, or unenforceable, in
whole or in part, the validity of any of the other terms of this Agreement shall
not, in any way, be affected thereby.
11.7 Variations in Pronouns. All pronouns include the masculine,
feminine, neuter, singular and plural as the identification of persons, places
or entities and the context may require.
11.8 Waiver or Breach. Either party's failure to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred, in any one or more instances,
shall not be construed to be a waiver or relinquishment of any such option or
right, or of any other covenants or agreements, but the same shall be and remain
in full force and effect.
11.9 Notices. To be effective, any notice hereunder shall be in
writing, delivered in person or mailed by certified or registered mail, postage
prepaid, to the appropriate party or parties at the addresses set forth below
their signature hereto, or to such other address as the parties may hereinafter
designate.
Employment and
Noncompetition Agreement Page 9
<PAGE> 10
11.10 Entire Agreement. This Agreement contains the entire agreement
and understanding of the parties with respect to the entire subject matter
hereof, and there are no representations, inducements, promises or agreements,
oral or otherwise, not embodied herein. Any and all prior discussions,
negotiations, commitments and understandings relating to the subject matter
hereof are merged herein. There are no conditions precedent to the effectiveness
of this Agreement other than as stated herein, and there are no related
collateral agreement existing between the parties that are not referenced
herein.
11.11 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Washington, regardless of
the fact that Employee is now a resident of a different state. Venue of any
dispute involving the interpretation or enforcement of this Agreement shall be
in Johnson County, Kansas.
EMPLOYEE:
/s/ JAMES NEESE
---------------------------------------
James Neese
Address: 25455 W. 127
[ ], KS 66461
T&W:
T & W FINANCIAL CORPORATION
By: /s/ THOMAS W. PRICE
---------------------------------------
Thomas W. Price, President
Address: P.O. Box 3028
Federal Way, WA 98063
Employment and
Noncompetition Agreement Page 10
<PAGE> 11
EXHIBIT "A" (TYPICAL CALCULATION)
<TABLE>
<S> <C>
Sample Beginning Acquisition Equity $5,500,000
Calculation of Pre-tax ROE:
Sample Income Statement:
Contract Income xxxx
Residual Income xxxx
*Gain on Sale of Portfolio
(Up to $20 Million Origination Dollars) xxxx
Less: Operating Expenses
- ------------------------
Direct Costs, Including Commissions (Initial Direct Costs) xxxx
Provision for Bad Debts (1% of Equipment Originations) xxxx
Servicing Costs on Non-sold Portfolio (After 20 Million at .75%
of Equipment Originations) xxxx
Interest Expense on Non-sold Portfolio (After 20 Million) xxxx
Net Income Before Income Taxes(A) xxxx
</TABLE>
* Currently discounted at 9.25 if it comes to T&W, otherwise actual discounting
income
<TABLE>
<S> <C>
(A) Net Income Before Income Taxes
Beginning Acquisition Equity x 4 = y If y is 30% less 25% (Base Pre-tax ROE)=5% x
Beginning Acquisition Equity divided by 4 x .50
x .50 is the Appropriate Bonus for Jim or Larry
</TABLE>
Note:
- -----
Each Quarter, pre-tax income is added to beginning equity and the reference
point changes, likewise average pre-tax equity.
<PAGE> 12
Illustration of the calculation for the Return on Equity ("ROE") quarterly
incentive bonus.
1992-1996 ROE AVERAGE CALCULATION
---------------------------------
1992 39.2%
1993 26.0%
1994 36.4% AVERAGE: 40.29%
1995 41.1% ---------------
1996 58.7% (Unaudited)
1997 FIRST QUARTER EXAMPLE - EST. AVERAGE ROE = 58.7 (1996 AVERAGE)
-------------------------------------------------------------------
OVERAGE/(UNDERAGE) CALCULATION
------------------------------
1997 Example First Quarter 58.70%
Previous 5 Years 40.29%
------
Difference 18.41%
BONUS CALCULATION
-----------------
Average Equity First Quarter 1997 11,047,000
----------
Multiplied by Difference 18.41%
2,033,753
Divided by 4 4
----------
508,438
Multiplied by Bonus Percentage 1%
----------
BONUS AMOUNT $5,084.38
----------------------
THE ABOVE EXAMPLE IS FOR ILLUSTRATION PURPOSES ONLY.
<PAGE> 1
EXHIBIT 10.50
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AGREEMENT is entered into effective as of June 2, 1997, between
LARRY RICE (herein referred to as "Employee") and T & W FINANCIAL CORPORATION, a
Washington corporation (herein referred to as "T&W").
In consideration of the mutual covenants herein contained, the parties
agree as follows:
1. EMPLOYMENT.
T&W employs Employee and Employee accepts employment effective as of
the effective date of this Agreement upon the following terms and conditions.
2. TERM OF EMPLOYMENT.
Employment under this Agreement shall be for a period of
six (6) years commencing on the effective date of this Agreement and terminating
on the earlier to occur of the following:
(a) June 1, 2003;
(b) Employee's death;
(c) at the option of T&W upon thirty (30) days prior written
notice to Employee in the event of the inability of
Employee to perform his duties hereunder by reason of injury
or illness incapacitating Employee for a continuous period
exceeding one hundred eighty (180) days;
(d) upon the termination of Employee's employment by the Board
of Directors of T&W for cause in accordance with Section
10.1; or
(e) upon Employee voluntarily terminating employment in
accordance with Section 10.2.
At the expiration of the initial term of this Agreement, this Agreement
shall be automatically renewed for two (2) succeeding terms of two (2) years
each, unless either party
Employment and
Noncompetition Agreement Page l
<PAGE> 2
shall, at least sixty (60) days prior to the expiration of the initial term, or
any extended term, give written notice of that party's intention not to renew
this Agreement.
2.2 T&W's Personnel Policies. T&W has implemented and adopted a Policy
and Procedure Manual which contains general policies regarding dress and
grooming, attendance and work rules and regulations. Employee acknowledges that
he has received a copy of T&W's Policy and Procedure Manual and agrees to follow
all rules therein pertaining to Employee's employment at T&W. HOWEVER, THE
POLICY AND PROCEDURE MANUAL MAY BE MODIFIED BY T&W AT ANY TIME WITHOUT NOTICE
AND ANYTHING CONTAINED IN THE MANUAL, OR ANY MODIFICATION TO THE MANUAL, SHALL
NOT CONSTITUTE A MODIFICATION OF THIS AGREEMENT. In the event of a conflict
between this Agreement and the Policy and Procedure Manual, this Agreement
controls.
3. DUTIES AND EXTENT OF SERVICES.
3.1 Employee's principal duties on behalf of T&W at the effective date
of this Agreement shall be to perform sales and marketing services at T&W's
Prairie Village location.
3.2 Employee will devote substantially his entire time and attention to
the business of T&W, and shall not, during such employment, engage in any other
business activity which interferes with Employee's duties and responsibilities
under this Agreement. Employee shall not directly or indirectly engage or
participate in any activities at any time during the term of this Agreement in
conflict with the best interest of T&W.
4. COMPENSATION.
In addition to other benefits referred to herein, T&W shall pay
Employee for all services rendered by Employee under this Agreement a salary of
$14,583.33 per month. Employee's salary shall be paid in semi-monthly
installments on the 15th and last day of each month, commencing on June 15, 1997
and shall be subject to normal payroll withholding. Unless changed by agreement
of the parties, the annual salary to Employee shall remain the same as provided
herein. Employee's annual salary shall be subject to annual review and may be
increased but shall not be decreased.
Employment and
Noncompetition Agreement Page 2
<PAGE> 3
5. STOCK OPTIONS.
In consideration for entering into this Agreement, and in the event that
T&W completes an initial public offering of its common stock, T&W shall grant
Employee an option to purchase shares of common stock of T&W in an amount equal
to one percent (1%) of the issued and outstanding shares of stock in T&W as of
the effective date of the initial public offering at a per share price equal to
the initial public offering price. Under the terms of such option, the option
shall vest ratably over a five-year period (i.e., at the rate of twenty percent
(20%) per year), so that the option shall be fully exercisable five (5) years
from the date of the grant. The other terms and conditions of the option shall
be set forth in a Stock Option Plan to be adopted by T&W prior to the completion
of the initial public offering.
6. ADDITIONAL BENEFITS.
T&W agrees at all times during Employee's employment to provide and
maintain for Employee, and Employee shall be entitled to participate in, all
fringe benefits in effect which are available for salaried employees of the T&W
or as introduced by T&W during Employee's employment. To the extent that it has
the right to do so with its other salaried employees, T&W reserves the right to
modify, suspend or discontinue any or all of such benefits at any time. In
addition to the compensation provided in Section 4, Employee shall have the
following additional benefits during the term herein.
6.1 QUARTERLY BONUS. In addition to the salary described above, Employee
shall be entitled to receive a bonus through participation in T&W's return on
equity ("ROE") incentive program (the "ROE Program"). Employee shall receive
twenty-five percent (25%) of any ROE in excess of twenty-five percent (25%) on
an annual pre-tax basis relative to beginning acquisition equity of $_______ .
The operation of the ROE Program is illustrated on the attached Exhibit "A." The
bonus shall be paid to Employee every April 30, July 30, October 30, and January
30 during the term of this Agreement. The bonus payable on July 30, 1997 shall
be calculated for the initial period beginning January 1, 1997, but prorated as
of June 1, 1997. In the event that a major recapitalization of T&W occurs, the
ROE Program will be restructured to produce a basically equivalent incentive
bonus program.
Employment and
Noncompetition Agreement Page 3
<PAGE> 4
6.2 EXPENSES. T&W will reimburse Employee for or pay for Employee all
reasonable and necessary business related expenses incurred by him in carrying
out his duties and responsibilities under this Agreement. The Employee shall
present to T&W from time to time an itemized account of such expenses in such
form as may be required by T&W.
6.3 CLUB DUES. T&W will reimburse Employee for or pay for Employee
social or athletic club dues as it relates to business purposes of T&W.
7. NONCOMPETITION/NONDISCLOSURE.
As a condition of employment with T&W, and in consideration of
continuing employment, the compensation of Employee by T&W during the term of
this Agreement, the use and enjoyment by Employee of T&W's facilities and
equipment, the ongoing disclosure to Employee of T&W's confidential and
proprietary information, the opportunity for Employee to serve T&W's customers,
and the mutual covenants contained herein, T&W and Employee recognize and agree
as follows:
(a) Confidential Information. Employee recognizes and
acknowledges that during the course of his employment hereunder, he will have
access to certain information not generally known to the public, relating to
products, sales, services or business of T&W, which may include without
limitation data, programs, customer or contact lists, contact with T&W's
customers, acquisition of information as to the nature and character of the
business and the names and requirements of the customers, prospects or
projections, techniques, processes, research, work in process, intellectual
property, including but not limited to any patents, trademarks, service marks,
copyrights, ideas, creations, and properties invented, created, written,
developed, furnished, produced, or disclosed by Employee, in the course of
rendering services to T&W except for items in the public domain or items
obtained by Employee from third parties not affiliated with T&W (collectively
the "Confidential Information").
(b) Possession. Employee agrees that upon request by T&W, and
in any event upon termination of employment, except for items in the public
domain or items obtained by Employee from third parties not affiliated with T&W,
Employee shall turn over to T&W all documents, notes, papers, data, files,
customer lists, office supplies or other materials or work product in Employee's
possession or under his control which were created pursuant to,
Employment and
Noncompetition Agreement Page 4
<PAGE> 5
or connected with or derived from Employee's services to T&W, or which are
related in any manner to T&W's business activities, whether or not such
materials are at the date of this Agreement in Employee's possession.
(c) Non-Disclosure of Confidential Information. Employee
agrees that for and during the entire time he is employed by T&W, any
Confidential Information shall be considered and kept as private and privileged
records of T&W and will not be divulged to any person or entity. Further, upon
termination of this Agreement for any reason, Employee agrees that he will
continue to treat as private and privileged any Confidential Information and
will not release any such Confidential Information to any person or entity,
either by statement, disposition, or as a witness, except upon the issuance of a
proper subpoena from a court of competent jurisdiction, and T&W shall be
entitled to an injunction by any competent court to enjoin and restrain the
unauthorized disclosure of such information. Employee hereby agrees to notify
T&W of any request for such information, whether by subpoena or otherwise.
(d) Covenant Not to Divulge Confidential Information. Employee
further recognizes and acknowledges that because the goodwill of T&W's business
is a valuable asset, and because the solicitation of T&W's customers by Employee
after Employee has ceased to be employed by or associated with T&W will cause
irreparable harm to the goodwill of T&W, T&W would not offer employment to
Employee unless Employee assures that such solicitation would not occur.
Employee therefore agrees and covenants that during Employee's employment by T&W
and for a period of thirty-six (36) months after termination of such employment
for any reason, Employee shall not disclose any Confidential Information about
the business of T&W as presently conducted, or as it may evolve in the ordinary
course of business between the date of this Agreement and the expiration of this
covenant.
(e) Non-Competition Agreement. Employee hereby agrees that,
during the term of employment with T&W and for a period of thirty-six (36)
months thereafter, Employee shall not, directly or indirectly, provide any
competitor or potential competitor of T&W doing or planning to do business in
the same business as T&W with any information relating in any way to T&W's
Confidential Information. Employee agrees that he shall not, whether as an
employee, agent, proprietor, partner, officer, director, member, shareholder,
independent contractor, or in any other capacity whatsoever, and in any fashion
in which he is
Employment and
Noncompetition Agreement Page 5
<PAGE> 6
beneficially interested, render any services or engage in any activities in the
United States and Canada in the business of equipment leasing and related
financial services, or in any business then competitive with the business of
T&W, or any of its affiliated companies (collectively, the "Business"), during
the term of employment with T&W and for a period of thirty-six (36) months after
Employee leaves T&W's employment for any reason. Ownership of a state
chartered or national bank is not prohibited. The period of time during which
Employee is prohibited from engaging in certain activities pursuant to the terms
of this section shall be extended by the length of time during which any such
party is in breach of the terms of this section. Provided, however, if T&W
defaults in payment of the Note evidencing T&W payment obligations to Seller,
Shareholders or Employee given as part of the consideration under that certain
Asset Purchase Agreement dated as of June 2, 1997 between T&W as "Purchaser" and
Commercial Capital Corporation as "Seller," and at that time, Employee is no
longer employed by T&W, then this Covenant Not-to-Compete shall be void and of
no force or effect whatsoever.
(f) Because of the difficulty in determining the magnitude of damages or
potential damages to T&W in the event of solicitation of an existing customer of
T&W, or competition in violation of this Agreement, Employee will pay to T&W
liquidated damages equal to the net income Employee derives in noncompliance
with this noncompetition provision. Such liquidated damages shall be due
immediately upon the rendering of the prohibited activity or services and shall
bear interest at the rate of twelve percent (12%) per annum thereafter.
8. REASONABLENESS OF RESTRICTIONS.
8.1 T&W and Employee agree and stipulate that the agreements and
covenants contained in this Agreement, including the covenant not to divulge
Confidential Information, is fair and reasonable for the protection of T&W's
Confidential Information, goodwill and other protectable interests, in light of
all the facts and circumstances of the relationship between Employee and T&W. In
the event a court of competent jurisdiction should decline to enforce any
provision of this Agreement, such provision shall be deemed to be modified or
eliminated as required by the court's order, but all remaining provisions shall
remain in full force and effect.
8.2 Employee further acknowledges, agrees and stipulates that, in the
event of the termination of employment with T&W,
Employment and
Noncompetition Agreement Page 6
<PAGE> 7
Employee's experience and capabilities are such that Employee can obtain
employment in business activities which are of a different and non-competing
nature with his activities as an employee of T&W, and that the enforcement of a
remedy hereunder by way of injunction shall not prevent Employee from earning a
reasonable livelihood.
9. INJUNCTIVE RELIEF.
Employee acknowledges that disclosure of any Confidential Information or
breach or threatened breach of any of the covenants or other agreements
contained herein would give rise to irreparable injury to T&W or customers of
T&W, which injury would be inadequately compensable in monetary damages.
Accordingly, T&W may seek and obtain injunctive relief from the breach or
threatened breach of any provision, requirement, or covenant of this Agreement,
in addition to and not in limitation of any other legal remedies which may be
available. Employee further acknowledges, agrees and stipulates that the
covenants and agreements contained herein are necessary for the protection of
T&W's legitimate business interests and are reasonable in scope and content. Any
breach by Employee of this Agreement (specifically including the covenant not to
compete) may cause irreparable injury to T&W. Upon breach or threatened breach,
T&W may obtain temporary restraining orders, injunctions, or other equitable
relief from a court in addition to, and not in lieu of, damages and any other
available remedy.
10. TERMINATION.
10.1 Termination by T&W for Cause. Without limiting in any way other
provisions of this Agreement, Employee may be terminated for cause upon ten (10)
days' prior written notice. In such event, Employee shall be entitled to
compensation only to the date of such termination. For purposes of this
Agreement, cause is defined as:
(a) Conviction of Employee for any felony involving
moral turpitude, or the charging of Employee with
any felony involving moral turpitude which results
in a suspended sentence or deferred prosecution;
(b) Fraud, embezzlement or conversion of T&W's
property;
(c) Employee's sexual harassment of T&W's employees if
admitted by Employee in writing or determined by
Employment and
Noncompetition Agreement Page 7
<PAGE> 8
arbitration as provided below;
(d) Engaging in competition with T&W during the period of
Employee's employment with T&W;
(e) Material breach of this Agreement by Employee, if
Employee fails to cease and desist from such conduct
within the ten (10) day notice period provided above;
or
(f) Divulging T&W trade secrets or other breach of
confidentiality.
In the event T&W terminates Employee's employment for cause as provided
for in this Section 10, and Employee disagrees with the T&W's determination that
just cause for termination exists, then the Employee and T&W agree to seek a
fair and prompt negotiated resolution. However, if this is not successful, the
dispute shall be resolved by binding arbitration in accordance with arbitration
procedures agreed to by Employee and T&W or, if they are unable to agree, by a
court of competent jurisdiction.
10.2 Termination by Employee Without Cause. Employee may terminate his
employment by giving at least ninety (90) days' written notice to T&W.
10.3 Termination by Employee With Cause. In the event that T&W defaults
in any of its obligations to Employee under this Employment and Noncompetition
Agreement, and T&W fails to cure such default within ten (10) days after
receiving written notice thereof, Employee may terminate his employment and seek
any damages available to Employee at law or in equity as a result of such breach
with it being specifically understood and agreed that Employee shall be relieved
from the non-competition provisions hereof.
11. MISCELLANEOUS.
11.1 Assignment. This Agreement shall not be assignable by Employee.
11.2 Amendment and/or Modification. Neither this Agreement nor any term
or provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by the parties hereto.
Employment and
Noncompetition Agreement Page 8
<PAGE> 9
11.3 Binding Effect. Subject to the restrictions on assignment
described above, this Agreement shall be binding upon and inure to the benefit
of the respective parties, their successors and assigns and Employee's heirs and
personal representative.
11.4 Section Headings. The section headings are for convenience only
and in no way define, limit, extend or interpret the scope of this Agreement or
of any particular paragraph hereof.
11.5 Interpretation and Fair Construction of Contract. This Agreement
has been reviewed and approved by each of the parties. Both T&W and Employee
have received independent legal advice in connection with the negotiation,
execution and performance of their respective obligations under this Agreement.
In the event a court of competent jurisdiction determines that any provision of
this Agreement is ambiguous, the language in all parts of this Agreement shall
be construed as a whole according to its fair meaning and not strictly construed
for nor against either party.
11.6 Validity. If any term of this Agreement shall be determined by a
court of competent jurisdiction to be invalid, illegal, or unenforceable, in
whole or in part, the validity of any of the other terms of this Agreement shall
not, in any way, be affected thereby.
11.7 Variations in Pronouns. All pronouns include the masculine,
feminine, neuter, singular and plural as the identification of persons, places
or entities and the context may require.
11.8 Waiver or Breach. Either party's failure to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred, in any one or more instances,
shall not be construed to be a waiver or relinquishment of any such option or
right, or of any other covenants or agreements, but the same shall be and remain
in full force and effect.
11.9 Notices. To be effective, any notice hereunder shall be in
writing, delivered in person or mailed by certified or registered mail, postage
prepaid, to the appropriate party or parties at the addresses set forth below
their signature hereto, or to such other address as the parties may hereinafter
designate.
Employment and
Noncompetition Agreement Page 9
<PAGE> 10
11.10 Entire Agreement. This Agreement contains the entire agreement
and understanding of the parties with respect to the entire subject matter
hereof, and there are no representations, inducements, promises or agreements,
oral or otherwise, not embodied herein. Any and all prior discussions,
negotiations, commitments and understandings relating to the subject matter
hereof are merged herein. There are no conditions precedent to the effectiveness
of this Agreement other than as stated herein, and there are no related
collateral agreement existing between the parties that are not referenced
herein.
11.11 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Washington, regardless of
the fact that Employee is now a resident of a different state. Venue of any
dispute involving the interpretation or enforcement of this Agreement shall be
in Johnson County, Kansas.
EMPLOYEE:
/s/ LARRY RICE
-----------------------------------------
Larry Rice
Address: 8938 Hirning Rd.
[ ], KS 66220
T&W:
T & W FINANCIAL CORPORATION
/s/ THOMAS W. PRICE
-----------------------------------------
Thomas W. Price, President
Address: P.O. Box 3028
Federal Way, WA 98063
Employment and
Noncompetition Agreement Page 10
<PAGE> 11
EXHIBIT "A" (TYPICAL CALCULATION)
<TABLE>
<S> <C>
Sample Beginning Acquisition Equity $5,500,000
Calculation of Pre-tax ROE:
Sample Income Statement:
Contract Income xxxx
Residual Income xxxx
*Gain on Sale of Portfolio
(Up to $20 Million Origination Dollars) xxxx
Less: Operating Expenses
Direct Costs, Including Commissions (Initial Direct Costs) xxxx
Provision for Bad Debts (1% of Equipment Originations) xxxx
Servicing Costs on Non-sold Portfolio (After 20 Million at .75%
of Equipment Originations) xxxx
Interest Expense on Non-sold Portfolio (After 20 Million) xxxx
Net Income Before Income Taxes(A) xxxx
</TABLE>
* Currently discounted at 9.25 if it comes to T&W, otherwise actual discounting
income
<TABLE>
<S> <C>
(A) Net Income Before Income Taxes
Beginning Acquisition Equity x 4 = y If y is 30% less 25% (Base Pre-tax ROE) = 5% x
Beginning Acquisition Equity divided by 4 x .50
x .50 is the Appropriate Bonus for Jim or Larry
</TABLE>
Note:
- -----
Each Quarter, pre-tax income is added to beginning equity and the reference
point changes, likewise average pre-tax equity.
<PAGE> 12
Illustration of the calculation for the Return on Equity ("ROE") quarterly
incentive bonus.
1992-1996 ROE AVERAGE CALCULATION
---------------------------------
1992 39.2%
1993 26.0%
1994 36.4% AVERAGE: 40.29%
1995 41.1% ---------------
1996 58.7% (Unaudited)
1997 FIRST QUARTER EXAMPLE - EST. AVERAGE ROE = 58.7 (1996 AVERAGE)
-------------------------------------------------------------------
OVERAGE/(UNDERAGE) CALCULATION
------------------------------
1997 Example First Quarter 58.70%
Previous 5 Years 40.29%
------
Difference 18.41%
BONUS CALCULATION
-----------------
Average Equity First Quarter 1997 11,047,000
Multiplied by Difference 18.41%
----------
2,033,753
Divided by 4 4
----------
508,438
Multiplied by Bonus Percentage 1%
----------
BONUS AMOUNT: $5,084.38
-----------------------
THE ABOVE EXAMPLE IS FOR ILLUSTRATION PURPOSES ONLY.
<PAGE> 1
EXHIBIT 10.51
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of October ____,
1997 (the "Effective Date"), by and between T & W FINANCIAL CORPORATION, a
Washington corporation (hereinafter referred to as "Company"), P.L.M. CONSULTING
GROUP, L.L.C., a Nevada limited liability company (hereinafter referred to as
"PLM") and the individual members of PLM whose names appear on the signature
page of this Agreement.
BACKGROUND
A. Company is a specialized commercial finance company that provides
equipment financing to small and medium-sized businesses, principally in the
form of leases.
B. Prior to the effective date of this Agreement, PLM, through its
members (as identified below), has provided certain consulting, marketing,
advisory and management services to Company.
C. Company and PLM desire for PLM to make available its members to
serve as executive officers of Company upon the terms and provisions of this
Agreement.
AGREEMENT
NOW, THEREFORE, it is agreed as follows:
1. Availability of PLM Members. PLM agrees to make available Michael A.
Price ("M. Price"), Thomas W. Price ("T. Price"), Kenneth W. McCarthy, Jr.
("McCarthy") and Paul B. Luke ("Luke") to serve as executive officers of the
Company. The offices in which the individuals shall serve and the rates paid to
PLM are set forth in Section 4 below.
2. Extent of Services. So long as any individual named in Section 1 is
serving as an executive officer of the Company, each individual agrees to devote
his attention and energies to the business of the Company on a full-time basis,
and shall not, during such period in which he serves as an executive officer,
engage in any other business activity which interferes with his duties and
responsibilities for the Company.
3. Term. Subject to the rights reserved in Section 7, this Agreement
shall be effective on the date first above written, and shall continue for an
initial term of twelve (12) months. At the end of that period, it shall be
automatically renewed from year to year
Agreement Page 1
<PAGE> 2
thereafter unless it is terminated by either party giving written notice of
termination to the other at least thirty (30) days prior to the end of the
initial term or any renewal term.
Agreement Page 2
<PAGE> 3
4. Fees.
4.1 Base Fee. From and after the Effective Date of this Agreement, PLM
agrees to make available the following individuals to serve in the capacity and
at the rate opposite their respective names ("Base Fee"):
<TABLE>
<CAPTION>
Name Position Rate
---- -------- ----
<S> <C> <C>
M. Price CEO $40,000/month
T. Price President $40,000/month
McCarthy Sr. Vice-President/
General Counsel $20,000/month
Luke Sr. Vice-President/
Secretary/
Chief Financial Officer $20,000/month
</TABLE>
The Base Fee shall be paid to PLM on the first (1st) day of each month for
services rendered by the aforementioned individuals during the preceding month.
The Base Fee payable for any partial month shall be prorated. To the extent that
an individual named in Section 4.1 fails or ceases to serve as an executive
officer of the Company, the Base Fee shall be appropriately reduced by such
individual's respective share of the Base Fee.
4.2 Incentive Fee. In addition to the Base Fee, the Company shall pay
PLM an incentive fee (the "Incentive Fee") with respect to each calendar year
equal to 35% of the amount by which the Company's audited consolidated net
income for such year (without taking into account the effect of any accruals
with respect to the payment called for by this Section 4.2 for such calendar
year) exceeds the product of (a) .20 multiplied by (b) the amount of the
shareholders' equity of the Company reflected in the Company's audited
consolidated balance sheet as of December 31st of the prior calendar year. The
Incentive Fee with respect to any calendar year shall be paid by the Company to
PLM no later than ten (10) business days after the date on which the Company
files its form 10-K with the Securities and Exchange Commission containing the
audited financial statements for such calendar year. The incentive Fee for any
partial year shall be prorated. To the extent that any individual named in
Section 4.1 fails or ceases to serve as an executive officer of Company, the
Incentive Fee for the year in which such individual ceases to so serve shall be
reduced by such individual's respective share of the Incentive Fee ( which shall
be in the same proportion as such individual's share of the Base Fee),
appropriately prorated for the number of days, if any, during such calendar year
in which such individual served as an executive officer. The Company may make
quarterly advances to PLM for anticipated Incentive
Agreement Page 3
<PAGE> 4
Fees with respect to any calendar year, provided that PLM agrees to promptly
repay any such advances which exceed the final Incentive Fee calculated as
provided above.
5. Taxes. PLM and its individual members shall be responsible for, and
indemnify the Company against, any taxes, penalties and interest assessed
against the Company as a result of or attributable to PLM's receipt of the Base
Fee and/or Incentive Fee payments in accordance with this Agreement.
6. Confidentiality. In connection with the performance of services
hereunder, PLM and its members acknowledge that they may become privy to
confidential or proprietary information relating to the business and affairs of
the Company. PLM and its members agree that they shall use their best efforts
and shall cause PLM's members, employees and agents performing services on
behalf of the Company to retain all information relative to the business of the
Company in strict confidence and not to disclose any such information now or
hereafter received or obtained from the Company to any third party without the
prior consent of the Company; provided, however, that any such confidential or
proprietary information may be disclosed (i) to third parties retained by PLM on
behalf of the Company (e.g., attorneys, accountants) as shall be necessary to
perform services hereunder, (ii) to the extent such information becomes
generally available to the public other than as a result of an unauthorized
disclosure by PLM or (iii) in the event PLM, or its members, employees or agents
are compelled to disclose such information in accordance with an order from any
court of competent jurisdiction or under any provision of applicable law;
provided, however, in such event PLM shall promptly notify the Company of such
required disclosure and shall furnish only such portion of such information as
PLM is legally compelled to disclose.
7. Termination. Upon the happening of any of the following events,
either party shall be entitled to terminate this Agreement prior to the end of
the term, and except as to liabilities or claims which shall have accrued or
arisen prior to the date of such termination, all obligations hereunder shall
cease:
7.1 30 days' Prior Notice. This Agreement, or any portion of this
Agreement with respect to any individual named herein, may be terminated by
either the Company or PLM upon at least thirty (30) days prior written notice.
The parties acknowledge that, notwithstanding the foregoing, the Company may
terminate the services of any or all of the PLM members referred to in Section 1
as executive officers of the Company at any time without prior notice, in the
Company's sole discretion.
7.2 Bankruptcy or Insolvency. The filing by the other party in any
court pursuant to any statute of the United States or any state of a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of all or a substantial portion of such party's property or
the making by such party of an assignment for or petition for an agreement for
the benefit of creditors or the filing of a petition in bankruptcy against such
party which is not discharged within ninety (90) days thereafter or
Agreement Page 4
<PAGE> 5
the consent to or sufferance of the application of any statute which obviates,
restricts or suspends the rights of creditors generally.
7.3 Failure to Cure Material Breach. The failure of the other party
to cure a material breach of this Agreement within thirty (30) days following
delivery of a notice from the non-breaching party setting forth the details of
such alleged breach.
8. Prior Agreement; Past Services. This Agreement supersedes any prior
agreement between the Company and PLM. Any such prior agreement is hereby
terminated as of the date hereof. The parties acknowledge that if PLM has
previously provided consulting, marketing, advisory and management services to
Company without a written agreement, then the parties hereby ratify the fees, if
any, paid to PLM by the Company for such services and acknowledge that all fees
owed pursuant to such agreement or arrangement have been paid prior to the
Effective Date.
9. Miscellaneous.
9.1 Assignment. No party may assign its rights under this Agreement
without the written consent of the other parties. Notwithstanding the previous
sentence, the Company may assign its rights under this Agreement to any entity
which is directly or indirectly controlled by the Company.
9.2 Binding Effect; Benefits. This Agreement shall inure to the
benefit of the parties and shall be binding upon the parties and their
respective heirs, personal representatives, successors and permitted assigns.
9.3 Notices. All notices, requests, demands and other communications
which are required or permitted under this Agreement shall be in writing and
shall be deemed to have been given when delivered in person or three (3) days
after deposit in the United States mail, certified postage prepaid, return
receipt requested, addressed as follows:
Agreement Page 5
<PAGE> 6
If to Company, to:
T & W FINANCIAL CORPORATION
Attn: Thomas W. Price, President
P.O. Box 3028
Federal Way, WA 98063
If to PLM, to:
P.L.M. CONSULTING GROUP, L.L.C.
Michael A. Price, Member
P.O. Box 3028
Federal Way, WA 98063
or to such other address as any party may designate by written notice to the
other parties.
9.4 Amendment. This Agreement may only be amended by a written
instrument executed by the Company and PLM.
9.5 Severability. The invalidity of all or any part of any section
of this Agreement shall not render invalid the remainder of this Agreement or
the remainder of such section.
9.6 Governing Law. This Agreement is made in and shall be governed
and interpreted in accordance with the internal laws of the State of Washington.
DATED as of the date and year first written above.
COMPANY: T & W FINANCIAL CORPORATION
By:___________________________________
Thomas W. Price, President
PLM: P.L.M. CONSULTING GROUP, L.L.C., by:
______________________________________
Thomas W. Price, Member
MEMBERS
OF PLM: ______________________________________
Agreement Page 6
<PAGE> 7
_____________________________________
Michael A. Price, Member
_____________________________________
Thomas W. Price, Member
_____________________________________
Kenneth W. McCarthy, Jr., Member
_____________________________________
Paul B. Luke, Member
Agreement Page 7
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF T&W FINANCIAL CORPORATION
As of the close of the Offering, the following entities will be all of
the subsidiaries of the Registrant:
<TABLE>
<CAPTION>
STATE OF INCORPORATION/
SUBSIDIARY ORGANIZATION
- ---------- -----------------------
<S> <C>
T&W Leasing, Inc. WA
T&W Financial Services Company L.L.C. WA
T&W Funding Company I, L.L.C. DE
T&W Funding Company IV, L.L.C. DE
T&W Funding Company V, L.L.C. DE
T&W Finance Corp. II DE
T&W Finance Corp. III DE
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
T&W Financial Corporation and Affiliates
Tacoma, Washington
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 7, 1997, relating to the
combined financial statements of T&W Financial Corporation and Affiliates, which
is contained in the Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
Seattle, Washington
August 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND UNAUDITED
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 8,861 8,064
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 124,180 144,437
<CURRENT-LIABILITIES> 6,111 5,634
<BONDS> 98,463 122,247
0 0
0 0
<COMMON> 3,438 3,438
<OTHER-SE> 8,726 6,859
<TOTAL-LIABILITY-AND-EQUITY> 124,180 144,437
<SALES> 0 0
<TOTAL-REVENUES> 11,618 19,496
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 4,281 6,097
<LOSS-PROVISION> 402 1,137
<INTEREST-EXPENSE> 3,726 6,434
<INCOME-PRETAX> 3,209 5,828
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 3,209 5,828
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,209 5,828
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
