<PAGE>
As filed with the Securities and Exchange Commission on August 11, 1997
Registration No. 333-30207
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
(Issuer with respect to the Securities)
HELLER FUNDING CORPORATION
(Depositor of the Trust described herein)
HELLER FUNDING CORPORATION HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
(Exact name of Registrants as specified in their respective charters)
Delaware 6799 36-4165546
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
Heller Funding Corporation
500 West Monroe Street
Chicago, Illinois 60661
(312) 441-7246
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Debra H. Snider, Esq.
Executive Vice President,
Chief Administrative Officer
and General Counsel
Heller Funding Corporation
c/o Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
(312) 441-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
M. David Galainena, Esq. Stephan J. Feder, Esq.
Winston & Strawn Simpson Thacher & Bartlett
35 West Wacker Drive 425 Lexington Avenue
Chicago, Illinois 60601 New York, New York 10017
(312) 558-5600 (212) 455-2000
-------------------------------------------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Amount to Be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
Securities Registered(1) Price Per Unit (2) Offering Price (2) Registration Fee*
to Be Registered =
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 $ 69,004,000 100% $ 69,004,000 $20,910.30
Receivable-Backed
Notes
- ------------------------------------------------------------------------------------------------------------------------------------
Class A-2 $187,692,000 100% $187,692,000 $56,876.37
Receivable Backed
Notes
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Receivable- $ 8,281,000 100% $ 8,281,000 $ 2,509.39
Backed Notes
- ------------------------------------------------------------------------------------------------------------------------------------
Class C Receivable- $ 5,520,000 100% $ 5,520,000 $ 1,672.73
Backed Notes
====================================================================================================================================
</TABLE>
* $909.09 was paid with the initial filing of this Registration Statement.
(1) The amount of Securities being registered represents the maximum aggregate
principal amount of Securities currently expected to be offered for sale.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with 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 that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
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 HAS
BECOME 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 , 1997
PRELIMINARY PROSPECTUS
- ----------------------
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
$ 69,004,000 [ ]% Class A-1 Receivable-Backed Notes, Series 1997-1
$187,692,000 [ ]% Class A-2 Receivable-Backed Notes, Series 1997-1
$ 8,281,000 [ ]% Class B Receivable-Backed Notes, Series 1997-1
$ 5,520,000 [ ]% Class C Receivable-Backed Notes, Series 1997-1
Heller Funding Corporation,
Trust Depositor
Heller Financial, Inc.,
Servicer
------------
The Heller Equipment Receivables Trust 1997-1 (the "Trust" or the
"Issuer"), a limited purpose Delaware business trust, has been formed pursuant
to a Trust Agreement, dated as of August 1, 1997, between Heller Funding
Corporation ("Heller Funding"), as Trust Depositor (in such capacity, the "Trust
Depositor"), and [ ], as Owner Trustee (the "Owner Trustee"). The
Trust Depositor is a wholly owned, limited purpose bankruptcy remote subsidiary
of Heller Financial, Inc. ("Heller Financial"). The Trust will issue
$69,004,000 aggregate principal amount of [ ]% Class A-1 Receivable-Backed
Notes, Series 1997-1 (the "Class A-1 Notes"), $187,692,000 aggregate principal
amount of [ ]% Class A-2 Receivable-Backed Notes, Series 1997-1 (the "Class
A-2 Notes"), $8,281,000 aggregate principal amount of [ ]% Class B
Receivable-Backed Notes, Series 1997-1 (the "Class B Notes") and $5,520,000
aggregate principal amount of [ ]% Class C Receivable-Backed Notes, Series
1997-1 (the "Class C Notes"; and together with the Class A-1 Notes, Class A-2
Notes and Class B Notes, the "Notes"). The Notes will represent debt
obligations of the Trust, and will be issued pursuant to and secured by an
Indenture dated as of August 1, 1997 (the "Indenture") to be entered into
between the Trust and [ ], as Indenture Trustee (the "Indenture Trustee").
The Trust will concurrently issue $[ ] aggregate principal amount of
[ ]% Class
(cover continued on next page)
------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH
UNDER "RISK FACTORS" ON PAGE 19 OF THIS PROSPECTUS.
THE NOTES WILL REPRESENT OBLIGATIONS OF THE TRUST ONLY AND WILL NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY,
THE TRUST DEPOSITOR, THE OWNER TRUSTEE, HELLER FINANCIAL OR ANY OF THEIR
RESPECTIVE AFFILIATES, OR ANY GOVERNMENTAL AGENCY.
------------
THESE NOTES 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.
Retain this Prospectus for future reference.
------------
<PAGE>
<TABLE>
<CAPTION>
Price to Public Underwriting Proceeds to Issuer (2)
Discounts
and Commissions (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Note $ $ $
- --------------------------------------------------------------------------------
Per Class A-2 Note $ $ $
- --------------------------------------------------------------------------------
Per Class B Note $ $ $
- --------------------------------------------------------------------------------
Per Class C Note $ $ $
- --------------------------------------------------------------------------------
Total $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1) The Issuer has agreed to indemnify the Underwriter against certain
liabilities, including under the Securities Act of 1933.
(2) Before deducting expenses of this Offering estimated to be $_________
The Notes are offered by the Underwriter, subject to prior sale, when, as
and if issued to and accepted by it and subject to its right to reject any order
in whole or in part or to withdraw, cancel or modify any order without notice.
It is expected that delivery of the Notes will be made in book-entry form only
through the Same Day Funds Settlement System of The Depository Trust Company, or
through Cedel Bank, S.A. or the Euroclear System, on or about [ ], 1997.
First Union Capital Markets Corp. [ ] [ ]
The date of this Prospectus is [ ], 1997.
(cover page continued)
-2-
<PAGE>
D Receivable-Backed Notes Series 1997-1 (the "Subordinated Notes"), as well as
Class E Receivable-Backed Certificates, Series 1997-1 (the "Certificates" and
together with the Subordinated Notes, the "Subordinated Securities") which will
not bear interest and have certain rights to the monies in the Reserve Fund and
certain other excess funds (as defined in "Summary of Terms-Reserve Fund") after
the payment of all principal and interest on the Notes and Subordinated Notes.
The Subordinated Notes will be issued pursuant to the Indenture; the
Certificates will represent fractional undivided beneficial equity interests in
the Trust and will be issued pursuant to the Trust Agreement. Neither the
Subordinated Notes nor the Certificates are being offered and sold hereunder.
The property of the Trust (the "Trust Assets") will include (a) a pool of
contracts originated or acquired by Heller Financial or its wholly-owned
subsidiary, Heller Financial Leasing, Inc. ("HFLI") as described herein
(inclusive of any Additional Contracts or Substitute Contracts added to the
Trust from time to time as defined in "Summary of Terms--The Contracts",
collectively, the "Contracts") consisting of (i) conditional sale agreements,
promissory notes with related security agreements, operating and finance leases,
installment payment agreements, and similar types of financing agreements with
end-users (each, an "End-User") of the Equipment, Software and Services
described below (such Contracts, "End-User Contracts") and meeting certain
eligibility criteria specified herein, relating to printing, pre-press, machine
tool, plastics, computer hardware, computer software, restaurant,
transportation, energy related, medical, and industrial equipment (the
"Equipment"), certain computer software (the "Software") and related support and
consulting services (the "Services"; together with Equipment and Software, the
"Financed Items"), together with certain rights of Heller Financial or HFLI
under finance program agreements and assignments with Vendors (as defined in
"Summary of Terms--Vendor Agreements") of the Financed Items, as well as the
Equipment or a security interest in the Equipment, and (ii) limited recourse
contractual payment obligations (which may take the form of promissory notes)
payable by Vendors (such payment obligations, "Vendor Loans") and secured by the
Vendor's interest in End-User Contracts originated by such Vendor (End-User
Contracts securing Vendor Loans being collectively referred to as "Secondary
Contracts"), and by the Equipment related to such End-User Contracts, (b)
collections on such Contracts due or received after July 31, 1997 (the "Cutoff
Date") or, in the case of Additional Contracts or Substitute Contracts, their
applicable Cutoff Dates as defined in "Summary of Terms--Cutoff Dates" and (c)
monies, to the extent available, in the Reserve Fund. The Contracts and related
interests will be conveyed by Heller Financial or HFLI (either, in such
capacity, a "Seller") to the Trust Depositor pursuant to a Transfer and Sale
Agreement dated as of August 1, 1997 (the "Transfer and Sale Agreement") by and
between Heller Financial, HFLI and the Trust Depositor. The Trust Depositor will
concurrently convey such assets to the Trust pursuant to the Sale and Servicing
Agreement, dated as of August 1, 1997 (the "Sale and Servicing Agreement"),
among the Trust Depositor, the Trust, the Indenture Trustee (as defined in
"Summary of Terms--Indenture Trustee") and Heller Financial, in its separate
capacity as Servicer thereunder (Heller Financial being, in such capacity, the
"Servicer").
Interest on the Notes and the Subordinated Notes will be payable monthly in
arrears on the 20th day of the month (or if such day is not a Business Day the
next succeeding Business Day) beginning on September 22, 1997 (each, a
"Distribution Date") with respect to the period from and including the
immediately preceding Distribution Date (or with respect to the initial
Distribution Date, the date of issuance of the Notes and Subordinated Notes) to
the period to and excluding such Distribution Date. Principal payments with
respect to the Notes and the Subordinated Securities will be payable to the
holders thereof on each Distribution Date, as described herein. The stated
maturity date with respect to the Class A-1 Notes is the [August 1998]
Distribution Date and the stated maturity date with respect to the other Notes
and the Subordinated Securities is the[ ] Distribution Date. The actual payment
in full, however, of the Notes or the Subordinated Securities could and is
expected to occur earlier than such stated maturity date. See "Summary of
Terms--Terms of the Notes--B. Principal" and "--Optional Redemption" herein.
The Notes and the Subordinated Notes will be payable primarily from
collections of payments due under the Contracts (including payments from Vendors
pursuant to certain recourse arrangements, where applicable, and as further
described below), certain amounts received upon the prepayment or purchase of
Contracts or liquidation of the Contracts and disposition of the related
Equipment upon defaults thereunder, and the proceeds of Servicer Advances (as
defined in "Summary of Terms--Servicing; Servicing Fee; Servicer Advances"), if
any.
Payments of interest due on the Notes on any given Distribution Date will
be made prior to making any payments of principal on any of the Notes or the
Subordinated Notes. Payments of interest due on the Subordinated Notes will be
subordinated in priority to payments of interest due on the Class A-1 Notes, the
Class A-2 Notes, the Class B Notes and the Class C Notes. Payments of interest
due on Class C Notes will
-3-
<PAGE>
be subordinated in priority to payments of interest on the Class A-1 Notes, the
Class A-2 Notes and the Class B Notes. Payments of interest due on Class B Notes
will be subordinated in priority to payments of interest due on the Class A-1
Notes and Class A-2 Notes. Payments of interest due on the Class A-2 Notes will
be subordinated in priority to payments of interest due on the Class A-1 Notes;
provided, however, after the occurrence and during the continuance of a
Restricting Event or the occurrence of an Event of Default payments of interest
on the Class A-2 Notes and Class A-1 Notes, will be made pro rata. Payments of
principal on the Subordinated Notes will be subordinated in priority to payments
of principal on the Class A-1 Notes, the Class A-2 Notes, the Class B Notes and
Class C Notes. Payments of principal on the Class C Notes will be subordinated
in priority to payments of principal on the Class A-1 Notes, the Class A-2 Notes
and the Class B Notes. Payments of principal on the Class B Notes will be
subordinated in priority to payments of principal on the Class A-1 Notes and the
Class A-2 Notes . Payments of principal on the Class A-2 Notes will be
subordinated in priority to payments of principal on the Class A-1 Notes;
provided, however, after the occurrence and during the continuance of a
Restricting Event or the occurrence of an Event of Default payments of principal
on the Class A-2 Notes and Class A-1 Notes, will be made pro rata. See "Summary
of Terms--Terms of the Notes", as well as "Description of the Notes--
Allocations" herein.
The Notes are being offered pursuant to this Prospectus. Sales of the
Notes may not be consummated unless the purchaser has received this Prospectus.
The Certificates are not being offered hereby.
The Issuer does not intend to apply for listing of the Notes on any
securities exchange or for the inclusion of the Notes on any automated quotation
system.
There currently is no secondary market for the Notes and there is no
assurance that one will develop, or if one does develop, that it will continue
or provide sufficient liquidity.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO NOTEHOLDERS
During such time as the Notes remain in book-entry form, periodic and
annual unaudited reports, containing information concerning the Trust, the
Contracts, the Notes and the Certificates, will be prepared by the Servicer and
sent on behalf of the Trust to Cede & Co. ("Cede"), as nominee of The Depository
Trust Company ("DTC"), and the Euroclear System ("Euroclear") or Cedel Bank,
S.A. ("CEDEL") as registered holders of the Notes. Such reports will be made
available by DTC, Euroclear or CEDEL and its participants to holders of
interests in the Notes in accordance with the rules, regulations and procedures
creating and affecting DTC, Euroclear and CEDEL, respectively. See "Description
of the Notes--Book Entry Registration" and "--Reports" below. Such reports will
not constitute financial statements prepared in accordance with generally
accepted accounting principles or that have been examined and reported upon by,
with an opinion expressed by, an independent or certified public accountant.
Upon the issuance of fully registered, certificated Notes, such reports will be
sent to each registered Noteholder.
AVAILABLE INFORMATION
The Trust Depositor, as originator of the Trust, has filed with the
Securities and Exchange Commission (the "Commission") a Registration Statement
(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 Notes offered pursuant to this Prospectus and described
herein. For further information, reference is made to the Registration
Statement which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549; Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois
60661 and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of the Registration Statement may be obtained from the Public Reference
Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a public access site on the
Internet through the World Wide Web at which site reports, information
statements and other information, including all electronic filings, regarding
the Trust Depositor and the Trust may be viewed. The Internet address of such
World Wide Web site is http://www.sec.gov. The Servicer, on behalf of the
Trust, will also file or cause to be filed with the Commission such periodic
reports as are required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations of the Commission thereunder.
Copies of such reports can be obtained as described above.
-4-
<PAGE>
Upon receipt of a request by an investor, or his or her representative,
within the period during which there is an obligation to deliver a Prospectus,
the Underwriter will promptly deliver, or cause to be delivered, without charge
and in addition to any such delivery requirements, a paper copy of this
Prospectus and a Prospectus encoded in an electronic format.
-5-
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used in this summary are defined elsewhere in this Prospectus on the pages
indicated in the "Index of Terms" on page [ ].
There are material risks associated with an investment in the Notes. See "Risk
Factors" on page 19 for a discussion of certain factors that investors should
consider before making an investment in the Notes.
<TABLE>
<CAPTION>
<S> <C>
Issuer................................. Heller Equipment Asset Receivables
Trust 1997-1 (the "Issuer" or the
"Trust"), a Delaware business trust
formed by the Trust Depositor and the
Owner Trustee pursuant to the Trust
Agreement dated as of August 1, 1997
(the "Trust Agreement") between the
Trust Depositor and the Owner
Trustee. The principal executive
offices of the Trust are in
Wilmington, Delaware, in care of the
Owner Trustee, at the address of the
Owner Trustee specified below.
Trust Depositor........................ Heller Funding Corporation (the
"Trust Depositor"), a Delaware
corporation and a wholly owned,
limited purpose subsidiary of Heller
Financial, Inc. The Trust
Depositor's principal executive
offices are located at 500 West
Monroe Street, Chicago, Illinois
60661 and its telephone number is
(312) 441-7246.
Seller/Servicer........................ Heller Financial, Inc., a Delaware
corporation ("Heller Financial"; or,
in its separate capacities as a
Seller under the Transfer and Sale
Agreement described herein, a
"Seller", or as Servicer under the
Sale and Servicing Agreement
described herein, the "Servicer").
Heller Financial's offices are
located at 500 West Monroe Street,
Chicago, Illinois 60661 and its
telephone number is (312) 441-7000.
Additional Seller...................... In addition to Heller Financial,
Heller Financial's wholly-owned
subsidiary, Heller Financial Leasing,
Inc. ("HFLI") will be an additional
Seller (in such capacity, also a
"Seller') under the Transfer and Sale
Agreement described herein.
Indenture Trustee...................... [ ], as indenture
trustee under the Indenture described
herein (the "Indenture Trustee"). The
Indenture Trustee's offices are located
at [ ].
Owner Trustee.......................... [ ], as owner trustee
under the Trust Agreement (the "Owner
Trustee"). The Owner Trustee's offices
are located at [ ].
Cutoff Dates........................... With respect to the Contracts
transferred to the Trust on the
Closing Date, July 31, 1998, and with
respect to any Additional Contract or
Substitute Contract (see "Summary of
Terms--The Contracts") transferred to
the Trust thereafter, the close of
business on the first day of the
calendar month in which such transfer
occurs (each of such dates a
"Cutoff Date", an "Additional
Contract Cutoff Date", or a
"Substitute Contract Cutoff Date",
respectively). The term "Cutoff
Date" when used herein in the context
of general references to the pool of
Contracts held by the Trust, should
be deemed to include a reference to
the Additional Contract Cutoff Date
and Substitute Contract Cutoff Date
of any Additional Contract or
Substitute Contract contained within
such pool of Contracts, unless
otherwise specified or unless the
context otherwise clearly requires.
Closing Date........................... On or about August 27, 1997 (the
"Closing Date").
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Collection Periods,................... A Collection Period is the period
Calculation Dates, from and including the first day of
Distribution Dates each calendar month to and including
and Record Dates the last day of the calendar month
(such first day, the "Calculation Date"
and each such period, a "Collection
Period"). A Distribution Date is the
[ ]th day (or if any such date is not a
"Business Day", i.e., a day other than a
Saturday, a Sunday or a day on which
banking institutions in Chicago,
Illinois, Wilmington, Delaware or New
York, New York are authorized or
obligated by any law or regulation to be
closed, then on the next succeeding
Business Day) of each calendar month
(each, a "Distribution Date") commencing
September 22, 1997. The Collection
Period relating to any particular
Distribution Date shall be the
Collection Period occurring during the
calendar month preceding the month in
which such Distribution Date occurs.
With respect to any Distribution Date
and the Notes, the "Record Date" is
the calendar day immediately
preceding each Distribution Date
(or, with respect to any Definitive
Note as defined in "Description of
the Notes -- Definitive Notes", the
last calendar day of the month
preceding the month in which such
Distribution Date occurs).
The Notes............................. $69,004,000 aggregate principal
amount (the "Initial Class A-1 Note
Principal Balance") of [ ]%
Class A-1 Receivable-Backed Notes,
Series 1997-1 (the "Class A-1
Notes"); $187,692,000 aggregate
principal amount (the "Initial Class
A-2 Note Principal Balance") of [ ]
Class A-2 Receivable-Backed Notes,
Series 1997-1 (the "Class A-2 Notes");
$8,281,000 aggregate principal amount
(the "Initial Class B Note Principal
Balance") of [ ]% Class B Receivable-
Backed Notes, Series 1997-1; and
$5,520,000 aggregate principal amount
(the "Initial Class C Note Principal
Balance") of [ ]% Class C Receivable-
Backed Notes, Series 1997-1 (the "Class
C Notes"; and together with the Class
A-1 Notes, Class A-2 Notes and Class B
Notes, the "Notes"). The Initial Class
A-1 Note Principal Balance is equal to
approximately 25.00% of the initial
Aggregate Discounted Contract Balance
(as defined in "Description of the
Notes--Principal") of the Contracts, the
Initial Class A-2 Note Principal Balance
is equal to approximately 68.00% of the
initial Aggregate Discounted Contract
Balance of the Contracts, the Initial
Class B Note Principal Balance is equal
to approximately 3.00% of the initial
Aggregate Discounted Contract Balance of
the Contracts, and the Initial Class C
Note Principal Balance is equal to
approximately 2.00% of the Initial
Aggregate Discounted Contract Balance of
the Contracts.
The Notes will be issued by the Trust
pursuant to an Indenture to be dated
as of August 1, 1997 (the
"Indenture"), between the Trust and
the Indenture Trustee. The Notes
will be secured by the assets of the
Trust. The Notes will be available
for purchase in book-entry form only
in minimum denominations of $1,000
and integral multiples thereof
(except for one Note of each Class
which, for rounding purposes, may be
than an integral multiple
thereof). The holders of beneficial
interests in the Notes held in
book-entry form ("Note Owners") will
not be entitled to receive
Definitive Notes except in the
limited circumstances described
herein. See "Description of the
Notes--General" and "--Definitive
Notes" and "--Book-Entry
Registration" herein. The Class
A-2 Notes, the Class B Notes, the
Class C Notes and the Subordinated
Securities will be subordinated to
the Class A-1 Notes to the extent
described herein; the Class B Notes,
the Class C Notes and the
Subordinated Securities will be
subordinated to the Class A-2 Notes
to the extent described herein; the
Class C Notes and the Subordinated
Securities will be subordinated to
the Class B Notes to the extent
described herein; and the
Subordinated Securities will be
subordinated to the Class C Notes to
the extent described herein. See
"Description of the Notes --
Allocations" herein.
The Subordinated Securities........... On the Closing Date, the Trust will
also issue [ %]Class D
Receivables-
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Backed Notes Series 1997-1 (the
"Subordinated Notes" ) with an aggregate
principal balance of $5,520,360
(the"Initial Class D Note Principal
Balance"), as well as Class E
Receivables-Backed Certificates Series
1997-1 (the "Certificates", and,
together with the Subordinated Notes,
the "Subordinated Securities") with an
initial certificate balance of [$ ]; the
Certificates will not bear interest. The
rights of the holders of the
Subordinated Securities to receive
distributions will be subordinated to
the rights of the Noteholders to receive
distributions with respect to the Notes
to the extent described herein. See
"Description of the Notes - Allocations"
herein.
A..................................... The Initial Class D Note Principal
Balance is equal to approximately [ ]%
of the initial Aggregate Discounted
Balance of the Contracts and will be
issued pursuant to the Indenture. The
Subordinated Notes are not being offered
and sold hereunder and are expected to
be sold concurrently with the Notes in a
private placement.
B..................................... The Certificates will represent
fractional undivided beneficial equity
interests in the Trust and residual
interests in amounts in the Reserve
Fund after the payment of all
outstanding interest and principal on
the Notes and Subordinated Notes), and
will be issued pursuant to the Trust
Agreement. The Certificates are not
being offered and sold hereunder. The
Trust Depositor is expected initially to
retain the Certificates, although the
Certificates could be subsequently
conveyed in a separate transaction
subject to certain restrictions to
ensure the Trust is not treated as a
taxable entity for federal income tax
purposes.
The Trust............................. The Trust is a business trust
established under the laws of the State
of Delaware pursuant to the Trust
Agreement. The activities of the Trust
are limited by the terms of the Trust
Agreement to acquiring, owning and
managing the Contracts and related
assets, issuing and making payments on
the Notes and the Certificates and other
activities related thereto.
Trust Assets.......................... The property of the Trust (the "Trust
Assets") will include (i) the Contracts
transferred to the Trust on the Closing
Date with an aggregate Discounted
Contract Balance of $276,018,000 as of
the Cutoff Date (together with
Additional Contracts and/or Substitute
Contracts that may be transferred to the
Trust from time to time as described
herein), (ii) all monies at any time
paid or payable thereunder or in respect
thereof from and after the Cutoff Date
applicable to such Contracts, in the
form of (A) Scheduled Payments inclusive
of such payments received through Vendor
recourse or support arrangements, but
excluding the Excluded Amounts, (B)
Prepayments, and (C) Recoveries
(including any derived from the
disposition of related Equipment)
received with respect to Defaulted
Contracts (in each case as such terms
are defined in this "Summary of Terms"),
(iii) the related Equipment (or a
security interest therein), (iv) with
respect to Contracts which are Vendor
Loans, the Applicable Security related
thereto, (v) such amounts as from time
to time may be held in the Collection
Account or any related Account or
Subaccount under the Sale and Servicing
Agreement or the Indenture, together
with earnings on funds therein, (vi) the
rights of the Trust Depositor under the
Transfer and Sale Agreement, (vii) any
late charges relating to a Contract
which were included in the Contract's
terms as of the Cutoff Date ("Late
Charges") (ix) amounts available, if
any, in the Reserve Fund and (x)
proceeds of any of the foregoing.
A. Contracts......................... All of the Contracts to be included in
the Trust (sometimes referred to herein,
collectively, as the "Contracts Pool" or
the "Transferred Contracts") consist of
conditional sale agreements (each, a
"CSA"), promissory notes with related
security agreements (each, a "Secured
Note"), finance leases (each, a
"Lease"), installment payment agreements
(each, an "IPA") or other similar types
of financing agreements (each, a
"Financing Agreement") covering Financed
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Items or, in the case of Vendor Loans,
secured by End-User Contracts which, in
turn, cover Financed Items.
With respect to the Contracts, the
Sellers will jointly and severally make
certain representations and warranties
in the Transfer and Sale Agreement,
including that: (i) the information with
respect to the Contracts, Secondary
Contracts and Equipment securing such
Contracts is true and correct in all
material respects; (ii) immediately
prior to the transfer of each Contract
and the interest in any related
Equipment to the Trust Depositor, such
Contract was owned by the Seller free
and clear of any adverse claim; (iii)
each Contract did not have any
delinquent payment thereon where such
payment was delinquent for more than 30
days and the Contract is not otherwise
in default; (iv) each Contract is a
valid and binding payment obligation of
the obligor and is enforceable in
accordance with its terms; and (v) no
adverse selection procedure was used in
selecting the Contracts for transfer.
With respect to Leases, the Sellers will
jointly and severally represent in the
Transfer and Sale Agreement either (i)
that such Leases are "net leases" and
contain "hell or high water" provisions
in favor of the Seller, which
unconditionally obligate each applicable
lessee (each, a "Lessee") to make all
payments scheduled under its Lease,
without setoff, or (ii) with respect to
certain Leases with Lessees that are
governmental entities or municipalities,
if such Lease is cancelled in accordance
with its terms, either (x) the Vendor
(as defined in this "Summary of Terms")
which assigned such Lease to the Seller
is unconditionally obligated to
repurchase such Lease from the Seller
for a purchase price not less than the
Discounted Contract Balance of such
Lease (as of the date of purchase) plus
interest thereon at the weighted average
of the Discount Rates through the
Distribution Date following such date of
repurchase or (y) pursuant to the
Transfer and Sale Agreement, the Sellers
have jointly and severally indemnified
the Trust Depositor (and any assignee
thereof) against such cancellation in an
amount equal to the Discounted Contract
Balance of such Lease (as of the date of
purchase) plus interest thereon at the
Discount Rate through the Distribution
Date following such cancellation less
any amounts paid by the Vendor pursuant
to clause (x). See "The Contracts
Generally" and "The Transfer and Sale
Agreement and Sale and Servicing
Agreement Generally--Representations and
Warranties" herein.
The Transferred Contracts have been
selected by the Seller from its
portfolio of CSAs, Secured Notes,
Leases, IPAs, Financing Agreements and
Vendor Loans, have the characteristics
specified in the Transfer and Sale
Agreement and Sale and Servicing
Agreement and described herein, and
(except for Additional Contracts or
Substitute Contracts as defined in this
"Summary of Terms") will be purchased by
the Trust Depositor from the applicable
Seller on the Closing Date pursuant to
the Transfer and Sale Agreement. See
"The Transfer and Sale Agreement and
Sale and Servicing Agreement Generally--
Representations and Warranties", "Use of
Proceeds" and "The Contracts Pool"
herein.
As of the Cutoff Date, the Contract Pool
had the following characteristics
(unless otherwise noted, percentages are
calculated by reference to Discounted
Contract Balances of the related
Contracts as a percentage of the
Aggregate Discounted Contract Balance of
the Contract Pool. The Discounted
Contract Balances and the Aggregate
Discounted Contract Balance utilized in
clauses (i) through (vii) below were
calculated utilizing the Statistical
Discount Rate (as defined in this
section):
(i) there were 1,865 Contracts in the
Contract Pool;
(ii) the Aggregate Discounted
Contract Balance, or ADCB (as defined in
this "Summary of Terms") of the
Transferred Contracts, calculated at the
Discount Rate (as defined in this
"Summary of Terms"), was $276,018,000;
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(iii) the final scheduled payment
date of the Transferred Contract with
the latest maturity or expiration as of
the Cutoff Date was [ ], 200[ ];
(iv) the average Discounted Contract
Balance was approximately $147,998.70;
(v) all of the Contracts had (A)
original terms to maturity of not less
than [ ] months and not more than [ ]
months, with a weighted average original
term to maturity of approximately [ ]
months, and (B) a remaining term to
maturity of not less than [ ] months and
not more than [ ] months, with a
weighted average remaining term to
maturity of approximately [ ] months;
(vi) of such Contracts, no more than
1.25% were Vendor Loans; and
(vii) the Obligors (as defined in this
"Summary of Terms") with respect to
approximately 18.65% of the Contracts
were located in the state of California;
approximately 8.65% were located in New
York; approximately 6.85% were located
in Florida; approximately 5.44% were
located in Massachusetts; approximately
5.08% were located in Illinois. No other
state represented more than 5.00% of the
Contracts.
See "The Transfer and Sale Agreement and
the Sale and Servicing Agreement
Generally--Concentration Amounts"
herein.
The Statistical Discount Rate is equal
to [ ] (the "Statistical Discount
Rate"). While the Discounted Contract
Balances and the Aggregate Discounted
Contract Balance calculated at the
Discount Rate will vary somewhat from
the Discounted Contract Balances and
Aggregate Discounted Contract Balance
calculated at the Statistical Discount
Rate, such variance will not be
material.
For further information regarding the
Transferred Contracts, see "The
Contracts Pool" and "The Contracts
Generally", as well as "The Transfer and
Sale Agreement and Sale and Security
Agreement Generally--Representations and
Warranties" and "--Concentration
Amounts" herein.
Between the Cutoff Date and the Closing
Date some amortization of the pool is
expected to occur. In addition, certain
Contracts included in the pool as of the
Cutoff Date may be determined not to
meet the eligibility requirements for
the final pool, and may not be included
in the final pool. To the extent a
Contract is determined not to meet the
eligibility requirements for the pool,
the Sellers, through the Trust
Depositor, may substitute a new Contract
or repurchase such Contract, (see The
Transfer and Sale Agreement and Sale and
Service Agreement Generally--
Representations and Warranties). While
the statistical distribution of the
characteristics as of the Closing Date
for the initial Contracts Pool will vary
somewhat from the statistical
distribution of such characteristics as
of the Cutoff Date as presented in this
Prospectus, such variance will not be
material.
Generally, the Contracts not
constituting Leases are prepayable by
their terms by the Obligors thereon; in
many (but not all) instances, such terms
require a prepayment penalty. The
Contracts constituting Leases generally
will be non-cancellable by the Obligors.
The Sellers have from time to time,
however, and the Servicer may, under the
terms of the Sale and Servicing
Agreement, permit or agree to the early
termination or full prepayment of any
such Contract included in the Contract
Pool in certain circumstances, and on
the terms and subject to the conditions
more fully specified in, the Sale and
Servicing Agreement (any prepayment of a
Contract, whether pursuant to its terms
or in the Servicer's discretion being an
"Early Termination", with the Contract
related thereto being an "Early
Termination Contract" or "Prepaid
Contract"). Such
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circumstances may include, without
limitation, a full or partial buyout of
the Equipment which is the subject of
the Contract, or an equipment upgrade.
In the event of an Early Termination
which has been prepaid in full, the
Trust Depositor will have the option to
cause the Trust to reinvest the proceeds
of such Early Termination in one or more
Contracts having similar characteristics
to such terminated Contract (each, an
"Additional Contract").
In addition, the Sellers will have the
option under the Transfer and Sale
Agreement to cause the Trust Depositor,
pursuant to the terms of the Sale and
Servicing Agreement, to substitute into
the Trust one or more Contracts having
similar characteristics (each, a
"Substitute Contract") for Defaulted
Contracts (as defined "Description of
the Notes--Defaulted Contracts"), and
Contracts following a material
modification to or adjustment of the
terms of such Contract which
modification or adjustment would not
otherwise be permissible under the Sale
and Servicing Agreement (unless the
Contract was to be prepaid in full to
the Trust and refinanced by the Seller
with a new, modified Contract outside
the Trust) (each, an "Adjusted
Contract"). For the periods reflected in
the twelve-month period ended December
31, 1994 and ending June 30, 1997, the
Sellers have recognized delinquencies of
[ %] with respect to their portfolio and
.22% of Defaulted Contract principal
balances and .02% of losses with respect
to such portfolio. (See "The Contracts
Pool--Delinquency and Loan Loss
Information"). With respect to replacing
either a Defaulted Contract or an
Adjusted Contract with a Substitute
Contract (which substitution is not an
obligation of the Sellers but is in
their sole and absolute discretion),
such Substitute Contract must meet the
Contracts Pool concentration limitation
as described in "The Transfer and Sale
Agreement and Sale and Servicing
Agreement Generally" as well as the
other substitution requirements
described herein. The Aggregate
Discounted Contract Balance of the
Defaulted Contracts and Adjusted
Contracts for which the Seller may cause
the substitution of Substitute Contracts
is limited to an amount not in excess of
15% of the Aggregate Discounted Contract
Balance of the Contracts as of the
Cutoff Date. The Sellers will also be
permitted to substitute a Substitute
Contract for a Contract which the Seller
would otherwise be required to
repurchase due to certain
representations or warranties relating
thereto proving to have been incorrect
(a "Warranty Contract"), without regard
to the 15% limitation described above.
See "The Transfer and Sale Agreement and
The Sale and Servicing Agreement
Generally--Representations and
Warranties" herein.
The terms of a Contract may be subjected
to material modifications or adjustments
for administrative reasons or at the
request of the Obligor or related Vendor
for such Contract due to a variety of
circumstances. Such material
modifications may result in adjustments
to the Contract commencement date, the
stated periodic payment date for
payments due, the amount of the periodic
payment or the equipment subject to the
Contract. There may also occasionally be
non-material adjustments or
modifications in Contract terms which
may be effected by the Servicer on
behalf of the Trust without Noteholder
consent and without affecting the
Contract's status as part of the Trust.
Additional Contracts and Substitute
Contracts will be originated and added
to the Trust using the same credit
criteria and eligibility standards as
the Contracts in the Contracts Pool on
the Closing Date. Information with
respect to such Additional Contracts or
Substitute Contracts, to the extent
deemed material, will be included in
periodic reports required under the
Exchange Act filed by the Servicer on
behalf of the Trust.
In no event will the aggregate scheduled
payments of the Contracts, after the
inclusion in the Trust of the Substitute
Contracts and reinvestment in Additional
Contracts, be materially less than the
aggregate scheduled payments of the
Contracts prior to such substitution or
reinvestment. In addition, either the
final
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payment on such Substitute Contract or
Additional Contract will be on or prior
to [ ], or, to the extent the final
payment on such Contract is due after
[ ], only scheduled payments due on or
prior to such date may be included in
the Discounted Contract Balance of such
Contract for purpose of making any
calculation under the Indenture or the
Sale and Servicing Agreement.
The Servicer is not authorized to permit
an Early Termination, without the
addition to the Trust of a related
Additional Contract, unless the amount
to be prepaid (whether by the related
Obligor, or through a combination of
payments from the related Obligor and
from the Seller/Servicer) on such
terminated Contract is equal at least to
the then Discounted Contract Balance of
the Contract, plus any delinquent
payments thereon. See [" "] herein.
The Sellers' define Contract delinquency
as a payment which is not made
consistent with the Contract terms and a
Defaulted Contract as a Contract for
which a full contractual payment has not
been received from the Obligor (or the
Vendor if Vendor recourse is applicable)
for 120 days or such shorter period as
the Sellers may determine consistent
with their respective collection policy.
(See "Heller Financial, Inc. and Heller
Financial Leasing, Inc.--Vendor
Finance--Collection Process/Vendor
Recourse" and "Heller Financial, Inc.,
and Heller Financial Leasing,
Inc.--Commercial Equipment Finance--
Collection/Servicing" and "The Contracts
Pool--Delinquency and Loan Loss
Information."
B. Equipment and Other............ All of the applicable Seller's right,
Financed Items title and interest (which may be
limited to a security interest) in
the Equipment, if any, subject to
each Lease and the security interest
of the applicable Seller in the
Equipment, if any, subject to each
CSA, Secured Note, IPA, Financing
Agreement and Vendor Obligation
included in the Contract Pool will be
transferred to the Trust. Equipment
will include, but shall not be
limited to, printing, information
technology, communications,
commercial, industrial,
transportation, health care and
construction equipment. See "The
Contracts Generally--Equipment" and
"The Contracts Pool" herein. In the
event the party obligated to make
payments under any Contract (as to a
Contract, the "Obligor") defaults in
such payments, the Servicer will
follow its customary and usual
collection procedures, which may
include the repossession and sale of
any related Equipment on behalf of
the Trust. Any Recoveries from such
sale shall constitute Available
Amounts (as defined in "Description
of the Notes--Allocations"). See
"The Contracts Generally--Equipment",
and "Description of the Notes--Defaulted
Contracts" herein.
Certain End-User Contracts cover
Financed Items other than Equipment,
including computer software
("Software") and related support and
consulting services (collectively,
"Services") and will represent
approximately 4.54% of the ADCB of
the Contracts Pool on the Closing
Date. The Trust will not have title
to or a security interest in such
Software, nor will it own such
Services (which will be retained by
the Obligor), and would not be able
to realize any value therefrom under
a related Contract upon a default by
the Obligor. See "The Contracts
Generally--Software and Services"
herein.
C. Collection Account............ A trust account will be established
by the Servicer in the name of and
maintained by the Indenture Trustee (the
"Collection Account") into which all
amounts that will be collected for the
Trust will be deposited in accordance
with the Indenture and the Sale and
Servicing Agreement. See "Description of
the Notes--Collection Account" herein.
D. Vendor Agreements............. Each of the Sellers' Vendor finance
program agreements (each, a "Program
Agreement") are agreements with
equipment manufacturers, dealers and
distributors or computer software
licensors or distributors or other
persons located in the United States
("Vendors") which, in each case, provide
the Seller with the opportunity to
finance transactions relating to the
acquisition or use by
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an End-User of a Vendor's Equipment,
Software, Services or other products.
Some of these Program Agreements take
the form of a referral relationship,
which may or may not include credit
support from the Vendor. All rights
(but not obligations) of the Sellers
under the Program Agreements with
respect to the Contracts are generally
assignable and will be so assigned by
the Sellers to the Trust Depositor and
in turn conveyed by the Trust Depositor
to the Trust. Such rights may include
various forms of support to the Sellers
under such Program Agreements including
representations and warranties by the
Vendor in respect of the End-User
Contracts assigned by the Vendor to the
Seller and related Equipment, Software
or Services, credit support with respect
to defaults by End-Users and equipment
repurchase and remarketing arrangements
upon early termination of End-User
Contracts upon a default by the End-
User. See "The Contracts Generally--
Vendor Agreements" herein.
In addition to the foregoing, the Seller
may enter into assignment agreements
(each a "Vendor Assignment";
collectively, with the Program
Agreements, "Vendor Agreements") from
time to time with Vendors pursuant to
which individual End-User Contracts
originated by Vendors are assigned to
the Seller, rather than pursuant to a
Program Agreement. Each Vendor
Assignment will be made either with or
without recourse against the Vendor for
End-User defaults and will generally
contain many, if not all, of the
representations, warranties and
covenants typically contained in Program
Agreements, as well as a Vendor
repurchase requirement in the event of a
breach by the Vendor of such
representations, warranties or
covenants. Vendor Assignments may or may
not provide for any Vendor remarketing
support in the event of an End-User
default.
E. Reserve Fund..................... A trust account has been established by
the Trust Depositor in the name of, and
maintained by, the Indenture Trustee
(the "Reserve Fund"). On the Closing
Date the Trust Depositor will deposit
$2,760,000 in the Reserve Account which
is equal to 1.00% of the ADCB of the
Contracts Pool as of the Cutoff Date.
The Reserve Fund will be required to be
maintained at the lesser of (1) 1.00% of
the ADCB of the Contracts as of the
Cutoff Date and (ii) the outstanding
Principal Amounts of the Notes and the
Subordinated Notes (the "Reserve Fund
Amount"). On each Distribution Date,
amounts on deposit in the Reserve
Account will be applied as described in
the Prospectus under "Description of the
Notes--Allocations" and "--Reserve
Account." As so described, on each
Distribution Date amounts on deposit in
the Reserve Account in excess of the
Reserve Fund Amount will be paid to the
Certificateholder.
Terms of the Notes................... The principal terms of the Notes will
be as described below:
A. Interest......................... The Class A-1 Notes will bear interest
at the rate of [ ]% per annum (the
"Class A-1 Interest Rate"), the Class
A-2 Notes will bear interest at the rate
of [ ]% per annum (the "Class A-2
Interest Rate"), the Class B Notes will
bear interest at the rate of [ ]% per
annum (the "Class B Interest Rate") and
the Class C Notes will bear interest at
the rate of [ ]% per annum (the "Class C
Interest Rate"), and the Subordinated
Notes will bear interest at the rate of
[ ]% per annum (the "Subordinated Note
Interest Rate" or "Class D Interest
Rate") in each case calculated on the
basis of a year of 360 days consisting
of twelve 30 day months.
Interest on the outstanding principal
amount of the Notes will accrue from and
including the most recent Distribution
Date on which interest has been paid
(or, in the case of the initial
Distribution Date, from and including
the Closing Date) to but excluding the
following Distribution Date (each period
for which interest accrues on the Notes,
an "Accrual Period"). Interest on the
Notes will be payable on each
Distribution Date, commencing [ ],
199[ ], to the holders of record of the
Class A-1 Notes (the "Class A-1
Noteholders"), the holders of record of
the Class A-2 Notes (the "Class A-2
Noteholders") the holders of
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record of the Class B Notes (the "Class
B Noteholders") and the holders of
record of the Class C Notes (the "Class
C Noteholders"; together with the Class
A-1 Noteholders, the Class A-2
Noteholders and Class B Noteholders, the
"Noteholders") as of the related Record
Date. See "Description of the Notes--
General" and "The Indenture--Payments of
Principal and Interest" herein.
Interest on the Class A-1 Notes is
payable on a Distribution Date from
Available Amounts available on such date
(and after application of such Available
Amounts to repay any outstanding
Servicer Advances and to pay the
Servicing Fee, each as defined in this
"Summary of Terms"). Such Available
Amounts represent primarily collections
of payments due under the Contracts
(including realization of amounts from
Vendor recourse, if applicable and any
amounts realized from Residuals), Late
Charges, certain amounts received upon
the prepayment or purchase of Contracts
or liquidation of the Contracts and
disposition of the related Equipment
upon defaults thereunder, and proceeds
of Servicer Advances, if any as well as
earnings on amounts held in the
Collection Account. Interest on the
Class A-2 Notes is payable on a
Distribution Date from the Available
Amounts on such date, but after
application of such Available Amounts to
repay any outstanding Servicer Advances,
to pay the Servicing Fee and to pay
interest on the Class A-1 Notes;
provided, however, in the event a
Restricting Event has occurred and is
continuing or an Event of Default has
occurred, interest on the Class A-1
Notes and the Class A-2 Notes will be
paid pro rata. Interest on the Class B
Notes is payable on a Distribution Date
from the Available Amounts on such date,
but after application of such Available
Amounts to repay any outstanding
Servicer Advances, to pay the Servicing
Fee, and to pay interest on the Class A-
1 Notes and Class A-2 Notes. Interest on
the Class C Notes is payable on a
Distribution Date from Available Amounts
on such date, but after application of
such Available Amounts to repay any
outstanding Servicer Advances, to pay
the Servicing Fee, and to pay interest
on the Class A-1 Notes, the Class A-2
Notes and the Class B Notes. See
"Description of the Notes--Allocations"
herein.
B. Principal
General............................. Principal of the Class A-1 Notes will be
payable on each Distribution Date in an
amount equal to the Class A-1 Principal
Payment Amount (as defined in
"Description of the Notes") for such
Distribution Date, to the extent
Available Amounts are available
therefor, but after payment of unpaid
Servicer Advances, the Servicing Fee,
interest payments on the Notes and the
Subordinated Notes.
Principal of the Class A-2 Notes will be
payable on each Distribution Date in an
amount equal to the Class A-2 Principal
Payment Amount (as defined in
"Description of the Notes") for such
Distribution Date, to the extent
Available Amounts are available
therefor, but after payment of unpaid
Servicer Advances, the Servicing Fee,
interest payments on the Notes and
Subordinated Notes and the Class A-1
Principal Payment Amount.
Principal of the Class B Notes will be
payable on each Distribution Date in an
amount equal to the Class B Principal
Payment Amount (as defined in
"Description of the Notes") for such
Distribution Date, to the extent
Available Amounts are available
therefor, but after payment of unpaid
Servicer Advances, the Servicing Fee,
interest payments on the Notes, interest
payments on the Subordinated Notes, and
the payment of the Class A-1 Principal
Payment Amount and the Class A-2
Principal Payment Amount.
Principal of the Class C Notes will be
payable on each Distribution Date in an
amount equal to the Class C Principal
Payment Amount (as defined in
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"Description of the Notes") for such
Distribution Date, to the extent Available
Amounts are available therefor, but after
payment of unpaid Servicer Advances, the
Servicing Fee, interest payments on the Notes,
and Subordinated Notes, and the payment of the
Class A-1 Principal Payment Amount, the Class
A-2 Principal Payment Amount and Class B
Principal Payment Amount. See "Description of
the Notes--Allocations" herein.
The Class A-1 Principal Payment Amount, the
Class A-2 Principal Payment Amount, Class B
Principal Payment Amount and Class C Principal
Payment Amount represent, in each case, a
calculation of the amount to be payable from
otherwise Available Amounts on a Distribution
Date in respect of principal on the Class A-1
Notes, the Class A-2 Notes, Class B Notes or
Class C Notes, as applicable. Such amount
generally is calculated, for each Class of
Notes (as will be the corresponding principal
payment amount for Subordinated Notes as
well), as a fractional percentage of the
amount that the ADCB of the Contract Pool has
declined or been deemed to decline (whether
through payment, prepayment, default and
writeoff, determination of ineligibility or
other mechanism as described further herein)
during the most recent Collection Period
(i.e., full calendar month), with the
fractional percentage for each Class
determined based on the proportion that the
initial principal amount of such Class bore to
the ADCB of the Contract Pool as of the Cutoff
Date (which was 25.00% for the Class A-1
Notes, 68.00% for the Class A-2 Notes, 3.00%
for the Class B Notes, 2.00% for the Class C
Notes, and 2.00% for Subordinated Notes).
Accordingly, if sufficient Available Amounts
exist, a proportionate amount of principal
would be repaid on any given Distribution Date
on each of the Class A-1 Notes, the Class A-2
Notes, the Class B Notes and the Class C Notes
(as well as the Subordinated Notes); provided,
however, the Class A-1 Principal Payment
Amount shall be paid prior to the Class A-2
Principal Payment Amount, the Class B
Principal Payment Amount, the Class C
Principal Payment Amount and, the Subordinated
Note Principal Payment Amount unless a
Restricting Event has occurred and is
continuing or an Event of Default has occurred
in which case payments of principal on the
Class A-2 Notes and Class A-1 Notes will be
made pro rata. Upon the occurrence of an Event
of Default, or upon the occurrence and during
the continuance of a Restricting Event (each
as defined in "Description of the Notes"),
however, the formula for determining such
principal payment amount will change with the
result that, for any Distribution Date
occurring after such adverse event, principal
on the Class A-2 Notes, Class B Notes and
Class C Notes (and also the Subordinated
Notes) will be accelerated and paid
sequentially, i.e., no principal will be paid
on the Class B Notes, Class C Notes or the
Subordinated Notes, until the Class A-2 Notes
have been repaid in full; no principal will be
paid on the Class C Notes or the Subordinated
Notes, until the Class B Notes have been
repaid in full; and no principal will be paid
on the Subordinated Notes until the Class C
Notes have been repaid in full. See
"Description of the Notes--Allocations"
herein.
Stated Maturity Date..............The stated maturity date of the Class A-1
Notes (the "Class A-1 Notes Maturity Date") is
the [August 1998] Distribution Date and the
stated maturity date (the "Maturity Date") for
the other Notes and the Subordinated
Securities is [ ], 200[ ]
C. Optional Redemption............Notes remaining outstanding may be redeemed in
whole, but not in part, on any Distribution
Date at the Trust Depositor's option if the
ADCB of the Contract Pool at such time is less
than 10% of the initial ADCB of the Contract
Pool as of the Cutoff Date (the "Cleanup Call
Condition"). The redemption price for such
outstanding Notes to be redeemed in such event
(the "Redemption Price") will be equal to the
unpaid principal amount of the Notes plus
accrued and unpaid interest thereon through
the date of redemption. The Trust Depositor
will fund such redemption through concurrent
receipt of a payment from the applicable
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Seller pursuant to such Seller's right under
the Transfer and Sale Agreement to repurchase
from the Trust Depositor for the Redemption
Price, and concurrently cause the Trust
Depositor to redeem and repurchase from the
Trust, the remaining Contracts held in the
Trust when the Cleanup Call Condition has been
satisfied.
Aggregate Discounted..............The "Aggregate Discounted Contract Balance"
Contract Balance or "ADCB" with respect to the Contracts means
the sum of the Discounted Contract Balances
of each Contract included in the group of
Contracts for which an ADCB determination
is being made.
"Discounted Contract Balance" means with
respect to any Contract, (A) as of the related
Cutoff Date, the present value of all of the
remaining Scheduled Payments becoming due
under such Contract after the applicable
Cutoff Date discounted monthly at the Discount
Rate, and (B) as of any other date of
determination, the sum of (1) the present
value of all of the remaining Scheduled
Payments becoming due under such Contract
after such date of determination discounted
monthly at the Discount Rate, and (2) the
aggregate amount of all Scheduled Payments due
and payable under such Contract after the
applicable Cutoff Date and prior to such date
of determination (other than Scheduled
Payments related to Defaulted Contracts and
Early Termination Contracts) that have not
then been received by the Servicer.
The Discounted Contract Balance for each
Contract shall be calculated assuming:
(a) All payments due in any Collection
Period are due on the last day of
the Collection Period;
(b) Payments are discounted on a monthly
basis using a 30 day month and a 360
day year; and
(c) All security deposits and drawings
under letters of credit, if any,
issued in support of a Contract are
applied to reduce Scheduled Payments
in inverse order of the due date
thereof.
"Discount Rate" means, at any date of
determination, ___% which is equal to the sum
of (i) the weighted average of the Class A-1
Interest Rate, Class A-2 Interest Rate
(weighted at the sum of the Class A-1
Principal Payment Amount and the Class A-2
Principal Payment Amount), Class B Interest
Rate, Class C Interest Rate, and the
Subordinated Note Interest Rate, and (ii) the
Servicing Fee Percentage. The Statistical
Discount Rate is equal to [ %]. See "The
Contracts Pool".
"Scheduled Payments" means, with respect to
any Contract, the monthly or quarterly or
semi-annual or annual rent or financing
(whether principal or principal and interest)
payment scheduled to be made by the related
Obligor under the terms of such Contract after
the related Cutoff Date (it being understood
that Scheduled Payments do not include any
Excluded Amounts).
Subordination.....................The Class A-1 Notes will be senior in right of
payment to the Class A-2 Notes, Class B Notes,
Class C Notes and the Subordinated Securities;
the Class A-2 Notes will be senior in right of
payment to the Class B Notes, the Class C
Notes and the Subordinated Securities. The
Class B Notes will be senior in right of
payment to the Class C Notes and the
Subordinated Securities; and the Class C Notes
will be senior in right of payment to the
Subordinated Securities; in each case to the
extent described herein. See "Description of
the Notes--Allocations" and "The Indenture--
Payments of Principal and Interest" herein.
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Servicing; Servicing Fee;.........The Servicer will be responsible for
Servicer Advances servicing, managing and administering the
Transferred Contracts and related interests,
and enforcing and making collections on the
Contracts. The Servicer will be required to
exercise the degree of skill and care in
performing these functions that it customarily
exercises with respect to similar property
owned or serviced by the Servicer in its
individual capacity. The Sellers have in some
cases delegated servicing and collection
functions to an applicable Vendor (or, in
certain limited instances, to a subservicer
acceptable to the Seller) with respect to End-
User Contracts originated through such Vendor,
but in such instances the Servicer (on behalf
of the Trust, in the Trust's capacity as
assignee of the Seller through the Trust
Depositor) retains ultimate contractual
control over the servicing and collection
functions through provisions in the applicable
Vendor Agreements (or agreement with such
subservicer) giving the Seller (and hence the
Servicer, on behalf of the Trust as assignee)
the right to determine or veto certain
servicing decisions and/or to replace or take
over servicing and collection functions from
the Vendor in the event of the Vendor's
default or non-compliance with its servicing
or other obligations.
The Servicer will be entitled to receive (a) a
monthly fee (the "Servicing Fee") equal to the
product of (i) one-twelfth of [ ]% (the
"Servicing Fee Rate") and (ii) the Aggregate
Discounted Contract Balance of all Contracts
as of the beginning of the previous Collection
Period, payable out of (a) the Collection
Account and (b) certain other fees paid by the
Obligors ("Servicing Charges"), as
compensation for acting as Servicer.
Under certain limited circumstances, the
Servicer may resign or be removed, in which
event either the Indenture Trustee or a third
party meeting the requirements set forth in
the Sale and Servicing Agreement will be
appointed as successor Servicer. See "The
Transfer and Sale Agreement and the Sale and
Servicing Agreement Generally--Certain Other
Matters Regarding the Servicer" and
"--Servicer Default" herein.
The Servicer will be required to cause amounts
collected on the Contracts on behalf of the
Trust to be deposited to the Collection
Account maintained by the Indenture Trustee no
later than two Business Days following the
Servicer's determination that such amounts
relate to the Contracts or the Financed Items.
The Servicer may also, at its option, make
advances (each, a "Servicer Advance") for
delinquent Scheduled Payments, to the extent
it determines in its sole discretion that such
advances will be recoverable in future
periods. Such Servicer Advances are
reimbursable from Available Amounts as
described herein. See "The Transfer and Sale
Agreement and The Sale and Servicing Agreement
Generally--Collection and Other Servicing
Procedures" herein.
Repurchase for Certain............The Trust Depositor under the Sale
Breaches Of Representations and Servicing Agreement and the
And Warranties Sellers under the Transfer and Sale
Agreement will be obligated to accept the
reconveyance of a Contract and the interest in
the related Equipment from the Indenture
Trustee and the Trust, and to deposit the
corresponding Transfer Deposit Amount (as
defined in "The Transfer and Sale Agreement
and Sale and Servicing Agreement Generally"),
if the interest of the Trust in any of the
related Equipment, the related Contract, or
the related Contract File (as defined in "The
Transfer and Sale Agreement and Sale and
Servicing Agreement Generally") is materially
adversely affected by a breach of a
representation or warranty made by such party
with respect to such Contract and if such
breach has not been cured within thirty (30)
days of discovery of such breach. See also
"Summary of Terms--Prepayment Considerations"
below. In the alternative, and at the Trust
Depositor's and applicable Seller's option,
the affected Contract may be replaced with a
Substitute Contract of similar characteristics
under the standards applicable generally to
Substitute Contracts as described herein.
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<PAGE>
Maturity and Prepayment......... As noted above, non-Lease Contracts
Conditions are generally prepayable by their terms,
and the Servicer will be authorized to accept
prepayments on Leases in certain
circumstances. Each prepayment on a Contract,
if such Contract is not replaced by the
Trust's reinvestment in a comparable
Additional Contract as described herein, will
shorten the weighted average remaining term of
the Contracts and the weighted average life of
the Notes. Such prepayments of principal will
be included in the Available Amounts and will
be payable to Noteholders on the Distribution
Date following the Collection Period in which
such prepayment was received, as set forth
herein. The rate of prepayments on the
Contracts may also be affected under certain
circumstances relating to breaches of
representations, warranties or covenants with
respect to the Contracts, since the Trust
Depositor will be obligated to repurchase
adversely affected Contracts from the Trust
(to be funded through a corresponding
obligation of the Seller to repurchase such
Contracts from the Trust Depositor). A higher
than anticipated rate of prepayments will
reduce the ADCB of the Contracts more quickly
than expected and thereby reduce anticipated
aggregate interest payments on the Notes. Any
reinvestment risks resulting from a faster or
slower incidence of prepayment of Contracts
will be borne entirely by the Noteholders.
Such reinvestment risks include the risk that
interest rates may be lower at the time such
holders received payments from the Trust than
interest rates would otherwise have been had
such prepayments not been made or had such
prepayments been made at a different time.
Certain Legal Risks............. See "Risk Factors" for a discussion of certain
material risks that should be considered in
connection with an investment in the Notes
offered hereby, including risks associated
with concentrations of Contracts and
obsolescence of the Financed Items as well as
certain legal risks.
Federal Income Tax.............. In the opinion of Winston & Strawn, federal
Considerations tax counsel to the Trust Depositor, federal
income tax purposes, the Notes will be
characterized as debt, and the Trust will not
be characterized as an association (or a
publicly traded partnership) taxable as a
corporation. Each Noteholder, by the
acceptance of a Note, will agree to treat the
Notes as indebtedness. See "Federal Income Tax
Considerations" herein.
ERISA Considerations............ Subject to the considerations discussed under
"ERISA Considerations" herein, the Notes will
be eligible for purchase by employee benefit
plans. See "ERISA Considerations" herein.
Rating.......................... It is a condition to the issuance of the Notes
offered hereunder that the Class A-1 Notes be
rated at least "Aaa" and "AAA", that the Class
A-2 Notes rated at least "Aaa" and "AAA", that
the Class B Notes be rated at least "A2" and
"A", and that the Class C Notes be rated at
least "Baa2" and "BBB" by Moody's Investors
Service, Inc. and Fitch Investors Service,
L.P. respectively (collectively, the "Rating
Agencies"). A rating is not a recommendation
to purchase, hold or sell Notes inasmuch as
such rating does not comment as to market
price or suitability for a particular
investor. Ratings address the likelihood of
timely payment of interest and the ultimate
payment of principal on the Notes pursuant to
their terms. Ratings will not address the
likelihood of an early return of invested
principal. There can be no assurance that any
rating will remain for a given period of time
or that a rating will not be lowered or
withdrawn entirely if, in the judgment of any
Rating Agency, circumstances in the future so
warrant. See "Rating of the Notes" herein.
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RISK FACTORS
Prospective investors should carefully consider the following risk factors
before investing in the Notes.
Absence of Public Market; Limited Liquidity
There is currently no public market for the Notes and there is no assurance
that one will develop. The Underwriter expects, but is not obligated, to make a
market in the Notes. There is no assurance that any such market will be created
or, if so created, will continue. If no public market develops, the Noteholders
may not be able to liquidate their investment in the Notes prior to maturity.
Prepayments on the Contracts Affect the Yield of the Notes
Because the rate of payment of principal on the Notes will depend, among
other things, on the rate of payment on the Contracts, the rate of payment of
principal on the Notes cannot be assured. Payments on the Contracts will
include Scheduled Payments as well as partial and full prepayments (including
any Scheduled Payment (or portion thereof) which the Servicer has received, and
expressly permitted the related Obligor to make, in advance of its scheduled due
date and which will be applied on such due date) (any such prepayment of a
Scheduled Payment, an "Optional Prepayment"), and any and all cash proceeds or
rents realized from the sale, lease, re-lease or re-financing of Equipment under
a Prepaid Contract (net of liquidation expenses), payments upon the liquidation
of Defaulted Contracts, payments upon repurchases by the applicable Seller
through the Trust Depositor as a result of the breach of certain representations
and warranties or covenants in the Transfer and Sale Agreement and the Sale and
Servicing Agreement, and payments upon an optional termination of the Trust (any
such voluntary or involuntary prepayment, purchase or termination, a
"Prepayment"). The occurrence of an Event of Default or a Restricting Event may
also result in the receipt by Noteholders of principal payments on the Notes in
excess of the expected principal payment amount and result in earlier than
anticipated repayment of the Notes. Noteholders may not be able to reinvest
distributions of principal at yields equivalent to the yield on the Notes. See
"Description of the Notes--Principal", "--Additions of Trust Assets" and
"--Restricting Events" herein. Further, the Servicer may permit the Obligor
under a Contract to make an Optional Prepayment in an amount which is less than
the amount sufficient to repay the portion of such Contract financed by the
Noteholders (together with accrued interest thereon) so long as the Trust is
indemnified for any such insufficiency by the Vendor or the Seller. See
"Description of the Notes--Prepaid Contracts".
The rate of early terminations of Contracts due to Prepayments, including
defaults, is influenced by various factors, including technological change,
changes in customer requirements, the level of interest rates, the level of
casualty losses, and the overall economic environment. Many prepayments occur
at the request of customers, whose motivations may not be known to the Seller.
No assurance can be given that Prepayments (including Optional Prepayments) on
the Contracts will conform to any historical experience, and no prediction can
be made as to the actual rate of Prepayments which will be experienced on the
Contracts. Noteholders will bear all reinvestment risk resulting from the rate
of Prepayments on the Contracts. See "Prepayment and Yield Considerations."
No Assurances Given as to Changes in the Ratings of the Notes
A rating is not a recommendation to purchase, hold or sell Notes inasmuch as
such rating does not comment as to market price or suitability for a particular
investor. Ratings of Notes will address the likelihood of the payment of
principal and interest thereon pursuant to their terms. The ratings of Notes
will not address the likelihood of an early return of invested principal. In
addition, any such rating will not address the possibility of the occurrence of
an Event of Default or Restricting Event. There can be no assurance that a
rating will remain for a given period of time or that a rating will not be
lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future so warrant. In the event that the rating initially
assigned to any Note is subsequently lowered for any reason, no person or entity
is obligated to provide any additional credit support therefor. For more
detailed information regarding the ratings assigned to any Class of the Notes,
see "Rating of the Notes."
Subordination of the Class A-2 Notes, Class B Notes, the Class C Notes and the
Subordinated Securities
To the extent described herein under "Description of the Notes--
Allocations", (i) payments of interest and principal on the Class A-2 Notes,
Class B Notes, Class C Notes and the Subordinated Securities will be
subordinated in priority of payment to interest and principal, respectively on
the Class A-1 Notes, (ii) payments of interest and principal on the Class B
Notes, Class C Notes and the Subordinated Securities will be subordinated in
priority of payment to interest and principal, respectively, on the Class A-2
Notes, (iii) payments of interest and principal on the Class C Notes and the
Subordinated Securities, will be subordinated in priority of payment to interest
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and principal, respectively, on the Class B Notes and (iv) payments of interest
and principal on the Subordinated Securities will be subordinated in priority of
payment to interest and principal, respectively on the Class C Notes. The
Subordinated Notes initially will represent the right to receive principal in an
amount equal to 2.00% of the initial ADCB, but such amount will be reduced as a
result of principal payments made on the Subordinated Notes prior to an Event of
Default or Restricting Event (see "Description of the Notes--Principal"), which
will reduce the benefit to the Notes of the subordination of the Subordinated
Notes.
Delinquencies and defaults on the Contracts could eliminate the protection
afforded the Noteholders by the subordination of the Subordinated Notes and the
Reserve Fund, and the Class C Noteholders could incur losses on their investment
as a result. Further delinquencies and defaults on the Contracts could
eliminate the protection offered to the Class B Noteholders by the
subordination of the Class C Notes, the Subordinated Notes and the Reserve Fund,
and such Noteholders could also incur losses on their investment as a result.
Additionally, delinquencies and defaults on the Contracts could eliminate the
protection offered the Class A-2 Noteholders by the subordination of the Class B
Notes, the Class C Notes, the Subordinated Notes and the Reserve Fund, and such
Noteholders could also incur losses on their interest as a result. Furthermore,
delinquencies and defaults on the Contracts could eliminate the protection
offered to the Class A-1 Noteholders by the subordination of the Class A-2
Notes, the Class B Notes, the Class C Notes, the Subordinated Notes and the
Reserve Fund.
Certain Risks Associated with Geographic Concentrations of Contracts
The Contracts constituting the initial Contract Pool reflect concentrations
of Obligors thereon located in the States of California, New York, Florida,
Massachusetts and Illinois in excess of 5.00% of the ADCB of the Contract Pool
as of the Cutoff Date; no other State accounts for more than 5.00% of the
Contract Pool. To the extent adverse events or economic conditions were
particularly severe in such geographic region or in the event Obligors under a
large amount of Contracts within such region were to experience financial
difficulties, the delinquency and default experience of the Contract Pool could
be adversely impacted with corresponding negative implications for the timing
and amount of collections on the Contracts and possible delays or
insufficiencies in payments due to Certificateholders or Noteholders. The Trust
Depositor, however, is unable to determine and has no basis to predict, with
respect to any state or region, whether any such events have occurred or may
occur, or to what extent any such events may affect the Contracts or the payment
of the Notes.
Certain Risks Associated With Concentration of Contracts relating to the
Printing Industry
Contracts constituting approximately 27.00% of the Contracts Pool ADCB as of
the Closing Date relate to Equipment used in the printing industry. No other
industry accounts for more than 6.80% of the Contract Pool. To the extent the
printing industry were to experience adverse events or economic conditions, the
delinquency and default experience of the Contract Pool could be adversely
impacted and accordingly, the timing and amount of collections on the Contracts
may be adversely effected and thus result in delays or reduced payments to the
Noteholders. The risks associated with the printing equipment concentration is
mitigated by what the Sellers feel is the largest and most geographically
diverse manufacturing industry in the United States. According to 1996 year-end
figures from the NPES Monthly Statistical Report, the industry generated over
$81 billion in total print sales and is comprised of 52,400 firms which employ
nearly 1 million people nationwide. Demand for printed products is a function
of general economic activity, personal consumption, business formations and
advertising expenditures. The largest of these is advertising which accounts
for over forty percent (40%) of the printed material within the United States.
Printing equipment financed by the Sellers is revenue generating equipment which
is critically important to the average commercial printer.
Rate at which Equipment Becomes Obsolete Affects Prepayment Rate of the
Contracts
Technological change could affect the Noteholders. For example, to the
extent that technological change results in increased prepayment activity, it
may increase Prepayments of the Contracts. See "--Maturity and Prepayment
Considerations" and "The Contracts Generally--Equipment", "--Leases" and
"--Installment Payment Agreements and Financing Agreements".
In the event a Contract becomes a Defaulted Contract, the only source of
payment for amounts expected to be paid on such Contract will be the income and
proceeds from the disposition of any related Equipment and a deficiency
judgment, if any, against the Obligor under the Defaulted Contract. Since the
market value of the Equipment may decline faster than the Discounted Contract
Balance, the Servicer may not recover the entire amount due on the Contract and
might not receive any Recoveries on the Equipment. Certain types of Equipment
also may be subject to sudden, significant declines in value because of
technological advances. See "The Contracts Generally--Equipment" herein.
Software and Services represent 4.54% of the ADCB of the pool; such Equipment
may be subject to
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sudden, significant declines in value; however, such risk is mitigated by the
"hell or highwater" terms in the related Contracts (i.e. Contract terms which
unconditionally obligate the Obligor to make all payments scheduled under the
Contract without setoff rights).
Certain Legal Risks
Legal Risks Associated With Servicer's or Vendor's Retention of Contract
Files. To facilitate servicing and reduce administrative costs, the Contract
Files will be retained in the possession of the Servicer and not be deposited
with the Indenture Trustee or any other agent or custodian for the benefit of
the Noteholders. The Servicer will, however, physically segregate the Contract
Files from other similar documents that are in the Servicer's possession, and
will stamp or mark the Contract Files to reflect the transfer of the Contracts
to the related Trust. Also, UCC financing statements will be filed reflecting
the sale and assignment of the Contracts and related interests (the "Transferred
Property") by Heller Financial or HFLI, as applicable, to the Trust Depositor,
and by the Trust Depositor to the Trust, and the Servicer's accounting records
and computer files will be marked to reflect such sales and assignments. Because
the Contract Files will remain in the Servicer's possession, if a subsequent
purchaser were able to take physical possession of the Contract Files without
knowledge of such assignment, the Indenture Trustee's priority interest in the
Contracts (as assignee of the Seller's, Trust Depositor's and the Trust's
interest) could be defeated. In the event that the Trust must rely upon
repossession and sale of the related Equipment and other assets securing
Defaulted Contracts to recover principal and interest due thereon, the Trust's
ability to realize upon such assets may be limited due to the existence of a
prior interest in the Contracts. In such event, distributions to Noteholders
could be adversely affected. The segregation and stamping of Contract Files
should, however, mitigate this risk.
Similarly, with respect to Secondary Contracts securing Vendor Loans, in
some instances the Vendor will retain the original contract files associated
with the related End-User Contracts which are Secondary Contracts securing such
Vendor Obligation. Although UCC financing statements are filed reflecting the
pledge of such Contracts to the applicable Seller as security for the Vendor
Loans, because these contract files will remain in the Vendor's possession, if a
subsequent purchaser were able to take physical possession of such contract
files without knowledge of the pledge to the Seller, the Indenture Trustee's
priority security interest in the such Secondary Contracts (as assignee of the
Seller's, Trust Depositor's and the Trust's interest) could be defeated. In such
event, distributions to Noteholders could be adversely affected. Each Vendor
represents, warrants and covenants in the applicable agreement evidencing a
Vendor Obligation, however, that it has not and will not sell, pledge or
otherwise assign or convey to any other party (other than the applicable Seller)
any interest in the Secondary Contracts securing such Vendor Obligation, and
agrees that it will maintain possession of the related contract files as
custodian for the benefit of the Seller as secured party with respect to such
Secondary Contracts.
Legal Risks Associated With Transfers of Interests in Financed Equipment.
In connection with the conveyance of the Contracts to the Trust, security
interests in the related financed Equipment securing such Contracts (or, in
connection with Leases, the Seller's ownership interest in or title to such
Equipment) will be assigned by the applicable Seller to the Trust Depositor and
by the Trust Depositor to the Trust. It has been the general policy of the
Sellers to file or cause to be filed UCC financing statements with respect to
the Equipment relating to the Contracts. Due to the administrative burden and
expense associated with amending and paying the filing fee for the assignment of
approximately 1800 UCC Financing Statements in 50 states where Equipment is
located, no assignments of the UCC financing statements evidencing the security
interest of the Sellers in the Equipment will be filed to reflect the Trust
Depositor's, the Trust's or the Indenture Trustee's interests therein. While
failure to file such assignments does not affect the Trust's interest in the
Contracts (including the related Seller's security interest in the related
Equipment) or perfection of the Indenture Trustee's interest in such Contracts
and related Equipment, it does expose the Trust (and thus Noteholders) to the
risk that the Servicer could inadvertently release its security interest in the
Equipment of record, and it could complicate the Trust's enforcement, as
assignee, of the Seller's security interest in the Equipment. While these risks
should not affect the perfection or priority of the interest of the Indenture
Trustee in the Contracts or rights to payment thereunder, they may adversely
affect the right of the Indenture Trustee to receive proceeds of a disposition
of the Equipment related to a Defaulted Contract. Additionally, statutory liens
for repairs or unpaid taxes and other liens arising by operation of law may have
priority even over prior perfected security interests in the Equipment assigned
to the Indenture Trustee.
Also, the transfer to the Trust Depositor of the applicable Seller's
security interest in aircraft ("Title Registry Equipment") securing certain
Contracts, or its ownership interest in Title Registry Equipment subject to
Leases, and the transfer of such interests by the Trust Depositor to the Trust,
is subject to certain federal title registration statutes, regulations and
procedures. Due to the significant administrative burden and expense associated
with re-registering security interests with respect to such Title Registry
Equipment, the registrations of title with respect to Title Registry Equipment
securing Contracts, and to Title Registry Equipment subject to Leases, will not
identify the Trust as secured party or owner, as the case may be, of such
Equipment. There exists a risk in not so identifying the Trust as the new
secured party or owner that, through fraud or negligence, a third party could
acquire an interest in the Title Registry
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Equipment superior to that of the Trust. In addition, statutory liens for
repairs or unpaid taxes may have priority even over a perfected security
interest in the Title Registry Equipment. The Sellers will jointly and severally
represent that as of the Cutoff Date, in the Sellers' reasonable judgment, the
Discounted Contract Balance of End-User Contracts in the Contract Pool that are
secured by Title Registry Equipment, does not exceed [ ]% of the ADCB of the
Contract Pool.
In addition, some of the Equipment related to the Contracts may constitute
"fixtures" under the real estate or UCC provisions of the jurisdiction in which
such Equipment is located. In order to perfect a security interest in such
Equipment, the holder of the security interest must file either a "fixture
filing" under the provisions of the UCC or a real estate mortgage under the real
estate laws of the state where the Equipment is located. These filings must be
made in the real estate records office of the county in which such Equipment is
located. So long as the Obligor does not permanently attach the Equipment to the
real estate, a security interest in the Equipment will be governed by the UCC,
and the filing of a UCC-1 financing statement will be effective to maintain the
priority of the applicable Seller's security interest in such Equipment. Except
for a small portion of such Equipment, the Trust Depositor does not believe that
any of the Equipment will be permanently affixed to the related real estate. If,
however, any Equipment is permanently attached to the real estate in which it is
located, other parties could obtain an interest in the Equipment which is prior
to the security interest originally obtained by the applicable Seller and
transferred to the Trust Depositor. Based on the representation of the Sellers,
the Trust Depositor, however, believes that with respect to Equipment which
constitutes a "fixture", it has obtained a perfected first priority security
interest, through assignment of such security interest by the Seller, by virtue
of the Seller's proper filing of UCC-1 financing statements naming the Seller as
secured party in the real estate records office of the county in which the
Equipment is located. Also, the Sellers will jointly and severally represent
that as of the Cutoff Date, in the Sellers' reasonable judgment, the Discounted
Contract Balance of End-User Contracts in the Contract Pool that are secured by
fixtures, does not exceed [ ]% of the ADCB of the Contract Pool.
The Trust Depositor will be obligated to reacquire any Contract transferred
to the Trust (subject to the Seller's reacquisition thereof) in the event it is
determined that a first priority perfected security interest, or ownership
interest in the case of Leases, in the name of the Trustee in the Equipment
related to such Contract did not exist as of the date such Contract was conveyed
to the Trust, if (i) such breach shall materially adversely affect such Contract
and (ii) such failure or breach shall not have been cured by the last day of the
second (or, if the Trust Depositor elects, the first) month following the
discovery by or notice to the Trust Depositor of such breach, and the Sellers
will be jointly and severally obligated to reacquire such Contract from the
Trust Depositor contemporaneously with the Trust Depositor's reacquisition from
the Trust. If there is any Equipment as to which the applicable Seller failed to
perfect its security interest, such Seller's security interest, and the security
interests of the Trust Depositor and the related Trust (and the Indenture
Trustee as assignee), would be subordinated to, among others, subsequent
purchasers of the Equipment and holders of perfected security interests with
respect thereto. To the extent the security interest of the Seller in the
related Equipment is perfected, subject to the exceptions set forth in the
following sentence, the Trust will have a prior claim over subsequent purchasers
from the Obligor of such Equipment and holders of subsequently perfected
security interests granted by Obligors. However, as against Mechanics' Liens or
liens for taxes and other non-consensual liens unpaid by an Obligor under a
Contract, or in the event of fraud or negligence of the Seller or Servicer, the
Trust could lose the priority of its interest or its interest in such Equipment
following the conveyance of such Contract to the Trust. See "Certain Legal
Aspects of the Contracts" herein. Neither the Trust Depositor nor the Servicer
nor any Seller will have any obligation to reacquire a Contract if any of the
occurrences described in the foregoing sentence (other than fraud or negligence
of the Seller) result in the Trust's losing the priority of its security
interest or its security interest in such Equipment after the date such Contract
is conveyed to the Trust.
Legal Risks Associated With Transfer of Contracts. There are certain
limited circumstances under the Uniform Commercial Code (the "UCC") and
applicable federal law in which prior or subsequent transferees of Contracts or
Secondary Contracts could have an interest in such contracts with priority over
the Trust's interest. See "Certain Legal Aspects of the Contracts--Transfer of
Contracts." Under each Vendor Agreement, the Vendor (i) has or will warrant to
the applicable Seller that the Contracts transferred to the Seller thereunder
will be transferred free and clear of the lien of any third party and that the
interests in Secondary Contracts transferred thereunder will be transferred free
and clear of the lien of any third party and (ii) has or will also covenant that
it will not sell, pledge, assign, transfer or grant any lien on any Contract (or
Secondary Contract) transferred thereunder to the Seller. Under the Transfer and
Sale Agreement, the Sellers will jointly and severally warrant to the Trust
Depositor and, under the Sale and Servicing Agreement, the Trust Depositor will
warrant to the Trust, that the Contracts and security interests in Secondary
Contracts transferred thereunder will be transferred free and clear of the lien
of any third party. Also, under the Transfer and Sale Agreement, the Sellers
will jointly and severally covenant to the Trust Depositor and, under the Sale
and Servicing Agreement, the Trust Depositor will also covenant to the Trust,
that it will not sell, pledge, assign, transfer or grant any lien on any
Contract or Secondary Contract transferred to the Trust Depositor or the Trust.
Risk of Ineffective Sale in Vendor Bankruptcy. The Sellers will either (i)
originate Contracts or (ii) acquire End-User Contracts from a Vendor, which
Contracts will be transferred to the Trust Depositor. If the acquisition of an
End-User
-22-
<PAGE>
Contract by a Seller is treated as a sale of such Contract from the applicable
Vendor to such Seller, except in certain limited circumstances, such Contract
would not be part of such Vendor's bankruptcy estate and would not be available
to such Vendor's creditors. If a Vendor became a debtor in a bankruptcy case
and, in the case of End-User Contracts acquired as described in clause (ii)
above, if an unpaid creditor of such Vendor or a representative of creditors of
such Vendor, such as a trustee in bankruptcy, or such Vendor acting as a debtor-
in-possession, were to take the position that the sale of such Contracts to a
Seller was ineffective to remove such Contracts from such Vendor's estate (for
instance, that such sale should be recharacterized as a pledge of Contracts to
secure borrowings of such Vendor), then delays in payments under the Contracts
to the Trust could occur or, should the court rule in favor of such creditor,
representative or Vendor, reductions in the amount of such payments could
result. If the transfer of End-User Contracts to a Seller as described in clause
(ii) above is recharacterized as a pledge, a tax or government lien on the
property of the pledging Vendor arising before the Contracts came into existence
may have priority over such Seller's (and hence the Trust Depositor's, the
Trust's and the Indenture Trustee's) interest in the Contracts. No law firm
will, in connection with the offering of the Notes, express any opinion as to
the issues discussed in this paragraph. See "Certain Legal Aspects of the
Contracts--Certain Matters Relating to Bankruptcy".
Risk of Ineffective Sale in Seller Bankruptcy. In the Transfer and Sale
Agreement, the Sellers will jointly and severally warrant to the Trust Depositor
that the conveyance of the Contracts to the Trust Depositor thereunder is a
valid sale and transfer of such Contracts to the Trust Depositor. In addition,
the Sellers and the Trust Depositor have covenanted that they will each treat
the transactions described herein as a sale of the Contracts to the Trust
Depositor, and the Sellers will take all actions that are required under
applicable law to perfect the Trust Depositor's ownership interest in the
Contracts sold by the Sellers and the Trust Depositor's security interest (as
assignee of the Seller's security interest) in the Secondary Contracts securing
Vendor Loans sold by the Sellers. See "Certain Legal Aspects of the Contracts--
Transfer of Contracts". Moreover, Winston & Strawn, special counsel to the
Sellers and the Trust Depositor, will render a reasoned opinion to the effect
that in the event a Seller became a debtor under the United States Bankruptcy
Code, the transfer of the Contracts from the Seller to the Trust Depositor in
accordance with the Transfer and Sale Agreement would be treated as a sale and
not as a pledge to secure borrowings.
If, however, the transfer of the Contracts from a Seller to the Trust
Depositor were treated as a pledge to secure borrowings by the Seller, the
distribution of proceeds of the Contracts to the Trust might be subject to the
automatic stay provisions of the United States Bankruptcy Code, which would
delay the distribution of such proceeds for an uncertain period of time. In
addition, a bankruptcy trustee would have the power to sell the Contracts if the
proceeds of such sale could satisfy the amount of the debt deemed owed by the
Seller, or the bankruptcy trustee could substitute other collateral in lieu of
the Contracts to secure such debt, or such debt could be subject to adjustment
by the bankruptcy court if the Seller were to file for reorganization under
Chapter 11 of the United States Bankruptcy Code. A case decided by the United
States Court of Appeals for the Tenth Circuit contains language to the effect
that accounts sold by a debtor under Article 9 of the Uniform Commercial Code
("UCC") would remain property of the debtor's bankruptcy estate. If, following a
bankruptcy of the Seller, a court were to follow the reasoning of the Tenth
Circuit and apply such reasoning to chattel paper, then similar reductions or
delays in payments of collections on or in respect of the Contracts could occur.
Additionally, because the Sellers have purchased Contracts from Vendors located
in the Tenth Circuit which could become debtors in a bankruptcy proceeding, the
rationale of such case could be applicable to such Vendors' sales of Contracts
to the Sellers and the corresponding negative implications for receipt of
payments with respect to such Contracts may occur.
Risks Associated with Insolvency of the Trust Depositor or the Trust.
Certain restrictions have been imposed on the Trust Depositor and the Trust and
certain other parties to the transactions described herein which are intended to
reduce the risk of an insolvency proceeding involving the Trust Depositor or the
Trust. These restrictions include incorporating the Trust Depositor as a
separate, special purpose corporation pursuant to a certificate of incorporation
containing certain restrictions on the nature and scope of its business.
Additionally, the Trust Depositor may commence a voluntary case or proceeding
under any bankruptcy or insolvency law, or cause the Trust to commence a
voluntary case or proceeding under any bankruptcy or insolvency law, only upon
the affirmative vote of all its directors, including its independent directors,
as long as the Trust Depositor is solvent and does not reasonably foresee
becoming insolvent. The Trust Depositor's certificate of incorporation requires
that the Trust Depositor have at all times at least two independent directors.
In addition, the Trust Depositor has no intent to file, and the Seller has
represented that it has no intent to cause the filing of, a voluntary
application under the insolvency laws with respect to the Trust Depositor, as
long as the Trust Depositor is solvent and does not reasonably foresee becoming
insolvent. However, no assurance can be given that insolvency proceedings
involving either the Trust Depositor or the Trust will not occur. In the event
the Trust Depositor becomes subject to insolvency proceedings, the Trust, the
Trust's interest in the Trust Assets and the Trust's obligation to make payments
on the Notes might also become subject to such insolvency proceedings. In the
event of insolvency proceedings involving the Trust, the Trust's interest in the
Trust Assets and the Trust's obligation to make payments on the Notes would
become subject to such insolvency proceedings. No assurance can be given that
insolvency proceedings involving the Seller would not lead to insolvency
proceedings of either, or both, of the Trust Depositor or the Trust. In either
such event, or if an attempt were made to litigate any of the foregoing issues,
delays
-23-
<PAGE>
of distributions on the Notes, possible reductions in the amount of payment of
principal of and interest on the Notes and limitations (including a stay) on the
exercise of remedies under the Indenture and the Sale and Servicing Agreement
could occur, although the Noteholders would continue to have the benefit of the
Indenture Trustee's security interest in the Trust Assets under the Indenture.
The right of the Indenture Trustee, as a secured party under the Indenture
for the benefit of the Noteholders, to foreclose upon and sell the Trust Assets
is likely to be significantly impaired by applicable bankruptcy laws, including
the automatic stay pursuant to Section 362 of the Bankruptcy Code, if a
bankruptcy proceeding were to be commenced by or against the Trust, and possibly
the Trust Depositor, before or possibly even after the Indenture Trustee has
foreclosed upon and sold the Trust Assets. Under the bankruptcy laws, payments
on debts are not made and secured creditors are prohibited from repossessing
their security from a debtor in a bankruptcy case or from disposing of security
repossessed from such a debtor, without bankruptcy court approval. Moreover, the
bankruptcy laws generally permit the debtor to continue to retain and to use
collateral even though the debtor is in default under the applicable debt
instruments, provided generally that the secured creditor has the right to seek
"adequate protection". The meaning of the term "adequate protection" may vary
according to circumstances, but it is intended in general to protect the value
of the security from any diminution in the value of the collateral as a result
of the use of the collateral by the debtor during the pendency of the bankruptcy
case. In view of the lack of a precise definition of the term "adequate
protection" and the broad discretionary powers of a bankruptcy court, it is
impossible to predict whether or to what extent the holders of the Notes would
be compensated for any diminution in value of the Trust Assets. Furthermore, in
the event a bankruptcy court determines that the value of the Trust Assets is
not sufficient to repay all amounts due on the Notes, the Noteholders would hold
secured claims only to the extent of the value of the Trust Assets to which the
holders are entitled, and unsecured claims with respect to such shortfall. The
bankruptcy laws do not permit the payment or accrual of post-petition interest,
costs and attorneys' fees during a debtor's bankruptcy case unless, and then
only to the extent, the claims are oversecured.
Risks Associated with Insolvency of the Vendors. In the event a Vendor
under a Vendor Obligation becomes subject to insolvency proceedings, the
Secondary Contracts and other Applicable Security for such Vendor Obligation as
well as such Vendor's obligation to make payments thereon would also become
subject to such insolvency proceedings. In such event, delays of distributions
on the Notes, possible reductions in the amount of payment of principal of and
interest on the Notes and limitations (including a stay) on the exercise of
remedies under the Indenture and the Sale and Servicing Agreement could occur,
although the Noteholders would continue to have the benefit of the Indenture
Trustee's security interest in the Vendor Loans and Applicable Security therefor
under the Indenture.
The right of the Indenture Trustee, as secured party under the Indenture
for the benefit of the Noteholders, to foreclose upon and sell any Secondary
Contracts is likely to be significantly impaired by applicable bankruptcy laws,
including the automatic stay pursuant to Section 362 of the Bankruptcy Code, if
a bankruptcy proceeding were to be commenced by or against a Vendor obligated on
a Vendor Obligation, before or possibly even after the Indenture Trustee has
foreclosed upon and sold such Secondary Contracts or Applicable Security. Under
the bankruptcy laws, payments on debts are not made and secured creditors are
prohibited from repossessing their security from a debtor in a bankruptcy case
or from disposing of security repossessed from such a debtor, without bankruptcy
court approval. Moreover, the bankruptcy laws generally permit the debtor to
continue to retain and to use collateral even though the debtor is in default
under the applicable debt instruments, provided generally that the secured
creditor has the right to seek "adequate protection". The meaning of the term
"adequate protection" may vary according to circumstances, but it is intended in
general to protect the value of the security from any diminution in the value of
the collateral as a result of the use of the collateral by the debtor during the
pendency of the bankruptcy case. In view of the lack of a precise definition of
the term "adequate protection" and the broad discretionary powers of a
bankruptcy court, it is impossible to predict whether or to what extent the
holders of the Notes would be compensated for any diminution in value of the
Secondary Contracts. Furthermore, in the event a bankruptcy court determines
that the value of the Secondary Contracts is not sufficient to repay all amounts
due on the related Vendor Loans, the Noteholders would hold secured claims in a
Vendor bankruptcy only to the extent of the value of the Secondary Contracts to
which the holders are entitled, and unsecured claims with respect to such
shortfall. The bankruptcy laws do not permit the payment or accrual of post-
petition interest, costs and attorneys' fees during a debtor's bankruptcy case
unless, and then only to the extent, the claims are oversecured.
Certain Vendor Assignments and certain assignments executed under various
Program Agreements (each, a "Program Assignment") provide that the Seller has
recourse to the related Vendor for all or a portion of the losses the Seller may
incur as a result of a default under the End-User Contracts sold under such
Vendor Assignment or Program Assignment. In the event of a Vendor's bankruptcy,
a bankruptcy trustee, a creditor or the Vendor as debtor in possession might
attempt to characterize sales to the Seller pursuant to such Vendor Assignments
or Program Assignments as loans to the Vendor from the Seller secured by the
Contracts sold thereunder. If such an attempt is successful, such Vendor
Assignment or Program Assignment would be subject to the risks described herein
for Vendor Loans. In such case the Contracts sold under such Vendor Assignment
-24-
<PAGE>
or Program Assignment would constitute Secondary Contracts under the
recharacterized Vendor Assignment or Program Assignment.
Risks Associated with Required Sale of Contracts Resulting from Trust
Depositor Bankruptcy. If a conservator, receiver or liquidator of the Trust
Depositor was appointed or if certain other events relating to the bankruptcy,
insolvency or receivership of the Trust Depositor were to occur (an "Insolvency
Event"), then an Event of Default would occur with respect to the Notes and,
pursuant to the terms of the Indenture and the Sale and Servicing Agreement, and
assuming the Trust was not then a debtor in a bankruptcy case, the Indenture
Trustee would be required to sell the Contracts, thereby causing early
termination of the Trust and a possible loss to the Noteholders if the sum of
(i) the proceeds of the sale allocable to the Noteholders and (ii) the proceeds
of any collections on the Contracts in the Collection Account allocable to the
Noteholders, is insufficient to pay the Noteholders in full. See "Certain Legal
Aspects of the Contracts--Transfer of Contracts" and "--Certain Matters Relating
to Bankruptcy".
Risk of Realization of Contract Amount Upon Bankruptcy. Application of
federal and state bankruptcy and insolvency laws in the event of bankruptcy of
End-Users could affect the interests of the Noteholders in the Contracts and
Secondary Contracts if such laws result in any such contracts being written off
as uncollectible or result in delay in payments due on any Contracts. See
"Description of the Notes--Defaulted Contracts" and "Certain Legal Aspects of
the Contracts--Certain Matters Relating to Bankruptcy". In addition, application
of federal and state bankruptcy and insolvency laws in the event of bankruptcy
of Vendors could affect the interests of the Noteholders in the Vendor Loans and
Secondary Contracts if such laws result in any such Vendor Loans or Secondary
Contracts being written off as uncollectible or result in delay in payments due
on any such Vendor Loans or Secondary Contracts. See "--Insolvency of the
Vendors". State laws impose requirements and restrictions relating to
foreclosure sales and obtaining deficiency judgments following such sales. In
the event that the Noteholders must rely on repossession and disposition of
Equipment to recover amounts due on Defaulted Contracts, such amounts may not be
realized because of the application of these requirements and restrictions.
Other factors that may affect the ability of the Noteholders to realize the full
amount due on a Contract or a Secondary Contract include the failure to file
financing statements to perfect the Seller's, Trust Depositor's, Trust's or the
Indenture Trustee's security interest, as applicable, in the Equipment or other
Applicable Security and the depreciation, obsolescence, damage or loss of any
item of Equipment. As a result, the Noteholders may be subject to delays in
receiving payments and losses if the over collateralization represented by the
subordinated Certificates is insufficient to absorb such losses.
Certain States may Limit the Enforceability of Certain Lease Provisions.
Certain states have adopted a version of Article 2A of the UCC ("Article 2A"),
which purports to codify many provisions of existing common law. Although there
is little precedent regarding how Article 2A will be interpreted, it may, among
other things, limit enforceability of any "unconscionable" lease or
"unconscionable" provision in a lease, provide a lessee with remedies, including
the right to cancel the lease contract, for certain lessor breaches or defaults,
and may add to or modify the terms of "consumer leases" and leases in which the
lessee is a "merchant lessee". However, in the Transfer and Sale Agreement, the
Sellers will jointly and severally represent that (I) no End-User Contract is a
"consumer lease" as defined in Section 2A-103(1)(e) of the UCC; and (ii) to the
best of the Sellers' knowledge, each End-User has accepted the Equipment leased
to it and, after reasonable opportunity to inspect and test, has not notified
the Seller of any defects therein. Article 2A, moreover, recognizes typical
commercial lease "hell or high water" rental payment clauses (which clauses
unconditionally obligate the lessee to make all scheduled payments, without
setoff) and validates reasonable liquidated damages provisions in the event of
lessor or lessee defaults. Article 2A also recognizes the concept of freedom of
contract and permits the parties in a commercial context a wide degree of
latitude to vary from the provisions of the law.
Certain Contracts Relating to Software or Services are not Secured by Such
Software or Services
Certain Contracts will relate not to Equipment but rather to Software or
Services that are not owned by the Seller and in which no related interest will
be transferred to the Trust. See "The Contracts Generally". Accordingly, if any
such Contract becomes a Defaulted Contract, the Trust will not realize any
proceeds from the related Software or Services from which to satisfy any related
outstanding Scheduled Payments.
Risks Associated with Non-Recourse Nature of the Offered Notes - No Recourse to
the Seller, Servicer or its Affiliates; Limited Vendor Recourse
Neither the Sellers, the Servicer nor any of their affiliates is generally
obligated to make any payments in respect of the Notes or the Contracts.
However, in connection with the sale of Contracts by a Seller to the Trust
Depositor, and the concurrent conveyance of such Contracts by the Trust
Depositor to the Trust, the Sellers will jointly and severally make
representations and warranties with respect to the characteristics of such
Contracts and, in certain circumstances, the Sellers may be required to
repurchase Contracts from the Trust Depositor (and the Trust Depositor
concurrently from the Trust) with respect to which such representations and
warranties have been breached. See "The Transfer and Sale
-25-
<PAGE>
Agreement and The Sale and Servicing Agreement Generally--Representations and
Warranties" herein. Moreover, if Heller Financial were to cease acting as
Servicer, delays in processing payments on the Contracts and information in
respect thereof could occur and result in delays in payments to the Noteholders.
Because the Trust is a limited purpose trust with limited assets, the
Noteholders must rely solely upon the Contracts, the Equipment and related
security described herein for payment of principal of and interest on the Notes.
Moreover, in respect of Vendor Loans, the Noteholders must generally rely solely
upon the Secondary Contracts securing such Vendor Loans (together with the
Equipment and related security securing such Secondary Contracts, should the
End-User default in its obligation to pay such Secondary Contracts), since
Vendor Loans are generally non-recourse to the Vendors (i.e., the holder of such
Vendor Obligation is limited to recovering amounts solely from the Secondary
Contracts and related security therefor) except for certain Vendor Loans which
are covered by a form of limited Vendor recourse. If payments made or realized
from the Contracts (including Secondary Contracts securing Vendor Loans) and the
disposition proceeds of the Equipment are insufficient to make payments on the
Notes, no other assets will be available for the payment of the deficiency.
Book-Entry Registration-Noteholders Limited to Exercising Their Rights Through
DTC, Euroclear or CEDEL
The Notes offered hereby initially will be represented by one or more Notes
registered in the name of Cede & Co. and will not be registered in the names of
the beneficial owners or their nominees. As a result of this, unless and until
Definitive Notes are issued, beneficial owners will not be recognized by the
Issuer or the Indenture Trustee as Noteholders, as that term is used in the
Indenture. Hence, until such time, beneficial owners will only be able to
exercise the rights of Noteholders indirectly, through DTC, Euroclear or CEDEL
and their respective participating organizations, and will receive reports and
other information provided for under the Indenture only if, when and to the
extent provided by DTC, Euroclear or CEDEL, as the case may be, and its
participating organizations. See "Description of the Notes--Book-Entry
Registration."
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<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes and the Certificates will be
paid to the Trust Depositor in consideration of the transfer to the Trust of the
Contracts. Such proceeds will be applied by the Trust Depositor to the purchase
price of the Contracts to be sold to the Trust Depositor by the applicable
Seller pursuant to the Transfer and Sale Agreement. The Sellers will use the
proceeds received to pay down preexisting debt and for other general corporate
purposes.
THE TRUST
The Notes offered hereby will be issued by the Trust which has been
established by the Trust Depositor pursuant to the Trust Agreement. The
Contract Pool will be formed and transferred to the Trust pursuant to the Sale
and Servicing Agreement and pledged to the Indenture Trustee pursuant to the
Indenture.
The Trust will be organized as a business trust to be formed in accordance
with the laws of the State of Delaware, pursuant to the Trust Agreement, solely
for the purpose of effectuating the transactions described herein. Prior to
formation, the Trust will have had no assets or obligations and no operating
history. Upon formation, the Trust will not engage in any business activity
other than (a) acquiring, managing and holding the Contracts and related
interests described herein, (b) issuing the Notes and Certificates, (c) making
distributions and payments thereon and (d) engaging in those activities,
including entering into agreements, that are necessary, suitable or convenient
to accomplish the foregoing or are incidental thereto or connected therewith.
As a consequence, the Trust is not expected to have any source of capital
resources other than the Trust Assets. As of the date of this Prospectus, the
Trust is not subject to any legal proceedings.
THE CONTRACTS POOL
The Transferred Contracts. The Transferred Contracts will consist of
Contracts purchased from the Seller by the Trust Depositor on the Closing Date
(and as of the Cutoff Date) under the Transfer and Sale Agreement dated as of
August 1, 1997 (the "Transfer and Sale Agreement"), as well as any Additional
Contracts or Substitute Contracts conveyed thereunder as described herein as of
their applicable Cutoff Dates. The Transferred Contracts have been and will be
selected by the Sellers from their portfolio of Contracts based on the criteria
specified in the Transfer and Sale Agreement and the Sale and Servicing
Agreement. See "The Sale and Servicing Agreement Generally--Representations and
Warranties" and "--Concentration Amounts" herein which specifically describe the
criteria for eligibility in the Contracts Pool. The representations of the
Sellers include a representation that no adverse selection with respect to the
Contracts has occurred. The Sellers will jointly and severally represent that
all of the Contracts are commercial, rather than consumer, leases or
loans/financings, and that no adverse selection process was employed in the
Sellers' selection of Contracts for sale under the Transfer and Sale Agreement.
As of the Cutoff Date, the ADCB of the Transferred Contracts was $276,018,000,
the weighted average remaining term to maturity for the Transferred Contracts
was approximately [ ] months, the final scheduled payment date of the
Transferred Contract with the latest maturity or expiration was [ ],
200[ ] and the average Discounted Contract Balance was approximately
$147,998.70]. The Discount Rate for the Transferred Contracts is [ ]% per
annum.
For further information regarding the Transferred Contracts, see "The
Contracts Generally" herein and "The Contracts Pool--Other Pool Data" below.
Other Pool Data. As of the Cutoff Date, there are [ ] Transferred
Contracts, with an ADCB (calculated at the Discount Rate) of $[ ].
Approximately [ ]% of the ADCB of the Transferred Contracts provide for
payments by the Obligor thereunder on a basis other than monthly payments. The
composition and distribution of the Transferred Contracts by remaining term,
original term, Discounted Contract Balance, End-User industry, geographic
distribution, type of equipment and type of End-User Contract are set forth in
the following tables and are reported as of the Cutoff Date. Subschedules to
Transferred Contracts reflecting amounts billed to separate billing locations
are treated as separate Transferred Contracts. Classification by industry is
based on Heller Financial's customary procedures for determining obligor
industry. Percentages and amounts set forth in the following tables may not
total due to rounding. The largest End-User industry concentration (including
End-User Obligors on Contracts originated by the Sellers directly, as well as
Contracts originated through Vendors with or without Vendor recourse, and
Secondary Contracts securing Vendor Loans), which represents an ADCB of 27.00%
as of the Cutoff Date, relates to printing equipment. See "Risk Factors--
Certain Risks Associated with Geographic or Industry Concentrations of
Contracts" herein, and "The Contracts Pool - Contract Loss Experience" below.
The statistical information concerning the Contracts set forth below is
based upon information as of the opening of business on the Cutoff Date and the
Statistical Discount Rate. Certain Contracts included in the pool as of the
Cutoff
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<PAGE>
Date may be determined not to meet the eligibility requirements for the final
pool, and may not be included in the final Contract Pool. While the statistical
distribution of the characteristics as of the Closing Date for the final
Contract Pool and calculated at the actual Discount Rate will vary somewhat from
the statistical distribution of such characteristics as of the Cutoff Date and
calculated at the Statistical Discount Rate as presented in this Prospectus,
such variance will not be material.
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<PAGE>
COMPOSITION OF THE CONTRACT POOL
Aggregate Discounted Contract
Balance
Number of Contracts
Weighted Average Original Term
(Range) (in months)
Weighted Average Remaining Term
(Range) (in months)
Average Discounted Contract
Balance
-29-
<PAGE>
DISTRIBUTION OF CONTRACTS BY CONTRACT TYPE
<TABLE>
<CAPTION>
Percentage of Number of Percentage of Aggregate
Type Number of Contracts Contracts Discounted Contract Balance Discounted Contract Balance
<S> <C> <C> <C> <C>
End-User Loans 393 21.07% $127,601,013 46.23%
Vendor Loans 1 0.05% $ 3,456,590 1.25%
Finance Leases 1,474 78.87% $144,959,977 52.52%
Total 1,865 100.00% $276,017,580 100.00%
</TABLE>
-30-
<PAGE>
DISTRIBUTION OF CONTRACTS BY STATE IN WHICH OBLIGORS ARE LOCATED
<TABLE>
<CAPTION>
Number of Percentage of Number Percentage of Number
State Contracts of Contracts Number of Obligors(1) of Obligors
<S> <C> <C> <C> <C> <C> <C>
Alabama
Alaska
Arizona
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
</TABLE>
<TABLE>
<CAPTION>
Percentage of
Discounted Contract Aggregate Discounted
State Balance Contract Balance
<S> <C> <C>
Alabama
Alaska
Arizona
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of Number Percentage of Number
State Contracts of Contracts Number of Obligors(1) of Obligors
<S> <C> <C> <C> <C>
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
</TABLE>
<TABLE>
<CAPTION>
Percentage of
Discounted Contract Aggregate Discounted
State Balance Contract Balance
<S> <C> <C>
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
</TABLE>
-32-
<PAGE>
DISTRIBUTION OF CONTRACTS BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
Percentage of Number Percentage of Aggregate
Equipment Type Number of Contracts of Contracts Discounted Contract Balance Discounted Contract Balance
<S> <C> <C> <C> <C>
Printing
[Plastics]
Computer Hardware
Computer Software
Telephones
Telex Machines
Facsimile
Office Furniture
Mailing Equipment
Manufacturing Equipment
Construction Equipment
Other/Miscellaneous
Total
</TABLE>
DISTRIBUTION OF CONTRACTS BY OBLIGOR INDUSTRY
<TABLE>
<CAPTION>
Percentage of Number of Percentage of Aggregate
Industry Number of Contracts Contracts Discounted Contract Balance Discounted Contract
<S> <C> <C> <C> <C>
Commercial Printing 244 13.08% $ 74,527,671 27.00%
Lithographic
Industrial Machinery 278 14.91% $ 18,780,021 6.80%
Plastic Products 220 11.80% $ 16,008,638 5.80%
Semiconductors and related 8 0.43% $ 13,144,702 4.76%
devices
Eating places 20 1.07% $ 8,784,741 3.18%
Grocery stores 7 0.38% $ 8,125,660 2.94%
Printed Circuit boards 5 0.27% $ 5,695,061 2.06%
Data processing and 3 0.16% $ 5,158,856 1.87%
preparations
Special dies tools, jigs 78 4.18% $ 4,970,333 1.80%
and fixtures
Total 1,865 100.00% $276,017,580 100.00%
</TABLE>
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<PAGE>
DISTRIBUTION OF CONTRACTS BY CONTRACT BALANCE
<TABLE>
<CAPTION>
Percentage of Aggregate Discounted
Discounted Contract Balance Number of Contracts Percentage of Number of Contracts Contract Balance
<S> <C> <C> <C>
$ 0.00 - $ 250,000 1,665 89.27% 35.35%
$ 250,000 - $ 500,000 86 4.61% 10.80%
$ 500,000 - $ 750,000 41 2.19% 8.93%
$ 750,0010 - $1,000,000 17 0.91% 5.20%
$1,000,000 - $1,250,000 15 0.80% 6.07%
$1,250,000 - $1,500,000 8 0.42% 4.01%
$1,500,000 - $1,750,000 8 0.42% 4.65%
$1,750,000 - $2,000,000 7 0.37% 4.63%
greater than $2,000,000 18 0.96% 20.31%
Total 1,865 100.00% 100.00%
</TABLE>
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<PAGE>
DISTRIBUTION OF CONTRACTS BY
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
Remaining Term Number of Contracts Percentage of Number of Percentage of Aggregate
(Months) Contracts Discounted Contract Balance Discounted Contract Balance
<S> <C> <C> <C> <C>
0.00 - 12.00 261 13.99% $ 6,733,541.84 2.43%
12.00 - 24.00 494 26.48% $ 29,136,916.22 10.55%
24.00 - 36.00 548 29.38% $ 67,519,350.04 24.46%
36.00 - 48.00 328 17.58% $ 58,065,978.13 20.31%
48.00 - 60.00 176 9.43% $ 61,309,596.00 22.21%
60.00 - 72.00 43 2.30% $ 43,596,250.99 15.79%
72.00 - 84.00 15 0.80% $ 11,655,946.57 4.22%
Total 1,865 100.00% $276,017,579.79 100.00%
</TABLE>
DISTRIBUTIONS OF CONTRACTS BY
ORIGINAL CONTRACT TERM
<TABLE>
<CAPTION>
Remaining Term Number of Contracts Percentage of Number of Percentage of Aggregate
(Months) Contracts Discounted Contract Balance Discounted Contract Balance
<S> <C> <C> <C> <C>
0.00 - 12.00 0 0.00% $ 0.00 0.00%
12.00 - 24.00 9 0.48% $ 887,956.63 0.32%
24.00 -36.00 185 9.91% $ 18,695,761.62 6.77%
36.00 - 48.00 196 10.50% $ 24,612,788.45 8.91%
48.00 - 60.00 1,049 56.24% $113,232,216.52 41.02%
60.00 - 72.00 265 14.20% $ 36,122,065.53 13.08%
72.00 - 84.00 69 3.69% $ 38,731,138.59 14.03%
84.00 - 96.00 70 3.75% $ 27,784,232.35 10.06%
Greater Than 96.00 22 1.17% $ 15,951,420.10 5.77%
Total 1,865 100.00% $276,951,420.10 100.00%
</TABLE>
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<PAGE>
Delinquency and Loan Loss Information
The following tables set forth the Sellers' delinquency and loss experience
on their aggregate portfolio of owned Contracts for the below described periods.
For purposes of this table such experience is described in terms of the Sellers'
funds deployed for the acquisition of the related Contracts less associated
unearned finance charges (hereinafter "Adjusted Deployed Funds").
Contract Portfolio
Delinquency Experience
(Dollars in Thousands)
At
-------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Six Months Twelve Months Twelve Months Twelve Months
Ended Ended Ended Ended Ended
June 30, June 30, December 31, December 31, December 31,
1992(2) 1996(2) 1996 1995 1994
------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ending Adjusted Deployed
Funds..................... $1,700.00 100.00% $1,289.00 100.00% $1,584.00 100.00% $1,193.00 100.00% $889.00 100.00%
========= ======= ========= ======= ========= ======= ========= ======= ======= =======
No. of Delinquent Days
(% of Ending Adjusted
Deployed Funds............
61-90 days................ 5.60 0.33% 4.00 0.31% 3.50 0.22% 11.60 0.97% 9.30 1.05%
========= ======= ========= ======= ========= ======= ========= ======= ======= =======
Over 90 days............. 19.60 1.15% 16.60 1.29% 18.70 1.18% 12.20 1.02% 7.20 0.81%
========= ======= ========= ======= ========= ======= ========= ======= ======= =======
Total..................... 25.20 1.48% 20.60 1.60% 22.20 1.40% 23.80 1.99% 16.50 1.86%
========= ======= ========= ======= ========= ======= ========= ======= ======= =======
</TABLE>
(1) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30 day months). Consequently, a Contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month. A Contract is considered delinquent consistent with
the definition provided above notwithstanding the existence of Vendor
recourse; see the "Contract Portfolio - Contract Loss Experience" for the
impact of Vendor recourse on the Contracts' loss experience.
(2) Annualized.
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<PAGE>
Contract Portfolio
Contract Loss Experience
(Dollars in Thousands)
At
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Six Months Six Months Twelve Months Twelve Months Twelve Months
---------- ---------- ------------- ------------- -------------
Ended Ended Ended Ended Ended
----- ----- ----- ----- -----
June 30, June 30, December 31, December 31, December 31,
-------- -------- ------------ ------------ ------------
1997(1) 1996(1) 1996 1995 1994
------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average
Adjusted
Deployed
Funds
(of all
Contracts
Serviced) $1,700.00 100.00% $1,289.00 100% $1,584.00 100% $1,193.00 100% $889.00 100%
Gross Losses
(as % of
Average
Adjusted
Deployed
Funds 0.28 0.02% 0.34 0.03% 0.65 0.04% 0.89 0.07% 1.08 0.12%
Gross
Recoveries
(as % of
Average
Adjusted
Deployed
Funds) 0.17 0.01% 0.12 0.01% 0.36 0.02% 0.32 0.03% 0.36 0.04%
Net Losses
(as % of
Average
Adjusted
Deployed
Funds 0.10 0.01% 0.21 0.02% 0.29 0.02% 0.58 0.05% 0.72 0.08%
Net Losses
(as % of
Liquidations)
(2)(3) 0.10 36.50% 0.21 63.68% 0.29 44.41% 0.58 64.66% 0.72 66.83%
</TABLE>
(1) Annualized.
(2) With respect to Contracts representing over 90% of the adjusted deployed
funds for Contracts secured by printing equipment, defaults would have been
approximately $7 million in the twelve months ended December 31, 1996 and
$7 million for the twelve months ended December 31, 1995; after vendor
recourse actual losses aggregated $42,000 over the period.
(3) The calculation of net loss includes actual charge-offs, deficiency
balances remaining after liquidation of repossessed Equipment and expenses
of repossession and liquidation, net of recoveries inclusive of Vendor
recourse.
The data presented in the foregoing tables are for illustrative purposes only
and there is no assurance that the delinquency or loss experience of the
Contracts will be similar to that set forth above.
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<PAGE>
THE CONTRACTS GENERALLY
The Trust will be entitled to all collections on account of the Contracts
in the Contract Pool and related Equipment and Applicable Security, except for
(i) collections on deposit in the Collection Account or otherwise received by
the Servicer on or with respect to the Contract Pool or related Equipment, which
collections are attributable to any taxes, fees or other charges imposed by any
governmental authority, and (ii) collections representing reimbursements of
insurance premiums or payments for certain services that were not financed by
the Seller, and (iii) any proceeds from the sale or other disposition of
Equipment in excess of the difference between (x) the Discounted Contract
Balance of the related Contract as of the applicable Cutoff Date, over (y) the
present value as of the applicable Cutoff Date of all amounts (other than
Excluded Amounts) actually received by the Trust in respect of such Contract,
discounted monthly at the Discount Rate (amounts described in clauses (i), (ii)
and (iii), "Excluded Amounts") due on or after the applicable Cutoff Date for
such Contracts.
End-User Contracts
The following discussion describes the End-User Contracts (including End-
User Contracts which are Secondary Contracts). All of the End-User Contracts to
be included from time to time in the Trust are CSAs, Leases, Secured Notes, IPAs
and Financing Agreements in respect of Equipment, Software and Services. There
is no limit on the number of Contracts in the Contract Pool which may consist of
any of the foregoing types. Each Contract is required, however, to be an
Eligible Contract (as defined in "The Transfer and Sale Agreement and Sale and
Servicing Agreement Generally") as of the Cutoff Date.
Conditional Sale Agreements. The Sellers offer financing for Equipment
under CSAs assigned to the Seller by Vendors. It is expected that most of the
CSAs in the Contract Pool will consist of either the Sellers' standard pre-
printed form, or of the Vendors' standard, pre-printed forms (which in each case
have been reviewed and approved for use by the applicable Seller). The CSA sets
forth the description of each Financed Item and the schedule of installment
payments. Generally, loans under CSAs are fixed rate and are for a one to five
year term. Payments under CSAs generally are due monthly. CSA terms (i) provide
for a grant by the End-User thereunder of a security interest in any related
Equipment (which security interest is assigned by the Vendor to the Seller),
(ii) may allow prepayment of the obligation upon payment, where allowed by
applicable state law, of an additional prepayment fee, (iii) require the End-
User to maintain the Equipment, keep it free and clear of liens and encumbrances
and pay all taxes related to the Equipment, (iv) restrict the modification or
disposal of the Equipment without the seller's, or its assignee's, consent, (v)
include a disclaimer of warranties, (vi) include the End-User's indemnity
against liabilities arising from the use, possession or ownership of the
Equipment, (vii) include the End-User's absolute (except as provided in clause
(ii)) and unconditional obligation to pay the installment payments thereunder
and (viii) include specifically identifiable events of default and remedies
therefor. The CSA also requires each End-User to maintain insurance, the terms
of which may vary. The terms of a CSA may be modified at its inception at the
End-User's request. Such modifications must either be approved by the Seller's
legal department and certain levels of management before the Seller will agree
to accept an assignment of the CSA from a Vendor, or the Vendor must indemnify
the Seller against any losses or damages it may suffer as a result of such
modifications.
Leases. The Sellers, either directly or by assignment from Vendors, offer
financing of Equipment, Software and Services under Leases. Leases may consist
of individual lease agreements relating to a single, separate transaction and
Financed Item, or may consist of individual transactions written under and
governed by a master lease agreement (each, an "MLA") which contains the general
terms and conditions of the transaction. Specific terms and conditions, such as
descriptions of the specific Equipment, Software and Services being leased or
financed and the schedule of related rental payments, are contained in a
supplement or schedule to the MLA (each an "MLA Supplement"), which is signed by
the End-User as lessee, and either the Vendor or the Seller, as lessor. The MLA
Supplement incorporates the MLA by reference, and is treated by the Seller as a
separate Lease. Each Lease is originated in the ordinary course of business by
either the Seller or a Vendor (and assigned to the Seller pursuant to a Vendor
Agreement).
The initial terms of the Leases in the Contract Pool generally range from
one to five years. Each Lease provides for the periodic payment by the End-User
of rent in advance or arrears, generally monthly or quarterly. Such periodic
payments represent the amortization, generally on a level basis, of the total
amount that an End-User is required to pay throughout the term of a Lease.
The Leases to be included in the Contract Pool are "net leases" under which
the End-User assumes responsibility for the Financed Items, including operation,
maintenance, repair, insurance or self-insurance, return of any Equipment at the
expiration or termination of the Lease and the payment of all sales and use and
property taxes relating to the Financed Items during the Lease term. The End-
User further agrees to indemnify the lessor for any liabilities arising out of
the use or operation of the Financed Items. In most cases, the lessor is also
authorized to perform the
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<PAGE>
End-User's obligations under the Lease at the End-User's expense, if it so
elects, in cases where the End-User has failed to perform. In addition, the
Leases generally contain "hell or high water" clauses unconditionally obligating
the End-User to make periodic payments, without setoff, at the times and in the
amounts specified in the Lease. If the Seller is the lessor, the Lease contains
no express or implied warranties with respect to the Financed Items other than a
warranty of quiet enjoyment. If a Vendor is the lessor, the Lease or a related
agreement may contain certain representations and warranties with respect to the
Financed Items in addition to a warranty of quiet enjoyment; however, the End-
User agrees not to assert any warranty claims against any assignee of the Vendor
(which would include the Seller) by way of setoff, counterclaim or otherwise,
and further agrees that it may only bring such claims against the Vendor. All
Leases of Equipment require the End-User to maintain, at its expense, casualty
insurance covering damage to or loss of the Equipment during the Lease term or
to self-insure against such risks, if approved in advance by the Seller.
The Sellers will represent that the Leases include only leases intended for
security as defined in Section 1-201(37) of the UCC. Under leases intended for
security, the lessor in effect finances the "purchase" of the leased property by
the lessee and retains a security interest in the leased property. The lessee
retains the leased property for substantially all its economic life and the
lessor retains no significant residual interest. Such leases are considered
conditional sales type leases for federal income tax purposes and, accordingly,
the lessor does not take any federal tax benefits associated with the ownership
of depreciable property. End of lease options for such Leases depend on the
terms of the related individual lease agreement or MLA Supplement, but generally
such terms provide for the purchase of the Equipment at a prestated price, which
may be nominal.
End-Users under a Lease are either prohibited from altering or modifying
the Equipment or may alter or modify the Equipment only to the extent the
alterations or modifications are readily removable without damage to the
Equipment. Under certain MLAs, the End-User may assign its rights and
obligations under the Lease, but only upon receiving the prior written consent
of the lessor, or may relocate the Equipment upon giving the lessor prompt
written notice of such relocation. The right to grant or deny such consent or to
receive such written notice will be exercised by the Servicer pursuant to the
authority delegated to it in the Sale and Servicing Agreement. Certain Leases
permit the End-User to substitute substantially identical leased Equipment for
leased Equipment scheduled to be returned to the lessor under the Lease.
While the terms and conditions of the Leases do not generally permit
cancellation by the End-User, certain Leases may be modified or terminated
before the end of the Lease term. Modifications to a Lease term or early Lease
terminations may be permitted by the Seller, or by a Vendor, with the consent of
the Seller, and are generally associated with additional financing opportunities
from the same End-User. In some circumstances, early termination of a Lease may
be permitted in connection with the acquisition of new technology requiring
replacement of the Equipment. In such cases, the related Equipment is returned
to the Vendor or Seller and an amount generally equal to the present value of
the remaining rental payments under the Lease plus an early termination fee is
paid by the End-User to the Seller. Modifications usually involve repricing a
Lease or modification of the Lease term. Occasionally a Lease may be modified in
connection with an increase in the capacity or performance of Equipment by
adding additional Equipment that includes new technology. Coincident with the
financing of an upgrade to such Equipment, the Seller may reprice and extend the
related base Lease term to be coterminous with the desired term of the Lease
relating to the upgrade. In certain cases, subject to certain conditions
described under "Description of the Notes--Prepaid Contracts," such base lease
extensions may remain in the Contract Pool. Heller Financial expects, as
Servicer, to continue to permit these modifications and terminations with
respect to Leases included in the Contract Pool pursuant to the authority
delegated to it in the Sale and Servicing Agreement, subject to certain
conditions and covenants of the Servicer described under "Description of the
Notes--Prepaid Contracts."
In certain circumstances, the standard terms and conditions of the MLA are
modified at the inception of a Lease at the request of the End-User. Such
modifications must either be approved by the Seller's legal department and
certain levels of management before the Seller will agree to enter into the
Lease or accept an assignment of the Lease from a Vendor, or the Vendor must
indemnify the Seller against any losses or damages it may suffer as a result of
such modifications. Common permitted modifications include, but are not limited
to, (i) a one dollar purchase option at the end of the Lease term, (ii)
prearranged mid-Lease purchase options, early termination options and lease
extension options as described above, (iii) modifications to the lessor's
equipment inspection rights, (iv) modifications to the End-User's insurance
requirements permitting the End-User to self-insure against casualty to the
Equipment, (v) the End-User's right to assign the Lease or sub-lease the
Financed Items to an affiliated entity, so long as the End-User remains liable
under the Lease and promptly notifies the lessor or its assignee of such
assignment or sublease and (vi) extended grace periods for late payments of
rent.
Secured Notes. The Sellers also provides direct initial financing or
refinancing of Equipment under secured promissory notes (each a "Secured Note"),
which consist of an installment note and a separate security agreement. In an
initial financing transaction, the applicable Seller pays to the Vendor the
purchase price for the Equipment and in
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<PAGE>
a refinancing transaction, the Seller pays off an End-User's existing financing
source, and the initial financing or refinancing is documented as a direct loan
by the Seller to the End-User of the Equipment using a Secured Note. In the
case of a refinancing transaction, upon payment to the existing financing
source, the Seller obtains a release of such party's lien on the financed
Equipment. In either case, the Seller records its own lien against the financed
Equipment and takes possession of the Secured Note, which constitutes chattel
paper under the UCC. Except for the lack of references to "sale" or "purchase"
of Equipment, the terms and conditions contained in a Secured Note are
substantially similar to those contained in a CSA.
Installment Payment Agreements. The Sellers provide financing for certain
Software license fees and related support and consulting services under
installment payment supplements to software license agreements, separate IPAs
other forms of Financing Agreements assigned to the applicable Seller by Vendors
of Software. Each such Financing Agreement is an unsecured obligation of the
End-User; generally provides for a fixed schedule of payments with no End-User
right of prepayment; is noncancellable for its term and generally contains a
"hell or high water" clause unconditionally obligating the End-User to make
periodic payments, without setoff, at the times and in the amounts specified
therein; permits the Vendor to assign the payment agreement to a third party
(including the Seller) and include the End-User's agreement, upon such
assignment, not to assert against such assignee any claims or defenses the End-
User may have against the Vendor; and contains default and remedy provisions
that generally include acceleration of amounts due and to become due and, in
certain cases, the right of the Vendor, or the Seller by assignment, to
terminate the underlying Software license and all related support and consulting
activities.
Equipment
The End-User Contracts and Secondary Contracts cover a wide variety of new
and used equipment, including, but not limited to, the following: printing, pre-
press, machine tool, plastics, computer hardware, computer software, restaurant,
transportation, energy related, medical, and industrial equipment (collectively,
"Equipment"). All of the interests of the applicable Seller in the Equipment
subject to each related End-User Contract (which consists or will consist of
either title to the Equipment or a security interest in the Equipment) will be
transferred to the Trust.
Software and Services
Certain of the End-User Contracts cover license fees and other fees owed by
the End-Users under either perpetual or term software license agreements and
other related agreements in connection with the use by such End-Users of
computer software programs ("Software"), and such End-User Contracts may also
cover related support and consulting services which are provided by the Vendor,
an affiliate thereof or a third party contract party and which facilitate the
Obligors use of such software ("Services"). No interest in the Software, the
Software license agreement (other than the right to collect the payment of
Software license fees and, in certain cases, to exercise certain rights and
remedies under the Software license agreement or other agreements related
thereto) or the related Services has been or will be conveyed to the Sellers by
either the Vendors or licensors of the Software or by the End-Users under the
related End-User Contracts. Consequently, the Trust will not have title to or a
security interest in such Software, nor will it own such Services, and would not
be able to realize any value therefrom under a related End-User Contract upon a
default by the End-User. Equipment, Software and Services are collectively
referred to as "Financed Items". It is a condition to the issuance of the Notes
that as of the Closing Date, no more than 4.54% of the ADCB of the Contract Pool
will consist of Software transactions.
Vendor Loans
The Contracts may include limited recourse loan or repayment obligations
(which may take the form of promissory notes with related security agreements)
("Vendor Loans") each of which is payable by a Vendor and secured by all of the
Vendor's interest in an individual End-User Contract originated by such Vendor
and by the Equipment related to such End-User Contract.
Vendor Loans may be originated through, and incorporate terms and
conditions of, a Program Agreement (including a Program Agreement under which
End-User Contracts also are or may be originated by the Seller directly, or
purchased by the Seller from the Vendor, in separate transactions not giving
rise to Vendor Loans). Vendor Loans generally are non-recourse to the Vendor,
i.e., the applicable Seller may obtain repayment solely from the proceeds of the
End-User Contracts and related Equipment securing the Vendor Obligation. In a
few instances, however, recourse to a Vendor for nonpayment of a Vendor
Obligation may be available through a limited recourse arrangement included in
the related Program Agreement. The repayment terms under a Vendor Obligation,
including periodic amounts payable and schedule of payments, correspond to the
payment terms of the End-User under the End-User Contract collaterally assigned
under such Vendor Obligation. Each Vendor Obligation either includes most, if
not all, of the representations and warranties regarding the End-User Contract
and related Equipment typically included in a Vendor
-40-
<PAGE>
Agreement, or incorporates such representations and warranties included in any
related Program Agreement by reference.
Program Agreements With Vendors
It is expected that a substantial portion of the End-User Contracts to be
included from time to time in the Trust will consist of End-User Contracts
originated by Vendors and assigned or pledged to the Seller pursuant to Program
Agreements. Also, as described above, Vendor Loans may be originated through
Program Agreements with the related Vendor. The Sellers' Program Agreements are
agreements with Equipment manufacturers, dealers and distributors, or Software
licensors or distributors, located in the United States ("Vendors") which
provide the Sellers with the opportunity to finance transactions relating to the
acquisition or use by an End-User of a Vendor's Equipment, Software, Services or
other products. Vendor finance arrangements provide the Sellers with a steady,
sustainable flow of new business, generally with lower costs of origination than
asset-based financings marketed directly to end-users. Many of the Program
Agreements provide various forms of support to the applicable Seller, including
representations and warranties by the Vendor in respect of the End-User
Contracts assigned by the Vendor to the Seller and related Equipment, Software
or Services, credit support with respect to defaults by End-Users and equipment
repurchase and remarketing arrangements upon early termination of End-User
Contracts upon a default by the End-User. Some of the Program Agreements take
the form of a referral relationship which is less formal, and may or may not
include credit or remarketing support to the Seller from the Vendor.
Each Program Agreement (other than Program Agreements that only establish a
referral relationship) generally includes the following provisions, among
others:
1. Vendor representations, warranties and covenants regarding each
End-User Contract assigned to the Seller, including among other things
that: the obligations of the End-User under the assigned End-User Contract
are absolute, unconditional, noncancellable, enforceable in accordance with
its terms and free from any rights of offset, counterclaim or defense; the
Seller holds the sole original of the End-User Contract and has either
title to or a first priority perfected security interest in the Equipment;
the Equipment and the End-User Contract are free and clear of all liens,
claims or encumbrances; the Equipment or the Software has been irrevocably
accepted by the End-User and will perform as warranted to the End-User; and
the assigned End-User Contract was duly authorized and signed by the End-
User.
2. Remedies in the event of a misrepresentation or breach of a
warranty or covenant by the Vendor regarding an assigned End-User Contract,
which usually require the Vendor to repurchase the affected End-User
Contract for the Seller's investment balance in the End-User Contract plus
costs incurred by the Seller in breaking any underlying funding arrangement
(which may or may not be calculated in accordance with a specified
formula).
3. In the case of End-User Contracts covering Equipment, remarketing
support from the Vendor in the event of an End-User default and subsequent
repossession or return of the Equipment under the End-User Contract (to
assist the Seller in realizing proceeds from the Equipment assigned as
collateral security to support the obligations of the End-User under the
End-User Contract).
4. The right of the Seller to further assign its interests in assigned
End-User Contracts, all payments thereunder and any related interest in
Equipment.
5. With respect to End-User Contracts for which the Vendor (or, in
certain limited instances a subservicer acceptable to the Seller) will
perform ongoing administrative duties on behalf of and for the benefit of
the applicable Seller relating to servicing, processing of collections and
actual substantive collection remedies, as such duties are delegated by the
Seller to the Vendor (or, in certain limited instances a subservicer
acceptable to the Seller) pursuant to the Program Agreement, provisions
governing the Vendor's (or subservicer's) performance of such duties, and
providing the Seller with the right to assume such duties in the event of
breach or inadequate performance by the Vendor (or subservicer, if
applicable).
In addition to the foregoing, a Program Agreement may include recourse
against the Vendor with respect to End-User defaults under certain identified
End-User Contracts, either by specifying that the assignment of the End-User
Contract from the Vendor to the Seller is with full recourse against the Vendor,
by specifying that the Vendor will absorb a limited fixed dollar or percentage
amount of "first losses" on the Contract, or by inclusion of the End-User
Contract in an "ultimate net loss pool" ("UNL Pool") created under the Program
Agreement. In the event of an End-User default under an End-User Contract which
was assigned by the Vendor to the Seller subject to the UNL Pool, the Seller may
-41-
<PAGE>
draw against the UNL Pool up to the amount of the Seller's remaining unpaid
investment balance in the defaulted End-User Contract, but not in excess of the
UNL Pool balance then available. Drawings may also be made against the UNL Pool
with respect to End-User Contracts that are not included in the Contract Pool
and, accordingly, there can be no assurance that any amounts contributed by a
Vendor to the UNL Pool will be available in the event of an End-User default
under a End-User Contract included in the Contract Pool.
The manner in which End-User Contracts are assigned to the Seller by the
Vendors differs under each Program Agreement, depending upon the nature of the
Financed Items, the form of the End-User Contract, the accounting treatment
sought by the Vendor and the End-User, and certain tax considerations.
For example, the Seller might either accept a Vendor Obligation and
collateral assignment of the End-User Contract and related Equipment (or
security interest therein) from the Vendor, or accept a full assignment of such
End-User Contract and either (i) a collateral assignment of the related
Equipment (or security interest therein) from the Vendor, which collateral
assignment secures the End-User's obligations under the End-User Contract or
(ii) in the case of Leases, title to the Equipment. The Seller also may receive,
from a Vendor with respect to Software, a full assignment of leases, installment
payment agreements, installment payment supplements to license agreements, and
other types of financing agreements used in financing Software license payments
and related support and consulting services. Such assignments may include an
assignment of the Software Vendor's or licensor's right, or the agreement of the
Vendor or licensor (at the Seller's instructions), to terminate the software
license covered by the End-User Contract and suspend related support in the
event of an End-User default under the End-User Contract. In some cases, the
Software Vendor also agrees not to relicense the same or similar software to a
defaulted End-User for some period of time (e.g., one year) unless the End-User
cures its default.
It is also expected that some portion of the End-User Contracts included in
the Contract Pool, especially in the case of CSAs, will consist of End-User
Contracts originated by Vendors and assigned to the Seller pursuant to Vendor
Assignments, each of which relates to an individual End-User Contract, rather
than pursuant to a Program Agreement. Each Vendor Assignment will either be made
with or without recourse against the Vendor for End-User defaults and will
generally contain many, if not all, of the representations, warranties and
covenants typically contained in Program Agreements, as well as a Vendor
repurchase requirement in the event of a breach by the Vendor of such
representations, warranties or covenants. Vendor Assignments may or may not
provide for any Vendor remarketing support in the event of an End-User default.
Contract Files
The applicable Seller will indicate in its books and records, including the
appropriate computer files relating to the Transferred Contracts, that such
Contracts have been transferred to the Trust for the benefit of the Noteholders,
and will stamp, or permit the Servicer to stamp, the related Contract Files or
otherwise mark such Contracts with a legend to the effect that such Contracts
have been transferred to the Trust for the benefit of the Noteholders. The
Sellers will also deliver to the Indenture Trustee a computer file or microfiche
or written list containing a true and complete list of all Contracts which have
been transferred to the Trust, identified by account number and by the
Discounted Contract Balance as of the Cutoff Date.
Collections on Contracts
All collections received with respect to the Contracts will be allocated as
described herein. See "Description of the Notes--Allocations". Prepayments will
be given effect as of the last day of the Collection Period in which they are
received and Scheduled Payments of principal made in advance of their due date
will be given effect on their due date.
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<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate amount of each
interest payment on the Notes and the yield to maturity of the Notes are
directly related to the rate of payments on the underlying Contracts. The
payments on such Contracts may be in the form of Scheduled Payments, Prepayments
or liquidations due to default, casualty and other events, which cannot be
specified at present. Any such payments may result in distributions to
Noteholders of amounts which would otherwise have been distributed over the
remaining term of the Contracts. In general, the rate of such payments may be
influenced by a number of other factors, including general economic conditions.
The rate of principal payments with respect to any Class may also be affected by
any repurchase by the Trust Depositor pursuant to the Sale and Servicing
Agreement (and contemporaneously therewith by the applicable Seller from the
Trust Depositor pursuant to the Transfer and Sale Agreement), whether as a
result of a breach of representation or warranty as to such Contract
constituting a Warranty Contract, or at the Trust Depositor's and Seller's
option upon satisfaction of the Cleanup Call Condition (and, in the case of
Warranty Contracts, such rate of prepayment would also be influenced by the
Trust Depositor's decision not to repurchase such Warranty Contract and instead,
to accept a Substitute Contract therefore as described below). In the event of
a repurchase, the repurchase price will decrease the Discounted Contract Balance
of the Contracts, leading to a principal repayment and causing the corresponding
weighted average life of the Notes to decrease. See "Risk Factors--Maturity
and Prepayment Considerations."
In the event a Contract becomes a Defaulted Contract, an Adjusted Contract
or a Warranty Contract, the Seller will have the option to substitute for the
affected Contract another of similar characteristics (a "Substitute Contract"),
subject to an overall limitation, in respect of Defaulted Contracts or Adjusted
Contracts only, of an aggregate amount not to exceed 15% of the ADCB of the
Contracts as of the Cutoff Date. In addition, in the event of an Early
Termination Contract which has been prepaid in full, the Seller will have the
option to transfer to the Trust through the Trust Depositor, and the Trust
Depositor may cause the Trust to reinvest such prepayment proceeds in, an
additional Contract of similar characteristics (an "Additional Contract"). The
Substitute Contracts and Additional Contracts will have a Discounted Contract
Balance equal to or greater than that of the Contracts being modified and/or
replaced and the monthly payments on the Substitute Contracts or Additional
Contracts will be at least equal to those of the replaced Contracts through the
term of such replaced Contracts. In the event that an Early Termination is
allowed by the Servicer and an Additional Contract is not provided, the amount
prepaid (whether by the related Obligor, or through a combination of payments
from the related Obligor and the Seller/Servicer) will be equal to at least the
Discounted Contract Balance of the terminated Contract, plus any delinquent
payments.
The effective yield to holders of the Notes will depend upon, among other
things, the amount of and rate at which principal is paid to such Noteholders.
The after-tax yield to Noteholders may be affected by lags between the time
interest income accrues to Noteholders and the time the related interest income
is received by the Noteholders.
The following chart sets forth the percentage of the Initial Principal
Amount of the Class A-1 Notes, Class A-2 Notes, Class B Notes and Class C Notes
which would be outstanding on the Distribution Dates set forth below assuming a
conditional payment rate (a "Conditional Payment Rate" or "CPR") of [ ]% and
[ ]%, respectively. Such information is hypothetical and is set forth for
illustrative purposes only. The CPR assumes that a fraction of the outstanding
Contract Pool is prepaid on each Distribution Date, which implies that each
Contract in the Contract Pool is equally likely to prepay. This fraction,
expressed as a percentage, is annualized to arrive at the Conditional Payment
Rate for the Contract Pool. The CPR measures prepayments based on the
outstanding Discounted Contract Balances of the Contracts, after the payment of
all Scheduled Payments on the Contracts during such Collection Period. The CPR
further assumes that all Contracts are the same size and amortize at the same
rate and that each Contract will be either paid as scheduled or prepaid in full.
The amounts set forth below are based upon the timely receipt of scheduled
monthly Contract payments as of the Cutoff Date, assumes that the Trust
Depositor does not exercise its option to cause a redemption of the Notes in
connection with the Cleanup Call Condition, and assumes the Closing Date is
August 27, 1997.
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<PAGE>
PERCENTAGE OF THE INITIAL CLASS A-1 PRINCIPAL AMOUNT,
INITIAL CLASS A-2 PRINCIPAL AMOUNT,
INITIAL CLASS B PRINCIPAL AMOUNT,
AND INITIAL CLASS C PRINCIPAL AMOUNT
AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
[ ]% CPR [ ]% CPR
--------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date Class A-1 Class A-2 Class B Class C Class A-1 Class A-2 Class B Class C
</TABLE>
WEIGHTED AVERAGE LIFE (YEARS)
If the Trust Depositor exercises its option to cause a redemption of the Notes
in connection with the Cleanup Call Condition, the average life of the Class
A-1 Notes would be ____ years and ____ years, the average life of the Class A-2
Notes would be ___ years and ___ years, the average life of the Class B Notes
would be ____ years and ____ years, and the average life of the Class C Notes
would be ____ years and ____ years for the [ ]% CPR and [ ]% CPR
scenarios, respectively.
The weighted average life of a Class A-1 Note, Class A-2 Note, a Class B Note
or a Class C Note is determined by (a) multiplying the amount of cash
distributions in reduction of the outstanding Class A-1 Principal Amount,
outstanding Class A-2 Principal Amount, outstanding Class B Principal Amount or
outstanding Class C Principal Amount, as the case may be, by the number of
years from the Closing Date to the respective Distribution Date on which each
such Class of Notes is repaid in full, (b) adding the results, and (c) dividing
the sum by the Initial Class A-1 Principal Amount, Initial Class A-2 Principal
Amount, Initial Class B Principal Amount or Initial Class C Principal Amount,
as the case may be.
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<PAGE>
HELLER FINANCIAL, INC.
AND
HELLER FINANCIAL LEASING, INC.
General
The Seller/Servicer was incorporated in 1919 under the laws of the State of
Delaware and is engaged in various aspects of the commercial finance business.
The Seller/Servicer and its consolidated subsidiaries employ approximately 1,500
people; its executive offices are located at 500 West Monroe Street, Chicago,
Illinois 60661 (telephone: (312) 441-7000). All of the outstanding Common Stock
of the Seller/Servicer is owned by Heller International Corporation, a wholly-
owned subsidiary of The Fuji Bank, Limited, headquartered in Tokyo, Japan. All
of the outstanding Common Stock of the Additional Seller is owned by the
Seller/Servicer. The Seller/Servicer is a diversified financial services
company which provides a broad array of commercial financial products and
services primarily to middle-market companies in the United States and
internationally and provides its products and services through five product
categories: (1) asset based finance, (2) cash flow lending, (3) real estate
finance, (4) international asset based finance and factoring and (5) specialized
finance. The middle-market segment served includes entities primarily in the
manufacturing and service sectors with annual sales in the range of $15 million
to $200 million and in the real estate sector with property values generally in
the range of $5 million to $40 million. The Additional Seller is a non-
operating subsidiary which through the Commercial Equipment Finance and the
Vendor Finance (both as described below) originates Contracts.
As of June 30, 1997, the Seller/Servicer had total assets of
$11,608,000,000 compared with $9,926,000,000 as of June 30, 1996, total
liabilities of $9,907,000,000 compared with $8,402,000,000 as of June 30, 1996,
shareholder's equity of $1,643,000,000 compared with $1,467,000,000 as of June
30, 1996 and total revenues and net income of $587,000,000 and $83,000,000,
respectively, for the period ended June 30, 1997, compared with $483,000,000 and
$69,000,000, respectively, for the period ended June 30, 1996. For the fiscal
year ended December 31, 1996, the Seller/Servicer had total assets of
$9,926,000,000 compared with $9,638,000,000 as of December 31, 1995, total
liabilities of $8,402,000,000 compared with $8,208,000,000 as of December 31,
1995, shareholder's equity of $1,467,000,000 compared with $1,384,000,000 as of
December 31, 1995 and total revenues and net income of $533,000,000 and
$133,000,000, respectively, for the fiscal year ended December 31, 1996 compared
with $620,000,000 and $125,000,000, respectively, for the fiscal year ended
December 31, 1995.
The Seller/Servicer and the Additional Seller originated the Contracts
under two separate operating divisions: Commercial Equipment Finance and Vendor
Finance. Originations from either Commercial Equipment Finance or Vendor
Finance must meet Heller Financial's Credit Risk Management System as
hereinafter described.
Credit Risk Management System
Heller's Financial's Credit Risk Management System provides credit
functions within the Sellers' origination groups (including Commercial Equipment
Finance and Vendor Finance) as well as credit oversight at the
Seller's/Servicer's corporate level. The system provides established,
consistent and documented credit policies at both the corporate and group level.
The first line of credit risk management is the origination groups where
substantially all originations, due diligence and primary credit analysis are
performed. Credit determinations are separate from origination and are staffed
with experienced credit and portfolio officers in the origination groups.
Headed by the Seller's Chief Credit Officer, oversight over the credit
process is maintained at the Seller's/Servicer's corporate level. Corporate
Credit is responsible for ensuring that the credit risk management system is
appropriately implemented. The Seller's/Servicer's Chief Executive Officer
approves all new transactions and modifications that exceed origination group
authority. Additionally, the Seller/Servicer Credit Committee approves new
lending programs and performs ongoing reviews of existing lending programs and
strategies as well as identifies strategic credit issues (including review of
the portfolio mix) and the credit policies and procedures throughout the
Seller/Servicer.
The Credit Risk Management System emphasizes active portfolio management in
an effort to ensure: (1) individual accounts are appropriately managed; (2)
portfolio reporting to management is accurate and timely; (3) problem accounts
are identified and reported on a timely basis to ensure prompt corrective
action. Each origination group has portfolio practices which enhance in early
identification of account issues through account performance analysis, risk
rating systems and regular group portfolio reviews. Management of risk accounts
is transferred to corporate workout specialists where appropriate. Quarterly or
semi-annual portfolio reviews are held with the Chairman and Chief Credit
Officer. The Seller's Internal Audit Department performs extensive loan reviews
on an independent basis to ensure (1) compliance with group and corporate credit
policies and procedures, (2) the integrity of the risk ratings, (3) the
effectiveness of problem loan identification, and (4) the adequacy of loan loss
reserves.
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<PAGE>
Vendor Finance
General Description. Vendor Finance ("VF") provides customized equipment
finance programs to manufacturers and distributors of a wide variety of
commercial, industrial and technology-based products. These programs are
generally made with partial, or in some cases, full recourse to the Vendor. The
Vendor Finance portfolio is well diversified with an average transaction size of
$150,000. With respect to originations, transactions generally range in size
from $50,000 to approximately $3 Million. Vendor Finance's annual originations
increased 30% in 1996 to over $400 Million.
VF's Credit Analysis. The primary factors involved in credit extensions by
VF are developed by determining the appropriate balance between the following
facts (in order of importance): (1) Vendor support and the Seller's reliance on
such support, (2) the credit strength of the underlying End-User, and (3) the
value of the Equipment.
Notwithstanding the type of program (i.e. Vendor credit extension or Vendor
End-User transactions) and their respective credit analysis, the following
discipline is applied to all VF originations: (1) a complete underwriting is
required for each new Vendor program evaluating financial information, equipment
value, quality of Obligor customer base, review of relevant industry data and
the value of recourse, (2) tiered credit approval authorities have been
implemented for each Vendor Program and the transactions originated under such
programs, (3) a comprehensive credit policies and procedures manual is
maintained to ensure consistent compliance with the Seller's credit standards,
(4) an independent internal audit function exists within VF to conduct due
diligence on new client relationships and which conducts ongoing audits of the
client relationship, (5) financial performance of each Vendor is periodically
reviewed, (6) VF's portfolio is reviewed semiannually with the Seller's Chairman
and Chief Credit Officer, and (7) there is an independent internal audit
function.
Collection Process/Vendor Recourse. Vendor recourse ranges from limited
remarketing assistance to full recourse programs. Vendor credit support includes
direct recourse, holdbacks, funded reserves, remarketing agreements as well as
representations and warranties provided in the Contract documentation. Direct
Vendor recourse may be provided with respect to a "pool" of numerous underlying
transactions or on an individual, transaction-by-transaction basis. In certain
circumstances the Vendor and/or another leasing company originates, documents
and performs servicing while in other circumstances the Seller/Servicer
originates, documents and performs servicing with respect to the Contracts. From
a servicing perspective a Vendor Program may be structured with the Vendor
generating documents and the bills as well as collecting payments from the End-
User and remitting payment to the Servicer. In such instances and the Servicer's
involvement is transparent to the End-User and is motivated by a variety of
Vendor marketing considerations. In other situations, the Vendor simply sources
the origination and the Servicer performs the servicing with respect to the
Vendor. In general, the servicing function of the Vendor is an important factor
in the pricing characteristics for the respective Vendor program. VF as a policy
considers a Contract to be a Defaulted Contract on the earlier of (i) the date
on which the facts and circumstances with respect to both the Obligor and the
Vendor indicate that there is no reasonable expectation of collectibility of
payments on the related Contract or (ii) the date 120 days after the last
payment date on which a full payment has been received with respect to the
Contract from either the Obligor or the Vendor.
In those situations in which the Vendor is providing a substantial portion
of the servicing functions, the Servicer undertakes extensive due diligence with
respect to the Vendor's internal operating procedures with additional emphasis
on billing, collection, reporting and remittance. The due diligence analysis
will take on various levels of scrutiny depending on the degree of servicing
handled by the Vendor, the Vendor's credit strength, the volume generated by the
Program, and the history and relationship with the Vendor.
Commercial Equipment Finance
General Description. Commercial Equipment Finance ("CEF") offers expansion,
replacement and modernization equipment financing directly to a broad range of
industries where the financing is primarily collateralized by the financed
equipment. The portfolio is well diversified with financings that generally
range from $500,000 to $15 Million. As of December 31, 1996 the average
transaction size was approximately $4 Million. New business volume in 1996 was
approximately $500 Million representing a 37% increase over 1995.
CEF's Credit Analysis. CEF's approach to lending concentrates on three
critical factors: (1) cash flow of the Obligor (i.e. evaluate the quality of the
underlying obligor's cash flow by analyzing the related industry dynamics, the
Obligor's competitive strengths and weaknesses, the role of external factors in
the obligor's business as well as the financial profile of the Obligor), (2) the
importance/value of the Equipment to the obligor's overall operations (i.e. in a
downside/workout scenario, the more important/valuable the Equipment, the more
likely it is that the Seller will be paid), and (3) the Seller's position in the
overall capital structure of the company (i.e. the smaller the role that CEF
plays in a company's overall capital structure, the more likely it is that the
Seller will be paid) in a negative economic environment).
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<PAGE>
Notwithstanding the type of program or related credit analysis, the
following discipline is applied to all CEF originations: (1) the CEF credit
approval process requires complete financial due diligence, collateral review,
management/strategy evaluation, review of all industry relevant data as well as
review of all legal aspects of the credit, (2) reliance on the CEF Policy
Manual, (3) approval authority tiered to provide prompt responses to the
customer at lower exposure levels and ensure divisional involvement at higher
exposure levels; (i.e. for all regional office origination, approval by both the
region manager and the area region credit manager is required), (4)
quarterly/annual financial reviews of each account are prepared by CEF credit
staff, (5) quarterly reviews of the portfolio are conducted with the Chairman
and Chief Credit Officer of the Seller, (6) monthly distribution of key reports
(delinquency, flash reports, risk ratings changes, etc.) to the Seller's senior
management (this helps ensure prompt communication of material credit issues),
and (6) industry and geographic diversity is maintained with respect to CEF's
originations.
Collection/Servicing. A delinquency report for each region must be
prepared by the Region Credit Manager on a monthly basis. The
Seller's/Servicer's key to successful resolution of a problem contract is early
recognition. Each region is responsible for detecting signs of potential
problem contracts through proactive portfolio management, including review of
delinquency reports, the Financial Statement and Covenant Compliance Checklist
for each account, Account Risk Rating Memos, Flash Reports, Annual Reviews, and
the quarterly portfolio reviews held in Chicago. Within ten business days of
the point in time at which an account is both 60 days past due or delinquent and
is put on a "watch list", an in-person collateral inspection must be performed.
If an in-person inspection is impractical, an updated UCC search must be
performed within the same ten day period.
CEF transactions are required to contain a provision for assessing late
charges in the event that an Obligor fails to make a payment on the Contract on
the related due date. The charge is generally between 1% and 5% of the amount
due and is incurred within one to fifteen days after the due date depending upon
the documentation (at times calculated on a per diem basis). An account is
delinquent if as of the 1st day of any given month, the borrower had failed to
make 2 consecutive monthly payments. An account is classified as non-earning if
no payment is received within ninety days of the scheduled payment due date;
provided however CEF policy considers a Contract to be a Defaulted Contract on
the earlier of (i) the date on which the facts and circumstances with respect to
the Obligor indicate that there is no reasonable expectation of the
collectibility of payments on the related Contract or (ii) 120 days from the
date on which the last payment has been received with respect to a Contract.
All obligors are required by the terms of the Contracts to maintain the
Equipment and install the Equipment at a place of business approved by CEF
personnel. Delivery, transportation, repairs and maintenance are obligations of
obligors, and obligors are required to carry, at their own expense, liability
and replacement cost insurance under terms acceptable to CEF. Any lease payment
defaults permit CEF to declare immediately due and payable all remaining lease
payments. At the end of a lease term, Lessees must return the leased equipment
to the Seller in good working order unless the lease is renewed or the leased
equipment is purchased by the Obligor.
THE TRUST DEPOSITOR
The Trust Depositor is a wholly-owned bankruptcy-remote subsidiary of
Heller Financial, formed solely for the purpose of acquiring from the Sellers
Contracts and Equipment as well as certain other financial assets from time to
time and either issuing debt securities secured by identifiable fixed or
revolving pools of such assets, or conveying or depositing the same into trusts
or other securitization vehicles. As a bankruptcy-remote entity, the Trust
Depositor's operations will be restricted so that (a) it does not engage in
business with, or incur liabilities to, any other entity (other than the
Indenture Trustee on behalf of the Noteholders and the trustees or collateral
agents on behalf of other securityholders under indentures, security agreements,
pooling agreements or similar agreements or undertakings which provide for
essentially nonrecourse, asset-backed financings) which may bring bankruptcy
proceedings against the Trust Depositor and (b) the risk that it will be
consolidated into the bankruptcy proceedings of any other entity is diminished.
The Trust Depositor will have no other assets available to pay amounts owing
under the Indenture except the Trust Assets, including the Contracts and the
interests in the Equipment, the proceeds thereof and the amounts on deposit in
the Collection Account. The Trust Depositor's address is 500 West Monroe
Street, Chicago, Illinois 60661, and its phone number is (312) 441-7246.
DESCRIPTION OF THE NOTES
The statements under this caption are summaries, do not purport to be
complete and are subject to and qualified in their entirety by reference to the
Sale and Servicing Agreement and the Indenture ( the "Operative Documents").
Copies of the Sale and Servicing Agreement and the Indenture have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
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<PAGE>
General
The Notes will consist of four Classes, the Class A-1 Notes, the Class A-2
Notes, the Class B Notes and the Class C Notes. The Notes will be issued
pursuant to the Indenture between the Trust and the Indenture Trustee. The
following summary describes the material terms of the Notes and is qualified in
its entirety by reference to the Sale and Servicing Agreement and the Indenture.
The Class A-1 Notes, Class A-2 Notes, Class B Notes and Class C Notes will
initially be represented by one or more certificates registered in the name of
the nominee of DTC (together with any successor depository selected by the Trust
Depositor, the "Depository"), except as set forth below. The Notes will be
available for purchase in minimum denominations of $1,000 and in integral
multiples thereof in book-entry form. The Trust Depositor has been informed by
DTC that DTC's nominee will be Cede. See "--Book-Entry Registration" and
"--Definitive Notes" below. Only the Notes will be offered hereby.
The Indenture Trustee will be granted a lien of the first priority on the
Trust Assets to secure the Notes; provided, that distributions on the Notes (and
each Class thereof) will be allocated as provided herein. The Notes are
nonrecourse obligations of the Trust only and do not represent interests in or
obligations of either the Sellers, the Servicer or the Trust Depositor, or any
affiliate thereof.
Interest
Interest on the Notes will be payable on each of the Distribution Dates
occurring on or prior to the earlier of (i) the date of payment in full of such
Notes and (ii) the Maturity Date for the Notes. Interest will accrue at the
applicable Class A-1 Interest Rate, Class A-2 Interest Rate, Class B Interest
Rate or Class C Interest Rate, for the period from and including the most recent
Distribution Date on which interest has been paid (or, in the case of the
initial Distribution Date, from and including the Closing Date) to but excluding
the following Distribution Date (each period for which interest accrues on the
Notes, an "Accrual Period") on the outstanding principal amount of such Notes as
of the first day of such Accrual Period.
Interest on the Class A-1 Notes is payable on a Distribution Date from
Available Amounts on such date (and after application of such Available Amounts
to repay any outstanding Servicer Advances and to pay the Servicing Fee). Such
Available Amounts represent primarily collections of payments due under the
Contracts, certain amounts received upon the prepayment or purchase of Contracts
or liquidation of the Contracts and disposition of the related Equipment upon
defaults thereunder, and proceeds of Servicer Advances, if any.
Interest on the Class A-2 Notes is payable on a Distribution Date from
Available Amounts on such date, but after the application of such Available
Amounts to repay any outstanding Servicer Advances, to pay the Servicing Fee,
and to pay interest on the Class A-1 Notes.
Interest on the Class B Notes is payable on a Distribution Date from
Available Amounts on such date, but after the application of such Available
Amounts to repay any outstanding Servicer Advances, to pay the Servicing Fee,
and to pay interest on the Class A-1 Notes and Class A-2 Notes.
Interest on the Class C Notes is payable on a Distribution Date from
Available Amounts on such date, but after the application of such Available
Amounts to repay any outstanding Servicer Advances, to pay the Servicing Fee,
and to pay interest on the Class A-1 Notes, the Class A-2 and the Class B Notes.
Principal
Each Note will have a stated maturity of [ ], 200[ ] (the
"Maturity Date"). However, if all payments on the Contracts are made as
scheduled, final payment with respect to the Notes would occur prior to stated
maturity.
Principal of the Class A-1 Notes will be payable on each Distribution Date
in an amount equal to the Class A-1 Principal Payment Amount for such
Distribution Date to the extent Available Amounts are available therefor, but
after payment from such Available Amounts of unpaid Services Advances, the
Servicing Fee and interest payments on the Notes and the Subordinated Notes.
Principal of the Class A-2 Notes will be payable on each Distribution Date
in an amount equal to the Class A-2 Principal Payment Amount for such
Distribution Date to the extent Available Amounts are available therefor, but
after payment from such Available Amounts of unpaid Servicer Advances, the
Servicing Fee, interest payments on the Notes
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<PAGE>
and the Subordinated Notes and the payment of the Class A-1 Principal Payment
Amount. See "Description of the Notes--Allocations" herein.
Principal of the Class B Notes will be payable on each Distribution Date
in an amount equal to the Class B Principal Payment Amount for such Distribution
Date to the extent Available Amounts are available therefor, but after payment
from such Available Amounts of unpaid Servicer Advances, the Servicing Fee,
interest payments on the Notes and the Subordinated Notes, and the payment of
the Class A-1 Principal Payment Amount and the Class A-2 Principal Payment
Amount. See "Description of the Notes--Allocations" herein.
Principal of the Class C Notes will be payable on each Distribution Date in
an amount equal to the Class C Principal Payment Amount for such Distribution
Date to the extent Available Amounts are available therefor, but after payment
from such Available Amounts of unpaid Servicer Advances, the Servicing Fee,
interest payments on the Notes and the Subordinated Notes, and the payment of
the Class A -1 Principal Payment Amount, the Class A-2 Principal Payment Amount,
and the Class B Principal Payment Amount. See "Description of the Notes--
Allocations" herein.
The Notes will mature and be due and payable on their respective Maturity
Dates. Prior thereto, amounts to be applied in reduction of the outstanding
Principal Amount of any Note, including the payment of the Class A-1 Principal
Payment Amount, Class A-2 Principal Payment Amount, Class B Principal Payment
Amount or Class C Principal Payment Amount payable on any Distribution Date,
will not be due and payable, although the failure of the Trust Depositor or
Servicer to remit any Available Amounts (including Available Amounts to be used
to make a Class A-1 Principal Payment Amount, a Class A-2 Principal Payment
Amount, a Class B Principal Payment Amount or a Class C Principal Payment
Amount) will, after the applicable grace period, constitute an Event of Default
under the Indenture. See "Description of the Notes--Events of Default".
As used herein, the following terms shall have the following meanings:
The "ADCB" or "Aggregate Discounted Contract Balance" with respect to
the Contracts means the sum of the Discounted Contract Balances of each
Contract included in the group of Contracts for which an ADCB determination
is being made.
"Aggregate Principal Amount" means, for any group of Notes at any date
of determination, the sum of the Principal Amounts of such Notes at such
date.
"Applicable Class Percentage" means (a) prior to the occurrence of an
Event of Default, or prior to the occurrence and during the continuance of
a Restricting Event, for any outstanding Class of Notes for which a
determination of Applicable Class Percentage is required to be made
hereunder (i) prior to the payment in full of the Class A-1 Notes, 0%; and
(ii) thereafter, the ratio (expressed as a percentage) that the Initial
Principal Amount of such Class of Notes or Subordinated Notes bears to the
sum of the Initial Principal Amount of all Classes of Notes and
Subordinated Notes (other than the Class A-1 Notes); and (b) following the
occurrence of an Event of Default, or following the occurrence and during
the continuance of a Restricting Event (i) for the Class A-1 Notes and the
Class A-2 Notes, (A) until each such Class has been repaid in full, the
ratio (expressed as a percentage) that the aggregate Principal Amount of
such Class of Notes on the date on which such Event of Default or
Restricting Event commences, bears to the sum of such aggregate Principal
Amounts for both such Classes of Notes, and (B) thereafter, 0%; (ii) for
the Class B Notes, 0% until all outstanding principal of the Class A-1
Notes and Class A-2 Notes has been paid in full, then 100% until all
outstanding principal of the Class B Notes has been paid in full, and
thereafter 0%; (iii) for the Class C Notes, 0% until all outstanding
principal of the Class A-1 Notes, Class A-2 Notes and Class B Notes has
been paid in full, then 100% until all outstanding principal of the Class C
Notes has been paid in full, and thereafter 0%; and (iv) for the Class D
Notes, 0% until all outstanding principal of the Class A-1 Notes, Class A-2
Notes, Class B Notes and Class C Notes has been paid in full, then 100%
until all outstanding principal of the Class D Notes has been paid in full,
and thereafter 0%.
"Class A-1 Principal Payment Amount" means, with respect to any
Distribution Date and the Class A-1 Notes (a) prior to the occurrence of an
Event of Default, or prior to the occurrence and during the continuance of
a Restricting Event, the sum of (i) the lesser of (A) the outstanding
Principal Amount of the Class A-1 Notes, and (B) the excess of (x) the ADCB
for all Contracts held by the Trust as of the last day of the second
Collection Period preceding such Distribution Date (or, in the case of
Contracts that were first added to the Contract pool during the Collection
Period immediately preceding such Distribution Date, as of the applicable
Cutoff Date for such Contracts) over (y) the ADCB for all Contracts held by
the Trust as of the last day of the Collection Period immediately preceding
such Distribution Date (such amount described in this clause (i) being, the
"Expected Class A-1 Payment"),
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plus (ii) the aggregate amount of Expected Class A-1 Payments which were
not paid on each preceding Distribution Date; and (b) following the
occurrence of an Event of Default, or following the occurrence and during
the continuance of a Restricting Event, the sum of (i) the difference
between (A) the outstanding Principal Amount of the Class A-1 Notes, and
(B) the product of (x) the Applicable Class Percentage for such Class A-1
Notes, and (y) the ADCB for all Contracts held by the Trust as of the last
day of the Collection Period immediately preceding such Distribution Date
(such amount described in this clause (i) being, the "Anticipated Class A-1
Payment"), plus (ii) the aggregate amount of Anticipated Class A-1 Payments
which were not paid on each preceding Distribution Date.
"Class A-2 Principal Payment Amount" means, with respect to any
Distribution Date and the Class A-2 Notes, the sum of (i) the difference between
(A) the Principal Amount of the Class A-2 Notes immediately prior to such
Distribution Date, and (B) the product of (x) the Applicable Class Percentage
for such Notes and (y) the ADCB for all Contracts held by the Trust as of the
last day of the Collection Period immediately preceding such Distribution Date
(the amount described in clause (i) being, the "Expected Class A-2 Payment"),
plus (ii) the aggregate amount of Expected Class A-2 Payments which were not
paid on each preceding Distribution Date.
"Class B Principal Payment Amount" means, with respect to any
Distribution Date and the Class B Notes, the sum of (i) the difference between
(A) the Principal Amount of the Class B Notes immediately prior to such
Distribution Date, and (B) the product of (x) the Applicable Class Percentage
for such Notes and (y) the ADCB for all Contracts held by the Trust as of the
last day of the Collection Period immediately preceding such Distribution Date
(the amount described in clause (i) being, the "Expected Class B Payment"), plus
(ii) the aggregate amount of Expected Class B Payments which were not paid on
each preceding Distribution Date.
"Class C Principal Payment Amount" means, with respect to any
Distribution Date and the Class C Notes, the sum of (i) the difference between
(A) the Principal Amount of the Class C Notes immediately prior to such
Distribution Date, and (B) the product of (x) the Applicable Class Percentage
for such Notes and (y) the ADCB for all Contracts held by the Trust as of the
last day of the Collection Period immediately preceding such Distribution Date
(the amount described in clause (i) being, the "Expected Class C Payment"), plus
(ii) the aggregate amount of Expected Class C Payments which were not paid on
each preceding Distribution Date.
"Class D Principal Payment Amount" means, with respect to any
Distribution Date and the Class D Notes, the sum of (i) the difference between
(A) the Principal Amount of the Class D Notes immediately prior to such
Distribution Date, and (B) the product of (x) the Applicable Class Percentage
for such Notes and (y) the ADCB for all Contracts held by the Trust as of the
last day of the Collection Period immediately preceding such Distribution Date
(the amount described in clause (i) being, the "Expected Class D Payment"), plus
(ii) the aggregate amount of Expected Class D Payments which were not paid on
each preceding Distribution Date.
"Discounted Contract Balance" means with respect to any Contract, (A)
as of the related Cutoff Date, the present value of all of the remaining
Scheduled Payments becoming due under such Contract after the applicable Cutoff
Date discounted monthly at the Discount Rate and (B) as of any other date of
determination, the sum of (1) the present value of all of the remaining
Scheduled Payments becoming due under such Contract after such date of
determination discounted monthly at the Discount Rate, and (2) the aggregate
amount of all Scheduled Payments due and payable under such Contract after the
applicable Cutoff Date and prior to such date of determination (other than
Scheduled Payments related to Contracts that have become Defaulted Contracts or
Prepaid Contracts, and which have not been replaced with an Additional Contract
or Substitute Contract) that have not then been received by the Servicer.
The Discounted Contract Balance for each Contract shall be calculated
assuming:
(a) All payments due in any Collection Period are due on the last day
of the Collection Period;
(b) Payments are discounted on a monthly basis using a 30 day month
and a 360 day year; and
(c) All security deposits and drawings under letters of credit, if
any, issued in support of a Contract are applied to reduce
Scheduled Payments in inverse order of the due date thereof.
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"Discount Rate" means, [ ]% which is equal to the sum of (i) the
weighted average of the Class A-2 Interest Rate (weighted at the sum of the
Class A-1 Principal Payment Amount and the Class A-2 Principal Payment Amount),
the Class B Interest Rate, the Class C Interest Rate, and the Subordinated Note
Interest Rate, and (ii) the Servicing Fee Percentage.
"Principal Amount" of a Class of Notes or Subordinated Notes means the
aggregate initial principal amount thereof reduced by (i) the aggregate amount
of any Distributions applied in reduction of such principal amount and (ii) the
aggregate amount of any Distributions then on deposit in the note or certificate
payment account, if any, for such Class of Notes or Subordinated Notes
established in accordance with the Indenture or the Sale and Servicing Agreement
and to be applied in reduction of such principal amount in accordance
therewith.
"Scheduled Payments" means, with respect to any Contract, the monthly
or quarterly or semi-annual or annual rent or financing (whether principal or
principal and interest) payment scheduled to be made by the related Obligor
under the terms of such Contract after the related Cutoff Date (it being
understood that Scheduled Payments do not include any Excluded Amounts).
Allocations
Prior to an Event of Default or Restricting Event. On the third
Business Day prior to each Distribution Date (each, a "Determination Date"),
prior to the occurrence of an Event of Default or the occurrence and continuance
of a Restricting Event, the Servicer shall instruct the Indenture Trustee to
withdraw, and on the succeeding Distribution Date the Indenture Trustee acting
in accordance with such instructions shall withdraw, the amounts required to be
withdrawn from the Collection Account in order to make the following payments or
allocations from the Available Amounts for the related Distribution Date (in
each case, such payment or transfer to be made only to the extent funds remain
available therefor after all prior payments and transfers for such Distribution
Date have been made), in the following order of priority:
(A) pay to the Servicer, the amount of any unreimbursed Servicer
Advances;
(B) pay to the Servicer, the monthly Servicing Fee for the preceding
monthly period together with any amounts in respect of the
Servicing Fee that were due in respect of prior monthly periods
that remain unpaid;
(C) pay to the Indenture Trustee, on behalf of the Class A-1 Notes,
an amount equal to interest accrued in respect of such Class A-1
Notes for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that accrued in
respect of prior Accrual Periods for which no allocation was
previously made;
(D) pay to the Indenture Trustee, on behalf of the Class A-2 Notes,
an amount equal to interest accrued in respect of such Class A-2
Notes for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that accrued in
respect of prior Accrual Periods for which no allocation was
previously made;
(E) pay to the Indenture Trustee, on behalf of the Class B Notes, an
amount equal to the interest accrued thereon for the Accrual
Period immediately preceding such Distribution Date, together
with any such amounts that accrued in respect of prior Accrual
Periods for which no allocation was previously made;
(F) pay to the Indenture Trustee, on behalf of the Class C Notes, an
amount equal to interest accrued thereon for the Accrual Period
immediately preceding such Distribution Date, together with any
such amounts that accrued in respect of prior Accrual Periods for
which no allocation was previously made;
(G) pay to the holders of the Subordinated Notes an amount equal to
interest accrued in respect of the Subordinated Notes Period
immediately preceding such Distribution Date, together with any
such amounts that accrued in respect of prior Accrual Periods for
which no allocation was previously made; provided, that if the
Available Amounts remaining to be allocated pursuant to this
clause is less than the full amount required to be so paid, such
remaining Available Amounts shall be allocated to each
Subordinated Notes pro rata based on the outstanding principal
amount thereof;
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(H) pay to the Indenture Trustee, on behalf of the Class A-1 Notes,
the lesser of (i) the Class A-1 Principal Payment Amount for such
Distribution Date, and (ii) the remaining outstanding Principal
Amount of the Class A-1 Notes; provided (i) that if the Available
Amounts remaining to be allocated pursuant to this clause is less
than the full amount required to be so paid, such remaining
Available Amounts shall be allocated to each Class A-1 Note pro
rata based on the outstanding principal amount thereof, and (ii)
if the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Class A-1 Note principal in
full, then such excess shall be applied in repayment of principal
on the Class A-2 Notes;
(I) pay to the Indenture Trustee, on behalf of the Class A-2 Notes,
the lesser of (i) the Class A Principal Payment Amount for such
Distribution Date, and (ii) the remaining outstanding Principal
Amount of the Class A-2 Notes; provided (i) that if the Available
Amounts remaining to be allocated pursuant to this clause is less
than the full amount required to be so paid, such remaining
Available Amounts shall be allocated to each Class A-2 Note pro
rata based on the outstanding principal amount thereof, and (ii)
if the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Class A-2 Note principal in
full, then such excess shall be applied in repayment of principal
on the Class B Notes;
(J) pay to the Indenture Trustee, on behalf of the holders of the
Class B Notes, the lesser of (i) the Class B Principal Payment
Amount for such Distribution Date, and (ii) the remaining
outstanding Principal Amount of the Class B Notes; provided (i)
that if the Available Amounts remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class B Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this
clause exceeds the amount needed to repay outstanding Class B
Note principal in full, then such excess shall be applied in
repayment of principal on the Class C Notes;
(K) pay to the Indenture Trustee, on behalf of the holders of the
Class C Notes, the lesser of (i) the Class C Principal Payment
Amount for such Distribution Date, and (ii) the remaining
outstanding Principal Amount of the Class C Notes; provided (i)
that if the Available Amounts remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class C Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this
clause exceeds the amount needed to repay outstanding Class C
Note principal in full, then such excess shall be applied in
repayment of principal on the Subordinated Notes;
(L) pay to the holders of the Subordinated Notes the lesser of (i)
the Class D-1 Principal Payment Amount for such Distribution Date
and (ii) the remaining outstanding Principal Amount of the
Subordinate Notes; provided (i) that if the Available Amounts
remaining to be allocated pursuant to this clause is less than
the full amount required to be so paid, such remaining Available
Amounts shall be allocated to each Subordinated Notes pro rata
based on the outstanding principal amount thereof, and (ii) if
the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Subordinated Notes principal
in full;
(M) pay to the Indenture Trustee for deposit into the Reserve Fund
any Available Amounts not necessary to make the payments
described in paragraph (A) through (L) above such amount as is
necessary to meet the Reserve Fund Amount; and
(N) any excess shall be paid to the holder of the Certificates.
As used herein,"Available Amounts" means as of any Distribution Date, the
sum of (i) all amounts on deposit in the Collection Account as of the
immediately preceding Determination Date on account of Scheduled Payments
inclusive of such payments received through Vendor recourse or support and
agreements, but excluding the Excluded Amounts due on or before, as well as
Prepayments received on or before, the last day of the Collection Period
immediately preceding such Distribution Date (other than Excluded Amounts); (ii)
Recoveries on account of previously Defaulted Contracts received as of the
immediately preceding Determination Date; (iii) such amounts as from time to
time may be held in the Collection Account, together with earnings on funds
therein, (iv) the rights of the Trust Depositor under the Transfer and
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Sale Agreement, (v) any late charges relating to a Contract provided such late
charges were included in the Contract's terms as of the Cutoff Date ("Late
Charges") and (vi) proceeds of any of the foregoing. Available Amounts will not
include any amounts (such as Residuals) payable on an account of the Financed
Items which exceeds the sum of the Scheduled Payments and Late Charges payable
under the related Contract.
Pursuant to the Indenture, the Indenture Trustee will distribute amounts
received from the Indenture Trustee in accordance with the foregoing to the
Class A-1 Noteholders, Class A-2 Noteholders, Class B Noteholders, Class C
Noteholders and the holders of the Subordinated Notes represented thereby pro
rata in accordance with the respective amounts owed thereto.
Following an Event of Default or Restricting Event. On each Determination
Date after the occurrence of an Event of Default, or after the occurrence of,
and during the continuance of, a Restricting Event, the Servicer shall instruct
the Indenture Trustee to withdraw, and on the succeeding Distribution Date the
Indenture Trustee acting in accordance with such instructions shall withdraw,
the amounts required to be withdrawn from the Collection Account in order to
make the following payments or allocations from the Available Amounts for the
related Distribution Date (in each case, such payment or transfer to be made
only to the extent funds remain available therefor after all prior payments and
transfers for such Distribution Date have been made), in the following order of
priority:
(A) pay to the Indenture Trustee, the amount of any unpaid fees,
expenses, late charges or other losses;
(B) pay to the Servicer, the amount of any unreimbursed Servicer
Advance;
(C) pay to the Servicer, the monthly Servicing Fee for the preceding
monthly period together with any amounts in respect of the
Servicing Fee that were due in respect of prior monthly periods
that remain unpaid;
(D) pay to the Indenture Trustee, on behalf of the Class A-1 Notes
and the Class A-2 Notes, an amount equal to interest accrued in
respect of such Class A-1 Notes and the Class A-2 Notes for the
Accrual Period immediately preceding such Distribution Date,
together with any such amounts that accrued in respect of prior
Accrual Periods for which no allocation was previously made;
provided, that if the Available Amounts remaining to be allocated
pursuant to this clause is less than the full amount required to
be so paid, such remaining Available Amounts shall be allocated
to each Class A-1 Note and the Class A-2 Note pro rata based on
the outstanding principal amount thereof;
(E) pay to the Indenture Trustee, on behalf of the Class B Notes, an
amount equal to the interest accrued thereon for the Accrual
Period immediately preceding such Distribution Date, together
with any such amounts that accrued in respect of prior Accrual
Periods for which no allocation was previously made; provided,
that if the Available Amount s remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class B Note pro rata based on the outstanding principal amount
thereof;
(F) pay to the Indenture Trustee, on behalf of the Class C Notes, an
amount equal to interest accrued in respect of the Class C Notes
for the Accrual Period immediately preceding such Distribution
Date, together with any such amounts that accrued in respect of
prior Accrual Periods for which no allocation was previously
made; provided, that if the Available Amounts remaining to be
allocated pursuant to this clause is less than the full amount
required to be so paid, such remaining Available Amounts shall be
allocated to each Class C Note pro rata based on the outstanding
principal amount thereof;
(G) pay to the Indenture Trustee, on behalf of the Subordinated
Notes, an amount equal to interest accrued in respect of the
Subordinated Notes for the Accrual Period immediately preceding
such Distribution Date, together with any such amounts that
accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available
Amounts remaining to be allocated pursuant to this clause is less
than the full amount required to be so paid, such remaining
Available Amounts shall be allocated to each Subordinated Note
pro rata based on the outstanding principal amount thereof;
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(H) pay to the Indenture Trustee, on behalf of the Class A-1 Notes
and the Class A-2 Notes, respectively, the lesser of (i) the
Class A-1 Principal Payment Amount and the Class A-2 Principal
Payment Amount for such Distribution Date, and (ii) the remaining
outstanding Principal Amount of the Class A-1 Notes and the Class
A-2 Notes; provided (i) that if the Available Amounts remaining
to be allocated pursuant to this clause is less than the full
amount required to be so allocated, such remaining Available
Amounts shall be allocated to each Class A-1 Note and Class A-2
Note, respectively pro rata based on the outstanding principal
amount thereof, and (ii) if the amount to be allocated pursuant
to this clause exceeds the amount needed to repay the outstanding
Class A-1 Note and the Class A-2 Note principal in full, then
such excess shall be applied in repayment of principal on the
Class B Notes;
(I) pay to the Indenture Trustee, on behalf of the holders of the
Class B Notes, the lesser of (i) the Class B Principal Payment
Amount for such Distribution Date, and (ii) the remaining
outstanding Principal Amount of the Class B Notes; provided (i)
that if the Available Amounts remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class B Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this
clause exceeds the amount needed to repay outstanding Class B
Note principal in full, then such excess shall be applied in
repayment of principal on the Class C Notes;
(J) pay to the Indenture Trustee, on behalf of the holders of the
Class C Notes, the lesser of (i) the Class C Principal Payment
Amount for such Distribution Date, and (ii) the remaining
outstanding Principal Amount of the Class C Notes; provided (i)
that if the Available Amounts remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class C Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this
clause exceeds the amount needed to repay outstanding Class C
Note principal in full, then such excess shall be applied in
repayment of principal on the Prior Certificates; and
(K) pay to the holders of the Subordinated Notes the lesser of (i)
the Class D-1 Principal Payment Amount for such Distribution Date
and (ii) the remaining outstanding Principal Amount of the
Subordinated Notes; provided (i) that if the Available Amounts
remaining to be allocated pursuant to this clause is less than
the full amount required to be so paid, such remaining Available
Amounts shall be allocated to each Subordinated Notes pro rata
based on the outstanding principal amount thereof, and (ii) if
the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Subordinated Notes principal
in full, then such excess shall be paid to the holder of the
Certificates.
Pursuant to the Indenture, the Indenture Trustee will distribute amounts
received from the Indenture Trustee in accordance with the foregoing to the
Noteholders represented thereby pro rata in accordance with the respective
amounts owed thereto.
Reserve Fund
General
The Reserve Fund will be an account in the name of the Indenture Trustee on
behalf of the Noteholders and the holders of the Subordinated Notes. The Reserve
Fund will be created with an initial deposit by the Trust Depositor on the
Closing Date of an amount equal to the Reserve Fund Amount.
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits thereto or withdrawals therefrom on such
Distribution Date) is greater than the Reserve Fund Amount, the Indenture
Trustee will distribute any excess to the holder of the Certificates. Upon any
such distributions to the holder of the Certificates, the Noteholders and the
holders of the Subordinated Notes will have no further rights in, or claims to,
such amounts.
If on any Distribution Date the principal balance of the Subordinated Notes
equals zero and amounts on deposit in the Reserve Fund have been depleted as a
result of losses in respect of the Contracts, the protection
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afforded to the Noteholders by the Subordinated Notes and by the Reserve Fund
will be exhausted and the Noteholders will bear directly the risks associated
with the ownership of the Contracts.
None of the Noteholders, the Indenture Trustee, the Owner Trustee, the
Seller nor the Trust Depositor will be required to refund any amounts properly
distributed or paid to them whether or not there are sufficient funds on any
subsequent Distribution Date to make full distributions to the Noteholders.
The Servicer may, from time to time after the date of this Prospectus
request each Rating Agency that rated the Notes to, at the request of the Trust
Depositor, approve a formula for determining the Reserve Fund Amount that is
different from the formula described above and would result in a decrease in the
amount of the Reserve Fund Amount or the manner by which the Reserve Fund is
funded. If each Rating Agency delivers a letter to the Indenture Trustee and
the Owner Trustee to the effect that the use of any such new formulation will
not in and of itself result in a qualification, reduction or withdrawal of its
then-current rating of any Class of Notes then the Reserve Fund Amount will be
determined in accordance with such new formula. The Agreement will accordingly
be amended to reflect such new calculation without the consent of any
Noteholder.
Withdrawals from the Reserve Fund
Amounts held from time to time in the Reserve Fund will continue to be held
for the benefit of the Noteholders and the holders of the Subordinated Notes.
On each Distribution Date, funds will be withdrawn from the Reserve Account to
the extent that the amount on deposit in the Collection Account with respect to
any Distribution Date is less than the amount necessary to pay interest on the
Notes and the Subordinated Notes; provided however upon the occurrence of an
Event of Default or upon the occurrence and continuance of Restricting Event
amounts in the Reserve Fund shall be allocable fully to pay the principal on the
most senior outstanding Class of Notes or if no Notes are outstanding the
Subordinated Notes.
Defaulted Contracts
A Contract will automatically be deemed to be in default (a "Defaulted
Contract") if (i) it is more than 120 days past due (or, with respect to
Contracts for which there exists sufficient available payment recourse to a
Vendor to cover the amounts in default, and which recourse was not available or
had not yet been paid by the Vendor prior to the end of such 120 day period, at
such time thereafter as the Vendor shall have failed to pay such defaulted
amount in accordance with the provisions of the applicable Program Agreement
providing such recourse); or (ii) if at any time the Servicer determines, in
accordance with its customary and usual practices, that such Contract is not
collectible (and taking into account any available Vendor recourse). The
current policy of the Servicer with respect to writing off Contracts is
described in "Heller Financial, Inc. and Heller Financial Leasing, Inc. ---
Vendor Finance --- Collection Process/Vendor Recourse" and "Heller Financial,
Inc. and Heller Financial Leasing, Inc. --Commercial Equipment Finance --
Collection/Servicing" above.
Upon classification as a Defaulted Contract, the Servicer shall accelerate
all payments due thereunder or take such other action as the Servicer reasonably
believes will maximize the amount of Recoveries in respect thereof and shall
otherwise follow its customary and usual collection procedures, which may
include the repossession and sale of any related Equipment or other Applicable
Security on behalf of the Trust. Any recoveries on account of a previously
Defaulted Contract (including proceeds of repossessed Equipment or other
Applicable Security or other property, Insurance Proceeds, amounts representing
late fees and penalties and amounts subsequently received pursuant to a Program
Agreement with a Vendor, but net of amounts representing costs and expenses of
liquidation incurred by the Servicer; such recoveries net of such amounts,
"Recoveries") shall be deemed to be Available Amounts.
Collection Account
The Servicer, for the benefit of the Noteholders, shall cause to be
established and maintained in the name of the Indenture Trustee, with an office
or branch of a depository institution or trust company (which may include the
Indenture Trustee) organized under the laws of the United States of America or
any one of the states thereof and located in the state designated by the
Servicer, a non-interest bearing segregated corporate trust account (the
"Collection Account") bearing a designation clearly indicating that the funds
deposited therein are held in trust for the benefit of the Noteholders;
provided, however, that at all times such depository institution or trust
company shall be (a) the corporate trust department of the Indenture Trustee or,
(b) a depository institution organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank), (i)(A) which has either (1) a long-term
unsecured debt rating acceptable to the Rating Agencies or (2) a short-term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies, (B) the parent corporation of which has either (1) a long-term
unsecured debt rating acceptable to the Rating Agencies or (2) a short-term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies or (C) is otherwise acceptable to the Rating Agencies and (ii) whose
deposits are
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insured by the Federal Deposit Insurance Corporation (the "FDIC";
any such depository institution or trust company, a "Qualified Institution").
Funds in the Collection Account generally will be invested in (i) obligations
fully guaranteed by the United States of America, (ii) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies having commercial paper with the highest rating from each Rating
Agency, (iii) commercial paper (or other short term obligations) having, at the
time of the Trust's investment therein, the highest rating from each Rating
Agency, (iv) demand deposits, time deposits and certificates of deposit which
are fully insured by the FDIC, (v) notes or bankers' acceptances issued by any
depository institution or trust company described in (ii) above, (vi) money
market funds which have the highest rating from, or have otherwise been approved
in writing by, each Rating Agency, (vii) time deposits with an entity, the
commercial paper of which has the highest rating from the Rating Agency, (viii)
eligible repurchase agreements, and (ix) any other investments approved in
writing by the Rating Agency (collectively, "Eligible Investments"). Such funds
may be invested in debt obligations of Heller Financial or its affiliates so
long as such obligations qualify as Eligible Investments. Any earnings (net of
losses and investment expenses) on funds in the Collection Account will be held
therein and be treated as Available Amounts. The Servicer will have the
revocable power to instruct the Indenture Trustee to make withdrawals and
payments from the Collection Account for the purpose of carrying out its duties
under the Sale and Servicing Agreement.
Replacement Accounts
If any institution with which any of the accounts established pursuant to
the Sale and Servicing Agreement or the Indenture are established ceases to be
a Qualified Institution, the Servicer or the Owner Trustee (as the case may be)
shall within ten Business Days establish a replacement account at a Qualified
Institution after notice thereof.
Events of Default
Allocations of Available Amounts will be made as described above under
"--Allocations; Prior to an Event of Default or Restricting Event" unless and
until an Event of Default or Restricting Event has occurred, in which case
allocations of Available Amounts will be made as described above under
"--Allocations; Following an Event of Default or Restricting Event". An "Event
of Default" refers to any of the following events:
(a) failure to pay on each Distribution Date the full amount of
accrued interest on any Note;
(b) failure to pay the then outstanding principal amount of any Note,
if any, on its related Maturity Date;
(c) (i) failure on the part of any Seller to make any payment or
deposit required under the Sale and Servicing Agreement or
Transfer and Sale Agreement within three Business Days after the
date the payment or deposit is required to be made, or (ii)
failure on the part of any Seller, the Trust Depositor, the Trust
or the Owner Trustee to observe or perform any other covenants or
agreements of such entity set forth in the Transfer and Sale
Agreement, Sale and Servicing Agreement or the Indenture, which
failure has a material adverse effect on the Noteholders and
which continues unremedied for a period of 60 days after written
notice; provided, that no such 60-day cure period shall apply in
the case of a failure by the Sellers to perform their joint and
several agreement to accept reassignment of Ineligible Contracts,
and further provided, that only a five day cure period shall
apply in the case of a failure by any Seller, the Trustee or the
Owner Trustee to observe their respective covenants not to grant
a security interest in or otherwise intentionally create a lien
on the Contracts;
(d) any representation or warranty made by any Seller, the Trust
Depositor, the Trustee or the Owner Trustee in the Sale and
Servicing Agreement or the Indenture or any information required
to be given by any Seller or the Trust Depositor to the Indenture
Trustee to identify the Contracts proves to have been incorrect
in any material respect when made and continues to be incorrect
in any material respect for a period of 60 days after written
notice and as a result of which the interests of the Noteholders
are materially and adversely affected; provided, however, that an
Event of Default shall not be deemed to occur thereunder if the
Seller has repurchased the related Contracts through the Trust
Depositor during such period in accordance with the provisions of
the Sale and Servicing Agreement and the Transfer and Sale
Agreement;
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(e) the occurrence of an Insolvency Event relating to any Seller, the
Trust Depositor, the Trust or the Servicer; or
(f) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
In the case of any event described in clause (a), (b), (c), (d), (e) or
(f) above, an Event of Default with respect to the Notes will be deemed to have
occurred provided such Event of Default may be waived if the Required Holders
provide written notice to the Trust Depositor and the Servicer of such waiver.
In the event the Indenture Trustee has actual knowledge of an Event of Default,
it will be required to notify, among others, the Trust Depositor, each Seller,
the Servicer and the Owner Trustee.
If an Insolvency Event relating to the Trust Depositor occurs, pursuant to
the Sale and Servicing Agreement, on the day of such Insolvency Event, the Trust
Depositor will promptly give notice to the Indenture Trustee of the Insolvency
Event, and the Indenture Trustee will, unless notified to the contrary by the
Controlling Party, promptly act to sell, dispose of or otherwise liquidate the
Contracts in a commercially reasonable manner and on commercially reasonable
terms. The proceeds from any such sale, disposition or liquidation of Contracts
will be deposited in the Collection Account and allocated as described in the
Sale and Servicing Agreement and herein. If the proceeds of any collections on
Contracts in the Collection Account allocated to Noteholders of any Class is not
sufficient to pay the Principal Amount of the Notes of such Class in full, such
Noteholders will incur a loss.
As used herein, "Required Holders" means (i) prior to the payment in full
of the Class A Notes outstanding, Class A Noteholders holding Class A Notes
evidencing more than 66 2/3% of the Aggregate Principal Amount of the Class A
Notes, or the Indenture Trustee on behalf of such Noteholders, and (ii) from and
after the payment in full of the Class A Notes outstanding, Class B Noteholders
holding Class B Notes evidencing more than 66 2/3% of the Aggregate Principal
Amount of the Class B Notes outstanding, and (iii) from and after the payment
in full of the Class B Notes outstanding, Class C Noteholders holding Class C
Notes evidencing more than 66 2/3% of the Aggregate Principal Amount of the
Class C Notes outstanding.
Restricting Events
Prior to the occurrence of a Restricting Event, allocations of Available
Amounts will be made as described above under "--Allocations; Prior to an Event
of Default or Restricting Event" unless a Restricting Event has occurred and is
continuing in which case allocations will be made as described above under
"--Allocations; Following an Event of Default or Restricting Event". A
"Restricting Event" refers to any of the following events:
(a) As of any Calculation Date, the Average Cumulative Net Loss Ratio
(as defined below) exceeds 1.00%; or
(b) A Servicer Default (as defined in "The Transfer and Sale
Agreement and Sale and Servicing Agreement Generally") or an
Event of Default has occurred and is continuing.
"Average Cumulative Net Loss Ratio" means, for any date of determination
following the conclusion of the sixth full Collection Period occurring since the
Closing Date, the average of the sum of the Cumulative Net Loss Ratios
determined for each of the six most recent full Collection Periods occurring
prior to such date of determination.
"Cumulative Net Loss Ratio" means, for any date of determination, the
fraction (expressed as a percentage) determined by dividing (i) the ADCB of all
Contracts in the Trust which have become Defaulted Contracts from the Closing
Date, net of aggregate Recoveries received by the Trust during such same period,
by (ii) the ADCB of all Contracts in the Contract Pool as of the Initial Cutoff
Date.
Servicing Compensation and Payment of Expenses
The Servicer's compensation with respect to its servicing activities and
reimbursement for its expenses for any Collection Period will be a servicing fee
(the "Servicing Fee") calculated monthly, and payable on each Distribution Date,
in an amount equal to the product of (i) one-twelfth, (ii) [ ]% (such
percentage, the "Servicing Fee Percentage") and (iii) the ADCB of the Contract
Pool as of the beginning of the related Collection Period. The Servicing Fee
will be funded from Available Amounts and will be paid on the Distribution Date
with respect to each Collection Period from the Collection Account.
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The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Contracts including, without
limitation, expenses related to the enforcement of the Contracts, payment of the
fees and disbursements of the Indenture Trustee and Owner Trustee and
independent accountants, casualty insurance on Equipment (to the extent the
Contracts provide for the Seller to pay such insurance) and other fees which are
not expressly stated in the Sale and Servicing Agreement to be payable by the
Trust, the Noteholders or the Trust Depositor (other than federal, state, local
and foreign income, franchise or other taxes based on income, if any, or any
interest or penalties with respect thereto, imposed upon the Trust). In the
event that Heller Financial is acting as Servicer and fails to pay the fees and
disbursements of the Indenture Trustee or Owner Trustee (the "Trustees"), such
Trustee will be entitled to receive the portion of the Servicing Fee that is
equal to such unpaid amounts. In no event will the Noteholders be liable to the
Trustees for the Servicer's failure to pay such amounts, and any such amounts so
paid to the Trustees will be treated as paid to the Servicer for all other
purposes of the Sale and Servicing Agreement.
Record Date
Payments on the Notes will be made as described herein to the Noteholders
in whose names the Notes were registered (expected to be Cede, as nominee of
DTC) at the close of business on the Record Date. However, the final payment on
the Notes offered hereby will be made only upon presentation and surrender of
such Notes. All payments with respect to the principal of and interest on the
Notes (each, a "Distribution") will be made to DTC in immediately available
funds. See "Description of the Notes--Book-Entry Registration".
Optional Termination
On any Distribution Date occurring on or after the date on which the ADCB
of the Contract Pool is less than 10% of the initial ADCB of the Contract Pool
as of the Cutoff Date (the "Cleanup Call Condition"), the Trust Depositor will
have the option to cause the Trust to purchase (without penalty) all, but not
less than all, of the remaining outstanding Notes and Certificates. The
redemption price will be equal to the sum of the outstanding principal amount of
the Notes and Certificates, together with accrued interest thereon through the
date of redemption, and shall be payable to the holders of the Notes and
Certificates on such Distribution Date from the proceeds of the Trust's sale to
the Trust Depositor (and the Trust Depositor's concurrent resale to the
applicable Sellers), for a repurchase price equal to such redemption price, of
the remaining Contracts Pool and other Trust Assets held by the Trust.
Following any redemption, the Noteholders will have no further rights with
respect to the Trust Assets.
Reports
No later than the third Business Day prior to each Distribution Date, the
Servicer will forward to the Indenture Trustee and each Rating Agency a
statement (the "Monthly Report") prepared by the Servicer setting forth certain
information with respect to the Trust and the Notes and Certificates, including:
(i) the ADCB (A) as of the end of the related Collection Period and (B) as of
the end of the second Collection Period preceding such Distribution Date (or, in
the case of Contracts that were first added to the Contract Pool during the
related Collection Period, as of the Cutoff Date for such Contracts); (ii) the
Class A Principal Payment Amount, Class B Principal Payment Amount, Class C
Principal Payment Amount and Class D Principal Payment Amount (including the
calculations utilized in the determination thereof); (iii) the ADCB of Contracts
held by the Trust which were 30, 60 and 90 days or more delinquent as of the end
of such Collection Period; (iv) the Discounted Contract Balance of each Contract
in the Contract Pool that became a Defaulted Contract during such Collection
Period and cumulatively for each preceding Collection Periods; (v) the monthly
Servicing Fee for such Collection Period; and (vi) the Available Amounts with
respect to the related Collection Period (including the calculation utilized in
the determination thereof).
With respect to each Distribution Date, the Monthly Report also will
include the following information with respect to the Notes: (i) the total
amount distributed; (ii) the amount allocable to principal on the Notes and each
Class thereof; (iii) the amount allocable to interest on the Notes and each
Class thereof; and (iv) the amount, if any, by which the unpaid principal amount
of the Notes of each Class exceeds the Principal Amount of such Class as of the
Record Date with respect to such Distribution Date. On each Distribution Date,
the Indenture Trustee (or an agent on its behalf), will forward to each
Noteholder of record a copy of the Monthly Report.
On or before January 31 of each calendar year, commencing January 31, 1998,
the Indenture Trustee (or an agent on its behalf) will furnish (or cause to be
furnished) to each person who at any time during the preceding calendar year was
a Noteholder of record, a statement containing the information required to be
provided by an issuer of indebtedness under the Code for such preceding calendar
year or the applicable portion thereof during which such person was a
Noteholder, together with such other customary information as is necessary to
enable the Noteholders to prepare their tax returns. See "Certain Federal
Income Tax Matters".
List of Noteholders
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At such time, if any, as Definitive Notes have been issued, upon written
request of any Noteholder or group of Noteholders of record holding Notes
evidencing not less than 10% of the aggregate unpaid principal amount of the
Notes, the Indenture Trustee will afford such Noteholders access during normal
business hours to the current list of Noteholders for purpose of communicating
with other Noteholders with respect to their rights under the Indenture, the
Sale and Servicing Agreement or the Notes. While the Notes are held in book-
entry form, holders of beneficial interests in the Notes will not have access to
a list of other holders of beneficial interests in the Notes, which may impede
the ability of such holders of beneficial interests to communicate with each
other. See "--Book-Entry Registration" below.
Administration Agreement
Heller Financial, in its capacity as administrator (in such capacity, the
"Administrator" ), will enter into an agreement (the "Administration Agreement")
with the Trust, the Trust Depositor and the Indenture Trustee pursuant to which
the Administrator will agree, to the extent provided in the Administration
Agreement, to provide the notices and to perform other administrative
obligations required to be provided or performed by the Trust or the Owner
Trustee under the Indenture. The Administrator in the Administration Agreement
agrees to perform certain accounting functions of the Trust which the Owner
Trustee is required to perform pursuant to the Trust Agreement, including but
not limited to maintaining the books of the trust, filing tax returns for the
trust, and delivering tax related reports to each Noteholder (except the Owner
Trustee shall retain responsibility for distributing the Schedule K-1s). As
compensation for the performance of the Administrator's obligations under the
Administration Agreement and as reimbursement for its expenses related thereto,
the Administrator will be entitled to a monthly administration fee (the
"Administration Fee"), which fee will be paid by the Servicer.
Book-Entry Registration
Noteholders may only hold their Notes through DTC (in the United States) or
Cedel or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations which are participants in such systems.
Cede, as nominee for DTC, will hold the global Class A Note or Notes, the
global Class B Note or Notes, and the global Class C Note or Notes. Cedel and
Euroclear will hold omnibus positions on behalf of their participants through
customers' securities accounts in Cedel's and Euroclear's names on the books of
their respective Depositaries (as defined below) which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. Citibank will act as depositary for Cedel and Morgan Guaranty
Trust will act as depositary for Euroclear (in such capacities, the
"Depositaries").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("Participants") and
facilitate the settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of notes. Participants include the
Underwriter, securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants (as defined in this section) and Euroclear
Participants (as defined in this section) will occur in accordance with their
respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected through
DTC in accordance with DTC rules on behalf of the relevant European
international clearing systems by its Depositary. Cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its rules
and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities received in Cedel
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
Cedel Participants on such business day. Cash received in Cedel or Euroclear as
a result of
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sales of securities by or through a Cedel Participant or a Euroclear
Participant to a Participant will be received with value on the DTC settlement
date but will be available in the relevant Cedel or Euroclear cash account only
as of the business day following settlement in DTC. For information with
respect to tax documentation procedures relating to the Notes, see "Certain
Federal Income Tax Considerations."
Noteholders that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
Notes may do so only through Participants and Indirect Participants. In
addition, Noteholders will receive all distributions of principal and interest
on the Notes from the Indenture Trustee through DTC and its Participants. Under
a book-entry format, Noteholders will receive payments after the related
Distribution Date, as the case may be, because, while payments are required to
be forwarded to Cede, as nominee for DTC, on each such date, DTC will forward
such payments to its Participants which thereafter will be required to forward
them to Indirect Participants or holders of beneficial interests in the Notes.
It is anticipated that the only "Class A Noteholder" , "Class B Noteholder" and
"Class C Noteholder" will be Cede, as nominee of DTC, and that holders of
beneficial interests in the Class A-1 Notes, Class A-2 Notes, Class B Notes or
Class C Notes, respectively, under the Indenture will only be permitted to
exercise the rights of Class A Noteholders, Class B Noteholders or Class C
Noteholders, respectively, under the Indenture indirectly through DTC and its
Participants who in turn will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Notes and is required to receive and
transmit distributions of principal of and interest on the Notes. Participants
and Indirect Participants with which holders of beneficial interests in the
Notes have accounts similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of these respective holders.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of holders of
beneficial interests in the Notes to pledge Notes to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of such
Notes, may be limited due to the lack of a Definitive Note for such Notes.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Class A-1 Noteholder, Class A-2 Noteholder, Class B Noteholder or
Class C Noteholder under the Indenture only at the direction of one or more
Participants to whose account with DTC the Class A-1 Notes, Class A-2 Notes,
Class B Notes or Class C Notes are credited. Additionally, DTC has advised the
Issuer that it may take actions with respect to percentage interests in any
particular Class of the Notes represented by holders of beneficial interests
evidencing that percentage, which actions may conflict with other of its actions
with respect to other percentage interests therein.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the Underwriter. Indirect access to Cedel is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Cedel Participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 29 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of
Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under
contract with Euroclear Clearance Systems S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriter. Indirect access to Euroclear is also available
to other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
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The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See
"Certain Federal Income Tax Considerations." Cedel or the Euroclear Operator,
as the case may be, will take any other action permitted to be taken by an
Noteholder under the Indenture on behalf of a Cedel Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf through
DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Notes among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
Except as required by law, none of the Servicer, any Seller, the Owner
Trustee, the Trust Depositor or the Indenture Trustee will have any liability
for any aspect of the records relating to, actions taken or implemented by, or
payments made on account of, beneficial ownership interests in the Notes held
through DTC, or for maintaining, supervising or reviewing any records or actions
relating to such beneficial ownership interests.
Definitive Notes
The Notes will be issued in fully registered, authenticated form to
beneficial owners or their nominees (the "Definitive Notes"), rather than to DTC
or its nominee, only if (a) the Trust advises the Indenture Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as Depository with respect to such Notes, and the Indenture Trustee or the
Issuer is unable to locate a qualified successor or (b) the Issuer at its option
elects to terminate the book-entry system through DTC.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Indenture Trustee is required to notify all beneficial
owners for each Class of Notes held through DTC of the availability of
Definitive Notes for such Class. Upon surrender by DTC of the Definitive Note
representing the Notes and instructions for reregistration, the Indenture
Trustee will issue such Definitive Notes, and thereafter the Indenture Trustee
will recognize the holders of such Definitive Notes as Noteholders under the
Indenture (the "Holders"). The Indenture Trustee will also notify the Holders
of any adjustment to the Record Date with respect to the Notes necessary to
enable the Indenture Trustee to make distributions to Holders of the Definitive
Notes for such Class of record as of each Distribution Date.
Additionally, upon the occurrence of any such event described above,
distribution of principal of and interest on the Notes will be made by the
Indenture Trustee directly to Holders in accordance with the procedures set
forth herein and in the Indenture. Distributions will be made by check, mailed
to the address of such Holder as it appears on the Note register. Upon at least
10 days' notice to Noteholders for such Class, however, the final payment on any
Note (whether the Definitive Notes or the Note for such Class registered in the
name of Cede representing the Notes of such Class) will be made only upon
presentation and surrender of such Note at the office or agency specified in the
notice of final distribution to Noteholders.
Definitive Notes of each Class will be transferable and exchangeable at the
offices of the Indenture Trustee or its agent in New York, New York, which the
Indenture Trustee shall designate on or prior to the issuance of any Definitive
Notes with respect to such Class. No service charge will be imposed for any
registration of transfer or exchange, but the Indenture Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
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THE SUBORDINATED NOTES
On the Closing Date, the Trust will also issue the [ %] Class D
Receivables-Backed Notes (the "Subordinated Notes") with an aggregate principal
balance of $[ ]. The Subordinated Notes will be issued pursuant to
the Indenture.
The Subordinated Notes are not being offered and sold hereunder.
Distributions with respect to the Subordinated Notes will be subordinated to the
rights of the Noteholders and the holders of the Subordinated Notes to the
extent described herein. See "Description of the Notes--Allocations" herein.
THE CERTIFICATES
On the Closing Date, the Trust will also issue the Certificates with an
initial certificate balance of [$ ] (the "Certificates"); the
Certificates will not bear interest and shall have the right to monies in the
Reserve Fund and to certain other excess funds (after the payment of all
principal and interest on the Notes and the Subordinated Notes). The
Certificates will represent fractional undivided beneficial equity interests in
the Trust and will be issued pursuant to the Trust Agreement.
The Certificates are not being offered and sold hereunder. The Trust
Depositor is expected initially to retain the Certificates, although the
Certificates could be transferred at some later date in a transaction separate
from this offering provided the Owner Trustee and Indenture Trustee receive an
opinion of Independent Counsel that such transfer will not cause the Trust to
become a taxable entity or otherwise adversely affect the Noteholders or the
holders of the Subordinated Notes. Distributions with respect to the
Certificates will be subordinated to the rights of the Noteholders and the
holders of the Subordinated Notes to the extent described herein. See
"Description of the Notes--Allocations" herein.
THE TRANSFER AND SALE AGREEMENT AND
SALE AND SERVICING AGREEMENT GENERALLY
The following is a summary of the material terms of the Transfer and Sale
Agreement and the Sale and Servicing Agreement, the forms of which were filed as
exhibits to the Registration Statement of which this Prospectus is a part, and
this summary is qualified in its entirety by reference to the Transfer and Sale
Agreement and Sale and Servicing Agreement, respectively.
Termination of Trust
Unless the Trust Depositor instructs the Owner Trustee otherwise, the Trust
will terminate only on the earliest to occur of (i) the day following the day on
which the Aggregate Principal Amount of all Notes and Certificates is zero
(provided, that the Trust Depositor shall have delivered a written notice to the
Owner Trustee electing to terminate the Trust), (ii) December [ ], or (iii) if
the Contracts are sold, disposed of or liquidated following the occurrence of an
Insolvency Event as described under "Description of the Notes--Events of
Default", immediately following such sale, disposition or liquidation (the
"Trust Termination Date"). Upon termination of the Trust, all right, title and
interest in the Trust Assets (other than amounts in accounts maintained by the
Trust for the final payment of principal and interest to Noteholders or
Certificateholders) will be conveyed and transferred to the holder of the
Subordinate Certificate and any permitted assignee.
Conveyance of Contracts
The Contracts, and interests in the Equipment and other Applicable
Security, to be sold or contributed to the Trust by the Trust Depositor will be
acquired by the Trust Depositor from the Sellers pursuant to the Transfer and
Sale Agreement dated as of [ ], 1997 among the Trust Depositor, Heller
Financial and HFLI (each as a Seller thereunder) (the "Transfer and Sale
Agreement"). A form of Transfer and Sale Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Under the Transfer and Sale Agreement, each Seller will sell to the Trust
Depositor, to the extent of the Seller's interest therein, (i) the Contracts and
its interest in any related Equipment and Applicable Security as of the Cutoff
Date, and (ii) the proceeds thereof (except Excluded Amounts). Pursuant to the
Sale and Servicing Agreement, such interests in the related Contracts, the
Equipment, the Applicable Security and the proceeds thereof will then be sold by
the Trust Depositor to the Trust, and pursuant to the Indenture a lien thereon
will be granted by the Trust in favor of the Indenture Trustee, and the Trust
Depositor will also assign its rights in, to and under the Transfer and Sale
Agreement with respect
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to the Contracts and Equipment and Applicable Security to the Trust and the
Trust will assign such rights to the Indenture Trustee.
Pursuant to the Transfer and Sale Agreement, each Seller will sell,
transfer, assign, set over and otherwise convey to the Trust Depositor, without
recourse (except as expressly set forth in such Transfer and Sale Agreement) all
of such Seller's right, title and interest in and to (i) specified Contracts and
all monies due or to become due in payment of such Contracts on or after the
related Cutoff Date, including all Scheduled Payments thereunder due on or after
such Cutoff Date, any Prepayment Amounts, any payments in respect of a casualty
or early termination, and any Recoveries received with respect thereto but
excluding any Scheduled Payments due prior to the Cutoff Date or any Excluded
Amounts, (ii) the related Equipment and, in the case of any Vendor Obligation,
Applicable Security, including all proceeds from any sale or other disposition
of such Equipment or Applicable Security, (iii) any documents delivered to the
Trust Depositor or held by the Servicer on its behalf with respect to each such
Contract (the "Contract Files"), (iv) all payments made or to be made in the
future with respect to each such Contract and the Vendor thereunder under any
Vendor Agreements with the applicable Seller and under any other guarantee or
similar credit enhancement with respect to such Contracts, (v) all payments made
with respect to each such Contract under any insurance policy covering physical
damage to the related Equipment (the "Insurance Proceeds") and (vi) all income
and proceeds of the foregoing (the foregoing are referred to collectively as the
"Transferred Assets"). As of the Cutoff Date the Trust Depositor will transfer
and assign, among other things, the Transferred Assets to the Trust for the
benefit of the Noteholders and holders of the Subordinated Notes and the Trust
will grant a lien on such Transferred Assets in favor of the Indenture Trustee,
pursuant to the Sale and Servicing Agreement and the Indenture.
Heller Financial, as Servicer under the Sale and Servicing Agreement, will
retain custody of (but not title to) the Contracts, the Contract Files and any
related evidence of insurance payments, Scheduled Payments and any other similar
payments under the Contracts. Prior to the conveyance of any Contracts to the
Trust Depositor, Heller Financial caused (in the case of the Contracts sold
under the Transfer and Sale Agreement on the Closing Date) or will cause (in the
case of Substitute Contracts conveyed after the Closing Date) its and/or HFLI's
computer accounting systems to be marked to show that the Contracts transferred
thereunder have been conveyed to the Trust Depositor, and prior to each transfer
of any Trust Assets to the Trust pursuant to the Sale and Servicing Agreement,
Heller Financial or the Trust Depositor, as appropriate, will file UCC financing
statements reflecting (A) the conveyance of the Transferred Assets to the Trust
Depositor, (B) each sale of Trust Assets to the Trust pursuant to the Sale and
Servicing Agreement and (C) the grant of a lien thereon in favor of the
Indenture Trustee (except that financing statements will be filed with respect
to each conveyance of an interest in Equipment to the Trust Depositor by Heller
Financial and each sale of an interest in Equipment to the Trust by the Trust
Depositor, and each transfer of an interest in Equipment to the Indenture
Trustee by the Trust, in each case, only to the extent the same may be viewed as
inventory of Heller Financial (or HFLI, as applicable), the Trust Depositor and
the Trust, respectively). Each Seller and the Trust Depositor will mark its
books and records, including the appropriate computer files relating to the
Contracts, to indicate that all interests in the Contracts have been conveyed
(i) to the Trust Depositor, (ii) by the Trust Depositor to the Trust, and (iii)
by the Trust to the Indenture Trustee. See "Certain Legal Aspects of the
Contracts".
Representations and Warranties
The Seller/Servicer and HFLI have, jointly and severally, made certain
representations and warranties in the Transfer and Sale Agreement with respect
to the Contracts transferred thereunder as of the Cutoff Date, and the Sellers
will similarly make or be deemed to have made certain representations and
warranties with respect to each Additional Contract or Substitute Contract
transferred by either of them as of its related Cutoff Date, including that:
(i) the information with respect to the Contract, any Secondary Contract
securing the obligations under such Contract, and the Equipment, if any, subject
to the Contract delivered under the Transfer and Sale Agreement is true and
correct in all material respects; (ii) immediately prior to the transfer of a
Contract and any related Equipment (or security interest therein) or Applicable
Security (or security interest therein) to the Trust Depositor, such Contract
was owned by the applicable Seller free and clear of any adverse claim; (iii)
the Contract did not have a Scheduled Payment that was a delinquent payment for
more than 30 days, and the Contract is not otherwise a Defaulted Contract; (iv)
no provision of the Contract has been waived, altered or modified in any
respect, except by instruments or documents contained in the Contract File
(other than payment delinquencies permitted under clause (iii) above); (v) the
Contract is a valid and binding payment obligation of the Obligor and is
enforceable in accordance with its terms (except as may be limited by applicable
insolvency, bankruptcy, moratorium, reorganization, or other similar laws
affecting enforceability of creditors' rights generally and the availability of
equitable remedies); (vi) the Contract is not and will not be subject to rights
of rescission, setoff, counterclaim or defense and, to the Sellers' knowledge,
no such rights have been asserted or threatened with respect to the Contract;
(vii) the Contract, at the time it was made, did not violate the laws of the
United States or any state, except for any such violations which do not
materially and adversely affect the collectibility of the Contracts in the
Contract Pool taken as a whole; (viii) (x) the Contract and any related
Equipment have not been sold, transferred, assigned or pledged by the applicable
Seller to any other person (other than the sale of the Equipment to the End-User
in connection with CSAs, Secured Notes and "non-true leases" and (y) either (A)
such Contract is secured by a fully perfected Lien of the first priority on the
related Equipment
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or, in the case of any Vendor Obligation, related Applicable Security or (B) in
the case of a Contract secured by Title Registry Equipment, either (1) within 30
calendar days of the origination or acquisition of such Contract by the Seller
all applicable federal registration or recording procedures were initiated], and
in any case such interest will be so noted or recorded within 180 days of such
acquisition or origination; (ix) if the Contract constitutes either an
"instrument" or "chattel paper" for purposes of the UCC, there is not more than
one "secured party's original" counterpart of the Contract; (x) all filings
necessary to evidence the conveyance or transfer of the Contract to the Trust
Depositor have been made in all appropriate jurisdictions; (xi) the Obligor is
not to the Sellers' knowledge, subject to bankruptcy or other insolvency
proceedings; (xii) the Obligor's billing address is in the United States and the
Contract is a U.S. dollar-denominated obligation; (xiii) the Contract does not
require the prior written consent of an Obligor or contain any other restriction
on the transfer or assignment of the Contract (other than a consent or waiver of
such restriction that has been obtained prior to the date of such Contract's
conveyance to the Trust); (xiv) either (A) the obligations of the related
Obligor under such Contract are irrevocable and unconditional and non-cancelable
(or, if prepayable by its terms, such Contract meets the criteria described in
clause (xxiv) below) or (B) with respect to certain Leases with Lessees that are
governmental entities or municipalities, if such Lease is cancelled in
accordance with its terms, either (1) the Vendor which assigned such Lease to
the Seller is unconditionally obligated to repurchase such Lease from the Seller
for a purchase price not less than the Discounted Contract Balance of such Lease
(as of the date of purchase) plus interest thereon at the Discount Rate through
the Distribution Date following such date of repurchase or (2) pursuant to the
Transfer and Sale Agreement, the Sellers have indemnified the Trust Depositor
against such cancellation in an amount equal to the Discounted Contract Balance
of such Lease (as of the date of purchase) plus interest thereon at the Discount
Rate through the Distribution Date following such cancellation less any amounts
paid by the Vendor pursuant to clause (1); (xv) the Contract has an original
maturity of not greater than the term specified in the Sale and Servicing
Agreement; (xvi) no adverse selection procedure was used in selecting the
Contract for transfer; (xvii) the Obligor under the Contract is required to
maintain casualty insurance with respect to the related Equipment or to self-
insure against casualty with respect to the related Equipment in accordance with
the Servicer's normal requirements; (xviii) the Contract constitutes chattel
paper, an account, an instrument or a general intangible as defined under the
UCC; (xix) no Lease is a "consumer lease" as defined in Section 2A-103(1)(e) of
the UCC and each Lease is a Lease intended for security as defined in Section 1-
201(39) of the UCC; (xx) each Lessee has represented to the Seller or the Vendor
that it has accepted the related Equipment and that it has had a reasonable
opportunity to inspect and test such Equipment and the Seller has not been
notified of any defects therein; (xxi) the Contract is not subject to any
guarantee by any Seller nor has the Seller established any specific credit
reserve with respect to the related Obligor; (xxii) each Lease is a "triple net
lease" under which the Obligor is responsible for the maintenance of the related
Equipment in accordance with general industry standards applicable to such item
of Equipment; (xxiii) each Vendor Obligation is secured by an Eligible Secondary
Contract having an aggregate Discounted Contract Balance for such Eligible
Secondary Contract equal to the outstanding principal amount of such Vendor
Obligation (and assuming the interest rate specified in such Vendor Obligation
is the "Discount Rate" for purposes of calculating such Discounted Contract
Balance); (xxiv) no provision of such Contract provides for a Prepayment Amount
less than the amount calculated in accordance with the definition thereof
(unless otherwise indemnified by the Vendor or the Sellers in an amount equal to
the excess of the "Prepayment Amount" as calculated in accordance with the
definition thereof over the amount otherwise payable upon a prepayment under
such Contract).
The foregoing representations and warranties, as appropriate, will be
reaffirmed by the Sellers with respect to any Additional Contract or Substitute
Contract transferred by any Seller to the Trust Depositor. A Contract which
satisfies all of the above representations and warranties shall be termed an
"Eligible Contract" and Contracts with respect to which the representations in
clauses (iii), (xv) and (xxiv) are not true shall also be Eligible Contracts if
the Trust Depositor shall have received confirmation from each Rating Agency
that the discrepancy will not result in a Ratings Effect. In addition, the
Sellers will jointly and severally represent and warrant to the Trust Depositor
that the conveyance pursuant to the Transfer and Sale Agreement constitutes a
valid sale and assignment to the Trust Depositor of all right, title and
interest of the applicable Seller in the related Contracts, whether then
existing or thereafter created, and the proceeds thereof, which is effective as
of the date of conveyance of such Contract.
As used above, "Permitted Liens" shall mean (a) with respect to Contracts
in the Contract Pool: (i) liens for state, municipal or other local taxes if
such taxes shall not at the time be due and payable or if the Trust Depositor
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, (ii) liens in favor of the Trust Depositor created pursuant to the
Transfer and Sale Agreement and transferred to the Trust pursuant to the Sale
and Servicing Agreement, (iii) liens in favor of the Trust created pursuant to
the Sale and Servicing Agreement, and (iv) liens in favor of the Indenture
Trustee created pursuant to the Sale and Servicing Agreement and the Indenture;
and (b) with respect to the related Equipment: (i) materialmen's,
warehousemen's, mechanics' and other liens arising by operation of law in the
ordinary course of business for sums not due, (ii) liens for state, municipal or
other local taxes if such taxes shall not at the time be due and payable or if
the Trust Depositor 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, (iii) liens in favor of the Trust Depositor
created pursuant to the Transfer and Sale Agreement and transferred to the Trust
pursuant to the Sale and Servicing Agreement, (iv) liens in favor of the Trust
created pursuant to the Sale and Servicing Agreement; (v) liens in favor of the
Indenture Trustee created pursuant to the Sale and Servicing
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Agreement and the Indenture, (vi) other subordinated liens which are
subordinated to the prior payment of the Notes and Subordinated Notes on terms
described in the Sale and Servicing Agreement and (vii) liens granted by the
End-Users or Vendors which are subordinated to the interest of the Trust in such
Equipment.
In addition to the foregoing, the Sellers will jointly and severally
represent and warrant in the Transfer and Sale Agreement with respect to each
Secondary Contract securing a Vendor Obligation transferred by either Seller
under the Transfer and Sale Agreement as of the related Cutoff Date (unless
otherwise indicated), among other things, (i) that each such Secondary Contract
satisfies the representations set forth in the third preceding paragraph (other
than the representations set forth in clauses (ii), (viii) (with respect to
ownership by the Seller of the Contract) and (xxiii), and except that the term
"Obligor" shall be deemed to be "End-User" in all such representations), (ii)
that the Seller holds a duly perfected lien of the first priority on such
Secondary Contract and (iii) that the transfer of the Seller's security interest
in such Secondary Contract and the proceeds thereof to the Trust Depositor is
effective to create in favor of the Trust Depositor a lien thereon and that such
lien has been duly perfected (Secondary Contracts which satisfy all of the
foregoing representations shall be termed "Eligible Secondary Contracts").
The Trust Depositor will represent and warrant in the Sale and Servicing
Agreement, among other things, (i) that the transfer of the related Contracts,
whether then existing or thereafter created, and the proceeds thereof is a valid
sale, transfer and assignment to the Trust of all right, title and interest of
the Trust Depositor therein and that all filings necessary to evidence the
conveyance or transfer of the Contracts to the Trust have been made in all
appropriate jurisdictions; (ii) that each Contract transferred by it to the
Trust is an "Eligible Contract"; (iii) that each Secondary Contract (or interest
therein) transferred by it to the Trust is an "Eligible Secondary Contract";
(iv) that the security interest granted on the related Contracts, whether then
existing or thereafter created, and the proceeds thereof by the Trust to the
Indenture Trustee is effective to create in favor of the Indenture Trustee a
lien thereon and that such lien has been duly perfected; (v) that the Trust
Depositor holds a duly perfected lien of the first priority on each Secondary
Contract and (vi) that the transfer of the Trust Depositor's security interest
in each Secondary Contract and the proceeds thereof by the Trust to the
Indenture Trustee is effective to create in favor of the Indenture Trustee a
lien thereon and that such lien has been duly perfected.
None of the Indenture Trustee, the Trust, the Owner Trustee or any of them
in their individual capacities (in such capacity, the "Trust Company"), shall
make or be deemed to have made any representations or warranties, express or
implied, regarding the Trust Assets or the transfers thereof by the Sellers, the
Trust Depositor or the Trust.
Under the terms of the Transfer and Sale Agreement and the Sale and
Servicing Agreement, each Contract must be an Eligible Contract as of its date
of transfer to the Trust. The Indenture Trustee shall reassign to the Trust
Depositor, and the Sellers will be concurrently obligated, jointly and
severally, to purchase from the Trust Depositor, any Contract transferred by a
Seller and any interest in Equipment transferred that is subject to such
Contract no later than 90 days after any Seller becomes aware, or receives
written notice from the Servicer or the Trust Depositor, of the breach of any
representation or warranty made by the Seller in the Transfer and Sale Agreement
that materially adversely affects the interests of the Trust Depositor or the
Trust or their successors or assigns in any Contract or the related Contract
File, which breach has not been cured or waived in all material respects (an
"Ineligible Contract"). This purchase obligation will constitute the sole
remedy against the Sellers available to the Trust Depositor, the Indenture
Trustee and the Noteholders or holders of the Subordinated Notes for a breach of
a representation or warranty under the Transfer and Sale Agreement made by the
Sellers with respect to such a Contract. This purchase obligation also will
constitute the sole remedy against the Trust Depositor available to the
Indenture Trustee and the Noteholders or holders of the Subordinated Notes for a
breach of a representation or warranty under the Sale and Servicing Agreement
made by the Trust Depositor with respect to such a Contract.
Pursuant to the Sale and Servicing Agreement, an Ineligible Contract shall
be reassigned to the Trust Depositor and the Trust Depositor shall make a
deposit in the Collection Account in immediately available funds in an amount
equal to the sum of the Discounted Contract Balance of the Ineligible Contract
(utilizing, for purposes of calculating the Discounted Contract Balance, the
Discount Rate at the time such Ineligible Contract was transferred to the Trust)
and any outstanding Servicer Advances thereon. Any amount deposited into the
Collection Account in connection with the reassignment of an Ineligible Contract
(the amount of such deposit being referred to herein as a "Transfer Deposit
Amount") shall be considered payment in full of the Ineligible Contract. Any
such Transfer Deposit Amount shall be treated as an Available Amount. In the
alternative, the Trust Depositor may instead cause the Sellers, or either of
them, to convey to the Trust Depositor, for concurrent conveyance to the Trust
and concurrent pledge to the Indenture Trustee, a Substitute Contract (otherwise
satisfying the terms and conditions generally applicable to Substitute Contracts
in other situations described herein) in replacement for the affected Ineligible
Contract, which shall thereupon be deemed released by the Trust (and Indenture
Trustee) and reconveyed through the Trust Depositor to the Seller thereof.
Concentration Amounts
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In addition to the representations and warranties made by the Sellers and
the Trust Depositor with respect to the Contracts as described above under
"--Representations and Warranties", the Trust Depositor will represent and
warrant as of the initial Cutoff Date as follows:
(i) the ADCB of all End-User Contracts with Obligors that are
governmental entities or municipalities does not exceed [ ]% of the
ADCB of the Contract Pool;
(ii) the ADCB of all End-User Contracts which finance, lease or are
related to Software will not exceed 4.54% of the ADCB of the Contract
Pool;
(iii) the ADCB of all End-User Contracts with Obligors who comprise the
three (3) largest Obligors (measured by ADCB as of the date of
determination) does not exceed 4.90% of the ADCB of the Contract
Pool;
(iv) the ADCB of all End-User Contracts with Obligors who comprise the
twenty (20) largest Obligors (measured by ADCB as of the date of
determination) does not exceed 24.59% of the ADCB of the Contract
Pool;
(v) the ADCB of all End-User Contracts related to a single Vendor, or
representing a Vendor Obligation of such Vendor or affiliate thereof
does not exceed 23.09% of the ADCB of the Contract Pool;
(vi) the ADCB of all End-User Contracts with Obligors or affiliates
thereof located in a single State of the United States does not
exceed 18.65% of the ADCB of the Contract Pool.
On the date an Additional Contract or Substitute Contract is added to the
Contract Pool the Trust Depositor will make the foregoing representations and
warranties as of the initial Closing Date provided, that, for purposes thereof
(i) the Contract Pool on the initial Closing Date shall be deemed to include
such Additional Contract or Substitute Contract in lieu of the Contract being
replaced or substituted and (ii) the Discounted Contract Balance of such
Additional Contract or Substitute Contract shall be equal to the Discounted
Contract Balance thereof as of the related Cutoff Date.
The Indenture Trustee shall reassign to the Trust Depositor, and the
Sellers will be jointly and severally obligated to purchase from the Trust
Depositor, any Contract transferred by a Seller (and any related Equipment or
Applicable Security) (an "Excess Contract"; any such Contract, together with any
Ineligible Contract as described and defined above, being sometimes referred to
herein, collectively, as a "Warranty Contract") selected by the Servicer at such
time as there is a breach of any of the foregoing representations or warranties,
which breach has not been cured or waived in all material respects, the removal
of which shall remedy such breach. Such purchase shall occur no later than 90
days after the Trust Depositor or any Seller becomes aware, or receives written
notice from the Servicer or the Trust Depositor, of such breach. This purchase
obligation will constitute the sole remedy against the Sellers available to the
Trust Depositor, the Indenture Trustee and the Noteholders or Certificateholders
for a breach of one of the foregoing representations or warranties.
Pursuant to the Sale and Servicing Agreement, an Excess Contract shall be
reassigned to the Trust Depositor and the Trust Depositor shall make a deposit
in the Collection Account in immediately available funds in an amount (an
"Excess Concentration Amount") equal to the sum of the Discounted Contract
Balance of the Excess Contract (together with accrued interest thereon at the
Discount Rate) and any outstanding Servicer Advances thereon. Any amount
deposited into the Collection Account in connection with the reassignment of an
Excess Contract shall be considered payment in full of the Ineligible Contract.
Any such amount shall be considered a Transfer Deposit Amount and shall be
treated as an Available Amount. In the alternative, the Trust Depositor may
instead cause the Sellers, or either of them, to convey to the Trust Depositor,
for concurrent conveyance to the Trust and concurrent pledge to the Indenture
Trustee, a Substitute Contract (otherwise satisfying the terms and conditions
generally applicable to Substitute Contracts in other situations described
herein) in replacement for the affected Excess Contract, which shall thereupon
be deemed released by the Trust (and Indenture Trustee) and reconveyed through
the Trust Depositor to the Seller thereof.
Indemnification
The Sale and Servicing Agreement provides that the Servicer will
indemnify the Trust Depositor, the Trust, the Owner Trustee, and the Indenture
Trustee from and against any loss, liability, expense, damage or injury suffered
or sustained arising out of the Servicer's actions or omissions with respect to
the Trust pursuant to the Sale and Servicing Agreement. Pursuant to the Sale and
Servicing Agreement, the Servicer, irrevocably and unconditionally, (i) submits
for itself and its property in any legal action arising out of the Sale and
Servicing Agreement and the other Operative Documents, to the nonexclusive
general jurisdiction of the courts of the United States of America for the
Northern District of Illinois, and appellate courts therefrom and (ii) waives
any objection it may have that any action therein was brought in an inconvenient
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court. Notwithstanding the foregoing, a court may determine, on its own motion,
that an action brought against the Servicer in any such court was brought in an
inconvenient forum.
Under the Sale and Servicing Agreement, the Trust Depositor has agreed to
be liable directly to an injured party for the entire amount of any losses,
claims, damages or liabilities (other than those incurred by a Noteholder or
Certificateholder in the capacity of an investor in the Notes or Certificates)
arising out of or based on the arrangement created by the Sale and Servicing
Agreement as though such agreement created a partnership under the Illinois
Uniform Limited Partnership Act in which the Trust Depositor was a general
partner. In the event of a Service Transfer, the successor Servicer will
indemnify and hold harmless the Trust Depositor for any losses, claims, damages
and liabilities of the Trust Depositor as described in this paragraph arising
from the actions or omissions of such successor Servicer. Except as provided in
the two preceding paragraphs, the Sale and Servicing Agreement provides that
none of the Trust Depositor, the Servicer or any of their directors, officers,
employees or agents will be under any other liability to the Trust, the Owner
Trustee, the Indenture Trustee, the holders of Notes or Subordinated Notes or
any other person for any action taken, or for refraining from taking any action,
in good faith pursuant to the Sale and Servicing Agreement. However, none of the
Trust Depositor, the Servicer or any of their directors, officers, employees or
agents will be protected against any liability which would otherwise be imposed
by reason of willful misfeasance, bad faith or gross negligence of any such
person in the performance of their duties or by reason of reckless disregard of
their obligations and duties thereunder.
In addition, the Sale and Servicing Agreement provides that the Servicer is
not under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the Sale and
Servicing Agreement. The Servicer may, in its sole discretion, undertake any
such legal action which it may deem necessary or desirable for the benefit of
holders of Notes or Subordinated Notes with respect to the Sale and Servicing
Agreement and the rights and duties of the parties thereto and the interest of
Noteholders or holders of the Subordinated Notes thereunder.
Collection and Other Servicing Procedures
Pursuant to the Sale and Servicing Agreement, the Servicer is responsible
for servicing, collecting, enforcing and administering the Contracts in
accordance with its customary and usual procedures for servicing contracts
comparable to the Contracts.
The Servicer pursuant to the Sale and Servicing Agreement also may advance
Scheduled Payments with respect to any Contract (a "Servicer Advance") which
were due in a Collection Period and were not received and identified to a
Contract by the close of business on the Determination Date, to the extent that
the Servicer, in its sole discretion, expects to recover the Servicer Advance
from subsequent payments on or with respect to the Contract. The Servicer shall
be entitled to reimbursement of Servicer Advances from subsequent payments on or
with respect to the Contract, including collections of any Prepayment Amount,
Transfer Deposit Amount or Recoveries with respect to such Contract, and, if the
Servicer determines that Servicer Advances will not be recovered from the
Contracts to which the Servicer Advances were related, from other Contracts
included in the Trust.
Certain Other Matters Regarding the Servicer
The Servicer may not resign from its obligations and duties under the Sale
and Servicing Agreement, except upon determination that such duties are no
longer permissible under applicable law. No such resignation will become
effective until the Indenture Trustee or a successor to the Servicer has assumed
the Servicer's responsibilities and obligations under the Sale and Servicing
Agreement.
Any person into which, in accordance with the Sale and Servicing Agreement,
Heller Financial or the Servicer may be merged or consolidated or any person
resulting from any merger or consolidation to which Heller Financial or the
Servicer is a party, or any person succeeding to the business of Heller
Financial or the Servicer, will be the successor to Heller Financial, as the
Servicer, under the Sale and Servicing Agreement.
Servicer Default
In the event of any Servicer Default, either the Indenture Trustee or the
Required Holders, by written notice to the Servicer and the Owner Trustee (and
to the Indenture Trustee, if given by the Noteholders) (a "Termination Notice"),
may terminate all of the rights and obligations of the Servicer, as servicer,
under the Sale and Servicing Agreement. If the Indenture Trustee within 60 days
of receipt of a Termination Notice is unable to obtain any bids from eligible
Servicers and the Servicer delivers an officer's certificate to the effect that
the Servicer cannot in good faith cure the Servicer Default which gave rise to
the Termination Notice, then the Indenture Trustee shall offer the Trust
Depositor the right at its option to accept retransfer of the Trust Assets. The
purchase price for such a retransfer shall be equal to the sum of the Aggregate
Principal Amount of all Notes and Certificates on such Distribution Date plus
accrued and unpaid interest thereon at the applicable
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interest rate (together with, if applicable, interest on interest amounts that
were due and not paid on a prior date), through the date of such retransfer.
The Indenture Trustee shall, as promptly as possible after giving a
Termination Notice, appoint a successor Servicer (a "Service Transfer"), and if
no successor Servicer has been appointed by the Indenture Trustee and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all rights, authority, power and obligations of the Servicer under the Sale and
Servicing Agreement shall pass to and be vested in the Indenture Trustee. Prior
to any Service Transfer, the Indenture Trustee will seek to obtain bids from
potential Servicers meeting certain eligibility requirements set forth in the
Sale and Servicing Agreement to serve as a successor Servicer for servicing
compensation not in excess of the Servicing Fee. The rights and interest of the
Trust Depositor under the Sale and Servicing Agreement as holder of the
Certificate will not be affected by any Termination Notice or Service
Transfer.
A "Servicer Default" refers to any of the following events:
(a) any failure by the Servicer to make any payment, transfer or deposit or
to give instructions or notice to the Owner Trustee or the Indenture
Trustee pursuant to the Sale and Servicing Agreement on or before the
date occurring three Business Days after the date such payment,
transfer, deposit, or such instruction or notice or report is required
to be made or given, as the case may be, under the terms of the Sale
and Servicing Agreement; or
(b) 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 the Sale and Servicing Agreement which has a material adverse
effect on the Noteholders or holders of the Subordinated Notes, which
continues unremedied for a period of 30 days after the first to occur
of (i) the date on which written notice of such failure requiring the
same to be remedied shall have been given to the Servicer by the
Indenture Trustee or to the Servicer and the Indenture Trustee by the
Noteholders or holders of the Subordinated Notes or the Indenture
Trustee on behalf of such Noteholders of Notes aggregating not less
than 25% of the Principal Amount of any Class adversely affected
thereby and (ii) the date on which the Servicer becomes aware thereof
and such failure continues to materially adversely affect such
Noteholders or holders of the Subordinated Notes for such period; or
(c) any representation, warranty or certification made by the Servicer in
the Sale and Servicing Agreement or in any certificate delivered
pursuant to the Sale and Servicing Agreement shall prove to have been
incorrect when made, which has a material adverse effect on the
Noteholders or the holders of the Subordinated Notes and which
continues to be incorrect in any material respect for a period of 30
days after the first to occur of (i) the date on which written notice
of such incorrectness requiring the same to be remedied shall have been
given to the Servicer and the Owner Trustee by the Indenture Trustee,
or to the Servicer, the Owner Trustee and the Indenture Trustee by
Noteholders or the holders of the Subordinated Notes or by the
Indenture Trustee on behalf of Noteholders of Notes aggregating not
less than 25% of the Principal Amount of any Class adversely affected
thereby and (ii) the date on which the Servicer becomes aware thereof,
and such incorrectness continues to materially adversely affect such
Holders for such period; or
(d) an Insolvency Event shall occur with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of five Business Days or
referred to under clause (b) or (c) for a period of 60 days (in addition to any
period provided in (a), (b) or (c)) shall not constitute a Servicer Default
until the expiration of such additional five Business Days or 60 days,
respectively, if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an
act of God or other similar occurrences. Upon the occurrence of any such event
the Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Sale and
Servicing Agreement and the Servicer shall provide the Owner Trustee, the
Indenture Trustee and the Trust Depositor prompt notice of such failure or delay
by it, together with a description of its efforts to so perform its obligations.
The Servicer shall immediately notify the Indenture Trustee in writing of any
Servicer Default.
Evidence as to Compliance
The Sale and Servicing Agreement provides that on or before June 30 of each
calendar year the Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Trust Depositor) to furnish a report to the effect that such
firm has applied certain procedures agreed upon with the Servicer and examined
certain documents and records relating to the servicing of the related Contracts
and that, on the basis of such procedures, nothing came to the attention of such
firm that caused them to believe that such servicing was not
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conducted in compliance with the Sale and Servicing Agreement except for such
exceptions or errors as such firm shall believe to be immaterial and such other
exceptions as shall be set forth in such statement.
The Sale and Servicing Agreement provides for delivery to the Indenture
Trustee and each Rating Agency on or before June 30 of each calendar year of a
statement signed by an officer of the Servicer to the effect that, to the best
of such officer's knowledge, the Servicer has performed its obligations in all
material respects under the Sale and Servicing Agreement throughout the
preceding year or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the
Indenture Trustee may be obtained by a request in writing delivered to the
Indenture Trustee.
Amendments
The Sale and Servicing Agreement may be amended from time to time by
agreement of the Owner Trustee, the Indenture Trustee and the Trust Depositor
without the consent of the Noteholders or Certificateholders (or the Indenture
Trustee) (i) to cure any ambiguity or (ii) to add any consistent provisions;
provided, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
The Sale and Servicing Agreement may also be amended from time to time by
the Trust Depositor, the Servicer, the Indenture Trustee and the Owner Trustee
with the consent of the Noteholders holding Notes evidencing not less than
66 2/3% of the Principal Amount of the Notes and the Subordinated Notes for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Sale and Servicing Agreement or of modifying in any
manner the rights of Noteholders. No such amendment, however, may
(i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Note without the
consent of each Noteholder affected thereby;
(ii) change the definition of (or that of any definition included within
the definition of) or the manner of calculating the "Applicable Class
Percentage", the "Controlling Party", the "Class A-1 Principal
Payment Amount", the Class A-2 Principal Payment Amount, the "Class B
Principal Payment Amount", the "Class C Principal Payment Amount",
the "Subordinated Note Principal Payment Amount", the "Discounted
Contract Balance", the "Principal Amount", or the "Available Amount"
without the consent of each Noteholder and Prior Certificateholder;
or
(iii) reduce the aforesaid percentage required to consent to any such
amendment without the consent of each Noteholder affected thereby; or
(iv) modify, amend or supplement the provisions of the Sale and Servicing
Agreement relating to the allocation of Available Amounts (see
"Description of the Notes--Allocations") without the consent of each
Noteholder; or
(v) make any Note or Certificate payable in money other than Dollars
without the consent of each Noteholder affected thereby.
Promptly following the execution of any such amendment (other than an
amendment described in the preceding paragraph), the Owner Trustee will furnish
written notice of the substance of such amendment to each affected Noteholder
and Certificateholder.
The Owner Trustee
[ ] will be the Owner Trustee under the Sale and
Servicing Agreement. Heller Financial and its affiliates may from time to time
enter into banking and trustee relationships with the Owner Trustee and its
affiliates. Heller Financial and its affiliates may hold Notes in their own
names; however, any Notes so held shall not be entitled to participate in any
decisions made or instructions given to the Owner Trustee by the Noteholders as
a group. The Owner Trustee's address is [ ], Wilmington, Delaware
[ ], Attention: Trust Department.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the Trust Assets may at the time be located, the Owner Trustee
will have the power to appoint a co-trustee or separate trustee of all or any
part of the Trust Assets. To the extent permitted by law, all rights, powers,
duties and obligations conferred or imposed upon the Owner Trustee will be
conferred or imposed upon and exercised or performed by the Owner Trustee and
such separate trustee or co-trustee jointly, or, in any jurisdiction in which
the Owner Trustee will be incompetent or unqualified to perform
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certain acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the direction
of the Owner Trustee.
The Owner Trustee may resign at any time, in which event a successor Owner
Trustee will be appointed as provided in the Sale and Servicing Agreement. The
Servicer may also remove the Owner Trustee if such Owner Trustee ceases to be
eligible to continue as such under the Sale and Servicing Agreement. In such
circumstances, a successor Owner Trustee will be appointed as provided in the
Sale and Servicing Agreement. Any resignation or removal of the Owner Trustee
and appointment of a successor Owner Trustee does not become effective until
acceptance of the appointment by the successor Owner Trustee.
THE INDENTURE
General
The Notes will be issued pursuant to an Indenture between the Trust and the
Indenture Trustee. Pursuant to the Sale and Servicing Agreement the Indenture
Trustee will obtain the benefits of the Sale and Servicing Agreement for itself
and the Noteholders represented thereby.
Payments of Principal and Interest
Pursuant to the Indenture, each payment received by the Indenture Trustee
as described above under "Description of the Notes--Allocations; Prior to an
Event of Default or Restricting Event" shall be promptly distributed in the
following order of priority:
first, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect
of the Class A-1 Notes shall be distributed to the Class A-1
Noteholders ratably, without priority of any one Class A-1 Note over
any other Class A-1 Note, in the proportion that the aggregate amount
of all accrued but unpaid interest to the date of distribution on each
Class A-1 Note bears to the aggregate amount of all accrued but unpaid
interest to the date of distribution on all Class A-1 Notes;
second, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect
of the Class A-2 Notes shall be distributed to the Class A-2
Noteholders ratably, without priority of any one Class A-2 Note over
any other Class A-2 Note, in the proportion that the aggregate amount
of all accrued but unpaid interest to the date of distribution on each
Class A-2 Note bears to the aggregate amount of all accrued but unpaid
interest to the date of distribution on all Class A-2 Notes;
third, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect
of the Class B Notes shall be distributed to the Class B Noteholders
ratably, without priority of any one Class B Note over any other Class
B Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class B Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class B Notes;
fourth, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect
of the Class C Notes shall be distributed to the Class C Noteholders
ratably, without priority of any one Class C Note over any other Class
C Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class C Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class C Notes;
fifth, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect
of the Subordinated Notes shall be distributed to the Subordinated
Noteholders ratably, without priority of any one Subordinated Note
over any other Subordinated Note, in the proportion that the aggregate
amount of all accrued but unpaid interest to the date of distribution
on each Subordinated Note bears to the aggregate amount of all accrued
but unpaid interest to the date of distribution on all Subordinated
Notes;
sixth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class A-1 Noteholders
to pay in full the aggregate amount of the Class A-1 Principal
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Payment then due pursuant to or in respect of the Class A-1 Notes,
without priority of any one Class A-1 Note over any other Class A-1
Note, in the proportion that the aggregate unpaid principal amount of
each Class A-1 Note bears to the aggregate unpaid principal amount of
all Class A-1 Notes;
seventh, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class A-2 Noteholders
to pay in full the aggregate amount of the Class A-2 Principal Payment
then due pursuant to or in respect of the Class A-2 Notes, without
priority of any one Class A-2 Note over any other Class A-2 Note, in
the proportion that the aggregate unpaid principal amount of each
Class A-2 Note bears to the aggregate unpaid principal amount of all
Class A-2 Notes;
eighth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class B Noteholders to
pay in full the aggregate amount of the Class B Principal Payment then
due pursuant to or in respect of the Class B Notes, without priority
of any one Class B Note over any other Class B Note, in the proportion
that the aggregate unpaid principal amount of each Class B Note bears
to the aggregate unpaid principal amount of all Class B Notes; and
ninth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class C Noteholders to
pay in full the aggregate amount of the Class C Principal Payment then
due pursuant to or in respect of the Class C Notes, without priority
of any one Class C Note over any other Class C Note, in the proportion
that the aggregate unpaid principal amount of each Class C Note bears
to the aggregate unpaid principal amount of all Class C Notes.
tenth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Subordinated
Noteholders to pay in full the aggregate amount of the Subordinated
Principal Payment then due pursuant to or in respect of the
Subordinated Notes, without priority of any one Subordinated Note over
any other Subordinated Note, in the proportion that the aggregate
unpaid principal amount of each Subordinated Note bears to the
aggregate unpaid principal amount of all Subordinated Notes.
Pursuant to the Indenture, each payment received by the Indenture Trustee
as described above under "Description of the Notes--Allocations; Following an
Event of Default or Restricting Event" shall be promptly distributed in the
following order of priority:
first, so much of such payment as shall be required to reimburse the
Indenture Trustee for any tax, expense, charge or other loss incurred
by the Indenture Trustee (to the extent not previously reimbursed),
(including, without limitation, the expense of sale, taking or other
proceeding, attorneys' fees and expenses, court costs, and any other
expenditures incurred or expenditures or advances made by the
Indenture Trustee in the protection, exercise or enforcement of any
right, power or remedy or any damages sustained by the Indenture
Trustee, liquidated or otherwise, upon the Indenture Event of Default
giving rise to such expenditures or advances) shall be applied by the
Indenture Trustee in reimbursement of such expenses;
second, so much of such payment remaining as shall be required to
reimburse the Noteholders in full for certain indemnity payments, if
any, made by such Noteholders to the Indenture Trustee (to the extent
not previously reimbursed) shall be distributed to the Noteholders,
and, if the aggregate amount remaining shall be insufficient to
reimburse all such payments in full, it shall be distributed ratably,
without priority of any Noteholder over any other, in the proportion
that the aggregate amount of such unreimbursed indemnity payments made
by each such Noteholder bears to the aggregate amount of such
unreimbursed indemnity payments made by all Noteholders;
third, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the
date of distribution on the Class A-1 Notes and the Class A-2 Notes
shall be distributed to the Class A-1 Noteholders and the Class A-2
Noteholders, and, if the aggregate amount remaining shall be
insufficient to pay all such amounts in full, it shall be distributed
ratably, without priority of any one Class A-1 Note and one Class A-2
Note over any other Class A-1 Note or over any other Class A-2 Note,
in the proportion that the aggregate amount of all accrued but unpaid
interest to the date of distribution on each Class A-1 Note or Class
A-2 Note bears to the aggregate amount of all accrued but unpaid
interest to the date of distribution on all Class A-1 Notes and Class
A-2 Notes;
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fourth, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the
date of distribution on the Class B Notes shall be distributed to the
Class B Noteholders, and, if the aggregate amount remaining shall be
insufficient to pay all such amounts in full, it shall be distributed
ratably, without priority of any one Class B Note over any other Class
B Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class B Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class B Notes;
fifth, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the
date of distribution on the Class C Notes shall be distributed to the
Class C Noteholders, and, if the aggregate amount remaining shall be
insufficient to pay all such amounts in full, it shall be distributed
ratably, without priority of any one Class C Note over any other Class
C Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class C Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class C Notes;
sixth, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the
date of distribution on the Subordinated Notes shall be distributed to
the Subordinated Noteholders, and, if the aggregate amount remaining
shall be insufficient to pay all such amounts in full, it shall be
distributed ratably, without priority of any one Subordinated Note
over any other Subordinated Note, in the proportion that the aggregate
amount of all accrued but unpaid interest to the date of distribution
on each Subordinated Note bears to the aggregate amount of all accrued
but unpaid interest to the date of distribution on all Subordinated
Notes;
seventh, the balance, if any, of such payment remaining thereafter
shall be distributed to the Class A-1 Noteholders and the Class A-2
Noteholders in order to pay in full the outstanding aggregate amount
of principal of the Class A-1 Notes and the Class A-2 Notes, and if
the aggregate amount remaining shall be insufficient to pay all such
amounts in full, it shall be distributed ratably, without priority of
any one Class A-1 Note and one Class A-2 Note over any other Class A-1
Note or over any other Class A-2 Note, in the proportion that the
aggregate unpaid principal amount of each Class A-1 Note and Class A-2
Note bears to the aggregate unpaid principal amount of all Class A-1
Notes and Class A-2 Notes;
eighth, the balance, if any, of such payment remaining thereafter
shall be distributed ratably to the Class B Noteholders to pay in full
the aggregate amount of principal of the Class B Notes, then due
pursuant to or in respect of the Class B Notes, and if the aggregate
amount remaining shall be insufficient to pay all such amounts in
full, it shall be distributed ratably, without priority of any one
Class B Note over any other Class B Note, in the proportion that the
aggregate unpaid principal amount of each Class B Note bears to the
aggregate unpaid principal amount of all Class B Notes;
ninth, the balance, if any, of such payment remaining thereafter shall
be distributed ratably to the Class C Noteholders to pay in full the
aggregate amount of principal of the Class C Notes, then due pursuant
to or in respect of the Class C Notes, and if the aggregate amount
remaining shall be insufficient to pay all such amounts in full, it
shall be distributed ratably, without priority of any one Class C Note
over any other Class C Note, in the proportion that the aggregate
unpaid principal amount of each Class C Note bears to the aggregate
unpaid principal amount of all Class C Notes; and
tenth, the balance, if any, of such payment remaining thereafter shall
be distributed ratably to the Subordinated Noteholders to pay in full
the aggregate amount of principal of the Subordinated Notes, then due
pursuant to or in respect of the Subordinated Notes, and if the
aggregate amount remaining shall be insufficient to pay all such
amounts in full, it shall be distributed ratably, without priority of
any one Subordinated Note over any other Subordinated Note, in the
proportion that the aggregate unpaid principal amount of each
Subordinated Note bears to the aggregate unpaid principal amount of
all Subordinated Notes.
Events of Default and Restricting Events; Remedies
If an Event of Default referred to in subparagraphs (d) or (e) (see
"Description of the Notes--Events of Default") has occurred, then and in every
such case the unpaid principal of the Notes, together with interest accrued but
unpaid thereon, and all other amounts due to the Noteholders under the
Indenture, shall immediately and without further act become due
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and payable.
If any other Event of Default shall have occurred and be continuing, then
and in every such case, the Notes shall be accelerated with accrued but unpaid
interest thereon; provided, however, such Event of Default may be waived if the
Required Holders may provide the Trustee and the Trust Depositor written notice
of such waiver.
The Indenture Trustee
The Indenture Trustee with respect to the Notes is [ ].
Heller Financial and its affiliates may from time to time enter into banking and
trustee relationships with the Indenture Trustee and its affiliates. Heller
Financial and its affiliates may hold Notes in their own names; however, any
Notes so held shall not be entitled to participate in any decisions made or
instructions given to the Indenture Trustee by the Noteholders as a group.
The Indenture Trustee's responsibilities will be generally ministerial in
nature, consisting principally of the distribution of monies received pursuant
to the Sale and Servicing Agreement, the authentication and registration of
transfer of Notes under the Indenture, and the delivery of certain information
received from the Trust Depositor.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the Trust Assets may at the time be located, the Indenture
Trustee will have the power to appoint a co-trustee or separate trustee of all
or any part of the Trust Assets. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon the Indenture Trustee
will be conferred or imposed upon and exercised or performed by the Indenture
Trustee and such separate trustee or co-trustee jointly, or, in any jurisdiction
in which the Indenture Trustee will be incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the direction
of the Indenture Trustee.
The Indenture Trustee may resign at any time, in which event a successor
Indenture Trustee which meets the requirements of Section 310(a) of the Trust
Indenture Act of 1939, as amended (the "TIA"), will be appointed by the
Servicer. The Servicer may also remove the Indenture Trustee if the Indenture
Trustee ceases to be eligible to continue as such under the Indenture. In such
circumstances, a successor Indenture Trustee which meets the requirements of
Section 310(a) of the TIA will be appointed by the Servicer. Any resignation or
removal of the Indenture Trustee and appointment of a successor Indenture
Trustee does not become effective until acceptance of the appointment by the
successor Indenture Trustee.
Governing Law
The Indenture will be governed by the laws of the State of New York.
Amendments
At any time and from time to time, (i) the Owner Trustee, the Trust
Depositor, and the Indenture Trustee, with the written consent of a Majority in
Interest of the Noteholders represented thereby, may execute a supplement to the
Indenture for the purpose of adding provisions to, or changing or eliminating
provisions of, the Indenture (including any appendix or schedule hereto) and
(ii) the Indenture Trustee, with the written consent of a Majority in Interest
of the Noteholders represented thereby, may consent to or execute a written
amendment of or supplement to, or waiver or consent under, the Sale and
Servicing Agreement; provided, however, that, without the consent of each
Noteholder under the Indenture, no such amendment, supplement, waiver or consent
shall
(i) reduce the amount or extend the time of payment of any
amount owing or payable under any Note or (except as provided in the
Indenture) increase or reduce the interest payable on any Note (except
that only the consent of the affected Noteholder shall be required for
any decrease in an amount of or the rate of interest payable on such
Note or any extension for the time of payment of any amount payable
under such Note), or alter or modify the provisions of the Sale and
Servicing Agreement with respect to the order of priorities in which
distributions thereunder shall be made or with respect to the amount
or time of payment of any such distribution,
(ii) reduce, modify or amend any indemnities in favor of any
Noteholder or in favor of or to be paid by the Trust Depositor, or
alter the definition of "Indemnitees" to exclude any Noteholder
(except as consented to by each Person adversely affected thereby),
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(iii) make any Note payable in money other than U.S. dollars,
(iv) modify, amend or supplement the provisions of the Sale and
Servicing Agreement relating to amendments, waivers and supplements to
the Indenture, the Sale and Servicing Agreement or any other document,
or
(v) modify the definition of "Majority in Interest" (as defined
in the Indenture) or the percentage of Noteholders required to effect
any modification of the Indenture.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
Transfer of Contracts. As of the Cutoff Date, Heller Financial or HFLI,
as Sellers, will sell the Contracts to the Trust Depositor, which Contracts will
be immediately conveyed to the Trust pursuant to the Sale and Servicing
Agreement. Under commercial law, the transfer of the Contracts to the Trust is
either a sale of the Contracts to the Trust or a grant of a security interest in
such property to the Trust. The Trust Depositor has taken and will take all
actions that are required under applicable law to perfect the Trust's interest
in the Contracts in the event the transfer by the Trust Depositor to the Trust
is deemed to be a loan for commercial law purposes, and it is the intent of the
Trust Depositor that the Trust will at all times have a first priority perfected
security interest in the Contracts and in the proceeds thereof, with certain
exceptions. The Trust Depositor will represent and warrant upon the execution of
the Sale and Servicing Agreement and as of the Closing Date and, with respect to
Additional Contracts or Substitute Contracts, as of each date of conveyance
thereof, that such sale to the Trust constitutes a valid sale to the Trust of
all right, title and interest of the Trust Depositor in and to such Contracts.
The Trust Depositor will also represent and warrant to the Trust that, in the
event the sale of such Contracts by the Trust Depositor to the Trust is deemed
to create a security interest under the UCC, there will exist a valid,
subsisting and enforceable first priority perfected security interest in the
Contracts, in existence at the time of the formation of the Trust with respect
to Contracts conveyed on the Closing Date or at the date of conveyance of any
Additional Contracts or Substitute Contracts, in favor of the Trust. For a
discussion of the Trust's rights arising from these representations and
warranties not being satisfied, see "The Transfer and Sale Agreement and The
Sale and Servicing Agreement Generally--Representations and Warranties".
Financing statements covering the Contracts will be filed under the UCC by
the Trust Depositor, the Trust and the Indenture Trustee to perfect their
respective interests in the Contracts and continuation statements will be filed
as required to continue the perfection of such interests. In addition, each
Seller will indicate in its books and records, including the appropriate
computer files relating to the Contracts, that such Contracts have been
transferred by such Seller to the Trust Depositor, by the Trust Depositor to the
Trust and by the Trust to the Indenture Trustee, and each Seller will physically
separate from its general files relating to similar Contracts, and stamp the
related Contract Files or otherwise mark such Contracts with a legend to the
effect that such Contracts have been transferred to the Trust and assigned to
the Indenture Trustee, and deliver to the Indenture Trustee a computer file or
microfiche or written list containing a true and complete list of all Contracts
then being transferred to the Trust and all Secondary Contracts in which a
security interest is then being transferred to the Trust, identified by account
number and by the Discounted Contract Balance as of the related Cutoff Date. To
facilitate servicing and reduce administrative costs, however, the Contract
Files will be retained in the possession of the Servicer and not deposited with
the Indenture Trustee or any other agent or custodian for the benefit of the
Noteholders. Because the Contract Files will remain in the Servicer's
possession, if a subsequent purchaser were able to take physical possession of
the Contract Files without knowledge of such assignment, the Indenture Trustee's
priority interest in the Contracts (as assignee of the Seller's, Trust
Depositor's and the Trust's interest) could be defeated. In such event,
distributions to Noteholders could be adversely affected. The segregation and
stamping of Contract Files should, however, mitigate this risk.
Similarly, with respect to Secondary Contracts securing Vendor Loans, in
some instances the Vendor will retain the original contract files associated
with the related End-User Contracts which are Secondary Contracts securing such
Vendor Obligation. Although UCC financing statements are filed reflecting the
pledge of such Contracts to the applicable Seller as security for the Vendor
Loans, because these contract files will remain in the Vendor's possession, if a
subsequent purchaser were able to take physical possession of such contract
files without knowledge of the pledge to the Seller, the Indenture Trustee's
priority security interest (as assignee of the Seller's, Trust Depositor's and
the Trust's interest) in the such Secondary Contracts, as security for the
related Vendor Obligation, could be defeated. In such event, distributions to
Noteholders could be adversely affected. Each Vendor represents, warrants and
covenants in the applicable agreement evidencing a Vendor Obligation, however,
that it has not and will not sell, pledge or otherwise assign or convey to any
other party (other than the applicable Seller) any interest in the Secondary
Contracts securing such Vendor Obligation, and agrees that it will maintain
possession of the related contract files as custodian for the benefit of the
Seller as secured party with respect to such Secondary Contracts.
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There are also certain limited circumstances under applicable federal or
state law in which prior transferees of Contracts or Secondary Contracts could
have an interest in such contracts with priority over the Indenture Trustee's
interest. A tax or other government lien on property of the Seller or the Trust
Depositor arising prior to the time a Contract or interest in a Secondary
Contract is conveyed to the Trust may also have priority over the interest of
the Trust and the Indenture Trustee in such contract. Under the Transfer and
Sale Agreement, the Sellers will jointly and severally warrant to the Trust
Depositor, and, under the Sale and Servicing Agreement, the Trust Depositor will
warrant to the Indenture Trustee, that the Contracts have been transferred free
and clear of the lien of any third party and that the interests in Secondary
Contracts transferred thereunder have been transferred free and clear of the
lien of any third party. Each Seller, the Trust Depositor, the Owner Trustee
and the Trust will also covenant that it will not sell, pledge, assign,
transfer or grant any lien on any Contract or Secondary Contract included in the
Trust, other than transfers to the Trust and by the Trust to the Indenture
Trustee. In addition, as described above under "The Trust Depositor", the Trust
Depositor has been organized as a "bankruptcy-remote" entity which is not
engaged in any business or activities unrelated to the transactions described
herein.
Transfers of Interests in Financed Equipment. In connection with the
conveyance of the Contracts to the Trust, security interests in the related
financed Equipment securing such Contracts (or, in connection with Leases, the
Seller's ownership interest in or title to such Equipment) will be assigned by
the applicable Seller to the Trust Depositor and by the Trust Depositor to the
Trust. It has been the general policy of the Sellers to file or cause to be
filed UCC financing statements with respect to the Equipment relating to the
Contracts. Due to the administrative burden and expense associated with
amending many filings in numerous states where Equipment is located, no
assignments of the UCC financing statements evidencing the security interest of
the Sellers in the Equipment will be filed to reflect the Trust Depositor's,
the Trust's or the Indenture Trustee's interests therein. While failure to file
such assignments does not affect the Trust's interest in the Contracts or
perfection of the Indenture Trustee's interest in such Contracts (including the
related Seller's security interest in the related Equipment), it does expose the
Trust (and thus Noteholders) to the risk that the Servicer could inadvertently
release its security interest in the Equipment of record, and it could
complicate the Trust's enforcement, as assignee, of the Seller's security
interest in the Equipment. While these risks should not affect the perfection
or priority of the interest of the Indenture Trustee in the Contracts or rights
to payment thereunder, they may adversely affect the right of the Indenture
Trustee to receive proceeds of a disposition of the Equipment related to a
Defaulted Contract. Additionally, statutory liens for repairs or unpaid taxes
and other liens arising by operation of law may have priority even over prior
perfected security interests in the Equipment assigned to the Indenture Trustee.
Also, the transfer to the Trust Depositor of the applicable Seller's
security interest in aircraft ("Title Registry Equipment") securing certain
Contracts, or its ownership interest in Title Registry Equipment subject to
Leases, and the transfer of such interests by the Trust Depositor to the Trust,
is subject to certain federal title registration statutes, regulations and
procedures (in the case of other Title Registry Equipment). Due to the
significant administrative burden and expense associated with reregistering
transfers of titles and of security interests with respect to such Title
Registry Equipment, the registrations of title with respect to Title Registry
Equipment securing Contracts, and to Title Registry Equipment subject to Leases,
will not identify the Trust as secured party or owner, as the case may be, of
such Equipment. There exists a risk in not so identifying the Trust as the new
secured party or owner that, through fraud or negligence, a third party could
acquire an interest in the Title Registry Equipment superior to that of the
Trust. In addition, statutory liens for repairs or unpaid taxes may have
priority even over a perfected security interest in the Title Registry
Equipment. The Sellers will jointly and severally represent that as of the
Cutoff Date, in the Sellers' reasonable judgment, the Discounted Contract
Balance of End-User Contracts in the Contract Pool that are secured by Title
Registry Equipment, does not exceed [ ]% of the ADCB of the Contract Pool.
In addition, some of the Equipment related to the Contracts may constitute
"fixtures" under the real estate or UCC provisions of the jurisdiction in which
such Equipment is located. In order to perfect a security interest in such
Equipment, the holder of the security interest must file either a "fixture
filing" under the provisions of the UCC or a real estate mortgage under the real
estate laws of the state where the Equipment is located. These filings must be
made in the real estate records office of the county in which such Equipment is
located. So long as the Obligor does not permanently attach the Equipment to the
real estate, a security interest in the Equipment will be governed by the UCC,
and the filing of a UCC-1 financing statement will be effective to maintain the
priority of the applicable Seller's security interest in such Equipment. Except
for a small portion of such Equipment, the Trust Depositor does not believe that
any of the Equipment will be permanently affixed to the related real estate. If,
however, any Equipment is permanently attached to the real estate in which it is
located, other parties could obtain an interest in the Equipment which is prior
to the security interest originally obtained by the applicable Seller and
transferred to the Trust Depositor. Based on the representation of the Sellers,
the Trust Depositor, however, believes that with respect to Equipment which
constitutes a "fixture", it has obtained a perfected first priority security
interest, through assignment of such security interest by the Seller, by virtue
of the Seller's proper filing of UCC-1 financing statements naming the Seller as
secured party in the real estate records office of the county in which the
Equipment is located. Also, the Sellers will jointly and severally represent
that as of the Cutoff Date, in the Sellers' reasonable judgment, the Discounted
Contract Balance of End-User Contracts in the Contract Pool that are secured by
fixtures, does not exceed [ ]% of the ADCB of the Contract Pool.
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The Trust Depositor will be obligated to reacquire any Contract transferred
to the Trust (subject to the Seller's reacquisition thereof) in the event it is
determined that a first priority perfected security interest, or ownership
interest in the case of Leases, in the name of the Seller in the Equipment
related to such Contract did not exist as of the date such Contract was conveyed
to the Trust, if (i) such breach shall materially adversely affect such Contract
and (ii) such failure or breach shall not have been cured by the last day of the
second (or, if the Trust Depositor elects, the first) month following the
discovery by or notice to the Trust Depositor of such breach, and the Sellers
will be jointly and severally obligated to reacquire such Contract from the
Trust Depositor contemporaneously with the Trust Depositor's reacquisition from
the Trust. If there is any Equipment as to which the applicable Seller failed to
perfect its security interest, such Seller's security interest, and the security
interests of the Trust Depositor and the related Trust (and the Indenture
Trustee as assignee), would be subordinated to, among others, subsequent
purchasers of the Equipment and holders of perfected security interests with
respect thereto. To the extent the security interest of the Seller in the
related Equipment is perfected, subject to the exceptions set forth in the
following sentence, the Trust will have a prior claim over subsequent purchasers
from the Obligor of such Equipment and holders of subsequently perfected
security interests granted by Obligors. However, as against Mechanics' Liens or
liens for taxes and other non-consensual liens unpaid by an Obligor under a
Contract, or in the event of fraud or negligence of the Seller or Servicer, the
Trust could lose the priority of its interest or its interest in such Equipment
following the conveyance of such Contract to the Trust. Neither the Trust
Depositor nor the Servicer not any Seller will have any obligation to reacquire
a Contract if any of the occurrences described in the foregoing sentence (other
than fraud or negligence of the Seller) result in the Trust's losing the
priority of its security interest or its security interest in such Equipment
after the date such Contract is conveyed to the Trust.
Certain other federal and state statutory provisions, including bankruptcy
law, insolvency laws, and other laws affecting the rights of creditors and
debtors generally as well as general equitable principles may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
Certain Matters Relating to Bankruptcy. The Sellers will either (i)
originate Contracts or (ii) acquire End-User Contracts from a Vendor, which
Contracts will be transferred to the Trust Depositor. If the acquisition of an
End-User Contract by a Seller is treated as a sale of such Contract from the
applicable Vendor to such Seller, such Contract generally would not be part of
such Vendor's bankruptcy estate and would not be available to such Vendor's
creditors. If a Vendor became a debtor in a bankruptcy case then, in the case
of End-User Contracts acquired as described in clause (ii) above, if an unpaid
creditor of such Vendor or a representative of creditors of such Vendor, such as
a trustee in bankruptcy, or such Vendor acting as a debtor-in-possession, were
to take the position that the sale of such Contracts to the Seller was
ineffective to remove such Contracts from such Vendor's estate (for instance,
that such sale should be recharacterized as a pledge of Contracts to secure
borrowings of such Vendor), then delays in payments under the Contracts to the
Trust could occur or, should the court rule in favor of such creditor,
representative or Vendor, reductions in the amount of such payments could
result. Further, if the transfer of End-User Contracts to the Seller as
described in clause (ii) above is recharacterized as a pledge, a tax or
government lien on the property of the pledging Vendor arising before the
Contracts came into existence may have priority over the respective Seller's
(and its assignee's) interest in the Contracts. No law firm will, in
connection with any offering of the Notes, express any opinion as to the issues
discussed above.
In the Transfer and Sale Agreement, the Sellers will jointly and severally
warrant to the Trust Depositor that the conveyance of the Contracts by a Seller
to the Trust Depositor is a valid sale and transfer of such Contracts to the
Trust Depositor. In addition, each Seller and the Trust Depositor will treat
the transactions described herein as a sale of the Contracts to the Trust
Depositor and the Seller will take all actions that are required under
applicable law to perfect the Trust Depositor's ownership interest in the
Contracts sold by it and the Trust Depositor's security interest in the
Secondary Contracts securing Vendor Loans sold by it. Notwithstanding the
foregoing, if the Seller became a debtor in a bankruptcy case and an unpaid
creditor of the Seller or a representative of creditors of the Seller, such as a
trustee in bankruptcy, or the Seller acting as a debtor-in-possession, were to
take the position that the sale of Contracts to the Trust Depositor was
ineffective to remove such Contracts from the Seller's estate (for instance,
that such sale should be recharacterized as a pledge of Contracts to secure
borrowings of the Seller), then delays in payments under the Contracts to the
Trust could occur or, should the court rule in favor of such creditor,
representative or Seller, reductions in the amount of such payments could
result. If the transfer of Contracts to the Trust Depositor is recharacterized
as a pledge, a tax or government lien on the property of the Seller arising
before the Contracts came into existence may have priority over the Trust
Depositor's interest in the Contracts. If the transactions contemplated herein
are treated as a sale of Contracts to the Trust Depositor, generally the
Contracts would not be part of the Seller's bankruptcy estate and would not be
available to the Seller's creditors.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), the
United States Court of Appeals for the Tenth Circuit held that, under the UCC,
accounts sold by a debtor remain property of the debtor's estate under Section
541 of the Bankruptcy Code. In the event of a bankruptcy of a Seller, or, in
the case of Contracts originated by a Vendor and purchased by a Seller, a
bankruptcy of a Vendor, and a determination by a court that the sale of the
Contracts to the Trust
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Depositor or to the Seller, respectively, should be recharacterized as a pledge
of such Contracts to secure a borrowing, not as a "true sale," including as a
result of the application by a court of the Octagon court's reasoning to the
Seller's sale of Contracts to the Trust Depositor or to a Vendor's sale of
Contracts to the Seller, delays in distributions on Notes, and possible
reductions in the amount of distributions, could occur.
The Trust Depositor will warrant in the Sale and Servicing Agreement (i)
that the conveyance of the Contracts to the Trust is a valid sale of the
Contracts to the Trust and (ii) that the security interest thereon granted by
the Trust in favor of the Indenture Trustee is a valid and duly perfected
security interest, and will take all actions that are required under applicable
law to perfect the Trust's and the Indenture Trustee's respective interests in
the Contracts and the Secondary Contracts securing Vendor Loans sold by it.
Nevertheless, if the Trust Depositor were to become a debtor in a bankruptcy
case and an unpaid creditor of the Trust Depositor or a representative of
creditors of the Trust Depositor, such as a trustee in bankruptcy, or the Trust
Depositor acting as a debtor-in-possession, were to take the position that the
sale of Contracts to the Trust was ineffective to remove such Contract's from
the Trust Depositor's estate (for instance, that such sale should be
recharacterized as a pledge of Contracts to secure borrowings of the Trust
Depositor), then delays in payments under the Contracts to the Trust could occur
or, should the court rule in favor of such creditor, representative or Trust
Depositor, reductions in the amount of such payments could result. If the
transfer of Contracts to the Trust is recharacterized as a pledge, a tax or
government lien on the property of the Trust Depositor arising before the
Contracts came into existence may have priority over the Noteholder's interest
in the Contracts. If the transactions are treated as a sale of Contracts,
generally, the Contracts would not be part of the Trust Depositor's estate and
would not be available to the Trust Depositor's creditors.
Certain restrictions have been imposed on the Trust Depositor and the Trust
and certain other parties to the transactions described herein which are
intended to reduce the risk of an insolvency proceeding involving the Trust
Depositor or the Trust. These restrictions include incorporating the Trust
Depositor as a separate, special purpose company pursuant to a certificate of
incorporation containing certain restrictions on the nature of its business.
Additionally, the Trust Depositor may commence a voluntary case or proceeding
under any bankruptcy or insolvency law, or cause the Trust to commence a
voluntary case or proceeding under any bankruptcy or insolvency law, only upon
the affirmative vote of all its directors, including its independent directors,
as long as the Trust Depositor is solvent and does not reasonably foresee
becoming insolvent. The Trust Depositor's certificate of incorporation requires
that the Trust Depositor have at all times at least two independent directors.
In addition, the Trust Depositor has no intent to file, and Heller Financial has
represented that it has no intent to cause the filing of, a voluntary
application under the insolvency laws with respect to the Trust Depositor, as
long as the Trust Depositor is solvent and does not reasonably foresee becoming
insolvent. However, no assurance can be given that insolvency proceedings
involving either the Trust Depositor or the Trust will not occur. In the event
the Trust Depositor becomes subject to insolvency proceedings, the Trust, the
Trust's interest in the Trust Assets, and the Trust's obligation to make
payments on the Notes might also become subject to such insolvency proceedings.
In the event of insolvency proceedings involving the Trust, the Trust's interest
in the Trust Assets and the Trust's obligation to make payments on the Notes
would become subject to such insolvency proceedings. No assurance can be given
that insolvency proceedings involving Heller Financial would not lead to
insolvency proceedings of either, or both, of the Trust Depositor or the Trust.
In either such event, or if an attempt were made to litigate any of the
foregoing issues, delays of distributions on the Notes, possible reductions in
the amount of payment of principal of and interest on the Notes and limitations
(including a stay) on the exercise of remedies under the Indenture and the Sale
and Servicing Agreement could occur, although the Noteholders would continue to
have the benefit of the Indenture Trustee's security interest in the Trust
Assets under the Sale and Servicing Agreement.
The right of the Indenture Trustee, as secured party under the Sale and
Servicing Agreement for the benefit of the Noteholders, to foreclose upon and
sell the Trust Assets is likely to be significantly impaired by applicable
bankruptcy laws, including the automatic stay pursuant to Section 362 of the
Bankruptcy Code, if a bankruptcy proceeding were to be commenced by or against
the Trust, and possibly the Trust Depositor, before or possibly even after the
Indenture Trustee has foreclosed upon and sold the Trust Assets. Under the
bankruptcy laws, payments on debts are not made and secured creditors are
prohibited from repossessing their security from a debtor in a bankruptcy case
or from disposing of security repossessed from such a debtor, without bankruptcy
court approval. Moreover, the bankruptcy laws generally permit the debtor to
continue to retain and to use collateral even though the debtor is in default
under the applicable debt instruments, provided generally that the secured
creditor has the right to seek "adequate protection". The meaning of the term
"adequate protection" may vary according to circumstances, but it is intended in
general to protect the value of the security from any diminution in the value of
the collateral as a result of the use of the collateral by the debtor during the
pendency of the bankruptcy case. In view of the lack of a precise definition of
the term "adequate protection" and the broad discretionary powers of a
bankruptcy court, it is impossible to predict whether or to what extent the
holders of the Notes would be compensated for any diminution in value of the
Trust Assets. Furthermore, in the event a bankruptcy court determines that the
value of the Trust Assets is not sufficient to repay all amounts due on the
Notes, the Noteholders would hold secured claims only to the extent of the value
of the Trust Assets to which the holders are entitled, and unsecured
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claims with respect to such shortfall. The bankruptcy laws do not permit the
payment or accrual of post-petition interest, costs and attorneys' fees during a
debtor's bankruptcy case unless, and then only to the extent, the claims are
oversecured.
If an Insolvency Event with respect to the Trust Depositor were to occur,
then an Event of Default would occur with respect to the Notes and, pursuant to
the terms of the Sale and Servicing Agreement, and assuming the Trust Assets
were not then subject to being involved in a bankruptcy case, the Indenture
Trustee would sell the Contracts, thereby causing early termination of the Trust
and would use the proceeds of such sale to pay the outstanding principal of and
accrued interest on the Notes to the extent and in the order of priority
described under "Description of the Notes--Allocations; Following an Event of
Default or Restricting Event". The Noteholders would suffer a loss if the sum
of (i) the proceeds of the sale allocable to the Noteholders and (ii) the
proceeds of any collections on the Contracts in the Collection Account allocable
to the Noteholders is insufficient to pay the Noteholders in full.
The occurrence of certain events of bankruptcy, insolvency or receivership
with respect to the Servicer will result in a Servicer Default. If no other
Servicer Default other than the occurrence of an Insolvency Event with respect
to the Servicer exists, an unpaid creditor of the Servicer or a representative
of creditors of the Servicer, such as a trustee in bankruptcy, or the Servicer
acting as a debtor-in-possession, would have the power to prevent either the
Indenture Trustee or the Noteholders from appointing a successor Servicer.
State laws impose requirements and restrictions relating to foreclosure
sales and obtaining deficiency judgments following such sales. In the event
that the Noteholders must rely on repossession and disposition of any Equipment
to recover amounts due on Defaulted Contracts, such amounts may not be realized
because of the application of these requirements and restrictions. Other
factors that may affect the ability of the Noteholders to realize the full
amount due on a Contract or Secondary Contract include the failure to file
financing statements to perfect the applicable Seller's, the Trust Depositor's,
the Trust's or Indenture Trustee's security interest, as applicable, in the
Equipment or other Applicable Security, depreciation, obsolescence, damage or
loss of any item of Equipment, and the application of federal and state
bankruptcy and insolvency laws. As a result, the Noteholders may be subject to
delays in receiving payments and losses if the remaining unaffected Contracts
are insufficient to cover such losses.
If a court, in a lawsuit by an unpaid creditor of a Seller or by a
representative of creditors of such Seller, such as a trustee in bankruptcy, or
by the Seller acting as a debtor-in-possession, were to find that, at the time
of or as a result of any transfer by such Seller of Contracts to the Trust
Depositor, (i) (A) the Seller entered into such transaction with the intent of
hindering, delaying or defrauding creditors or (B) the Seller received less than
a reasonably equivalent value or fair consideration as a result of such transfer
and (ii) the Seller (A) was insolvent or would be rendered insolvent by such
transfer, (B) was engaged in a business or transaction for which its assets
constituted unreasonably small capital after such transfer or (C) intended to
incur, or believed that it would incur, indebtedness beyond its ability to pay
as the obligations under such indebtedness matured (as the foregoing terms are
defined in or interpreted under the relevant fraudulent conveyance statutes),
such court could invalidate such transfer to the Trust Depositor or to the
Trust, or substantively consolidate the Trust Depositor, the Trust and the
Seller, or subordinate the rights of the Noteholders to the rights of unsecured
creditors of the Seller, or take other actions that would be adverse to the
Noteholders.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction that is being applied. Generally, however, an
entity would be considered insolvent if the fair saleable value of its assets is
less than the amount of its liabilities (including contingent liabilities) or
the amount that will be required to pay its probable liabilities on its existing
debts as they become absolute and matured. The Sellers believe that they are
entering into these transactions (including the transfers of Contracts pursuant
to the Transfer and Sale Agreement) for proper purposes and in good faith and
that the purchase price for the Contracts identified in the Transfer and Sale
Agreement will represent reasonably equivalent value or fair consideration for
the transfers of such Contracts by the Sellers to the Trust Depositor.
The Trust Depositor will receive, on the Closing Date, a certificate from
each Seller to the effect that (i) the Seller did not intend, in entering into
the Transfer and Sale Agreement and consummating the transactions contemplated
thereby, to hinder, delay or defraud either then present or future creditors or
any other person to which such Seller was or would thereafter become, as of or
after the consummation of such transactions, indebted and (ii) the purchase
price for the Contracts sold under the Transfer and Sale Agreement represented
reasonably equivalent value or fair consideration as a result of the transfers
of such Contracts to the Trust Depositor. There can be no assurance, however,
that a court would reach the same conclusion.
No law firm will, in connection with any offering of the Notes, express any
opinion as to federal or state laws relating to fraudulent transfers.
Certain states have adopted a version of Article 2A of the UCC ("Article
2A"), which purports to codify many provisions of existing common law. Although
there is little precedent regarding how Article 2A will be interpreted, it may,
among other things, limit enforceability of any "unconscionable" lease or
"unconscionable" provision in a lease, provide a lessee with
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remedies, including the right to cancel the lease contract, for certain lessor
breaches or defaults, and may add to or modify the terms of "consumer leases"
and leases where the lessee is a "merchant lessee". However, in the Transfer and
Sale Agreement, the Sellers will jointly and severally represent that (i) no
Contract is a "consumer lease" and (ii) each Obligor has accepted the equipment
leased to it and, after reasonable opportunity to inspect and test, has not
notified Heller Financial of any defects therein. Article 2A, moreover,
recognizes typical commercial lease "hell or high water" rental payment clauses
and validates reasonable liquidated damages provisions in the event of lessor or
lessee defaults. Article 2A also recognizes the concept of freedom of contract
and permits the parties in a commercial context wide degree of latitude to vary
provisions of the law.
Vendor Loans and Vendor Recourse Contracts. The Vendor Loans are, by their
terms, payable solely from the proceeds of the Secondary Contracts securing such
Vendor Loans, and do not generally represent obligations of the Vendor (except
that Secondary Contracts may be covered by such Vendor's UNL Pool or other forms
of Vendor recourse).
Consequently, Noteholders must rely solely upon the Secondary Contracts and
any other Applicable Security, if any, for the payment of principal of, and
interest on, the related Vendor Loans. As noted above, any Secondary Contract
which is a "true lease" originated by a Vendor will be subject to rejection by
such Vendor, as debtor in possession, or by such Vendor's bankruptcy trustee.
Upon any such rejection Scheduled Payments under such rejected Secondary
Contract may terminate and the Noteholders may be subject to losses if the
remaining unaffected Contract, and security interests in the related Equipment,
are insufficient to cover the losses. Further, as noted under above, a tax or
government lien on the property of the pledging Vendor arising before a
Secondary Contract came into existence may have priority over the applicable
Seller's (and hence its assignee's) interest in such Secondary Contract.
Certain Vendor Assignments and certain Program Agreements provide that the
applicable Seller has recourse to the related Vendor for all or a portion of the
losses the Seller may incur as a result of a default under the End-User
Contracts sold under such Vendor Assignment or Program Agreement. In the event
of a Vendor's bankruptcy, a bankruptcy trustee, a creditor or the Vendor as
debtor in possession might attempt to characterize sales to the Seller pursuant
to such Vendor Assignments or Program Agreements as loans to the Vendor from the
Seller secured by the Contracts sold thereunder. If such an attempt is
successful, such Vendor Assignment or Program Agreement would be subject to the
risks described herein for Vendor Loans. In such case the Contracts sold under
such Vendor Assignment or Program Agreement would constitute Secondary Contracts
under the recharacterized Vendor Assignment or Program Agreement.
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a general and brief discussion of certain United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes. The discussion that follows, and the opinion set forth below of
Winston & Strawn, special tax counsel to the Trust Depositor ("Tax Counsel"),
are based upon current provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations promulgated thereunder, current
administrative rulings, judicial decisions and other applicable authorities in
effect as of the date hereof, all of which are subject to change, possibly with
retroactive effect. There are no cases, regulations, or Internal Revenue
Service ("IRS") rulings on comparable transactions or instruments to those
described herein. As a result, there can be no assurance that the IRS will not
challenge the conclusions reached herein, and no ruling from the IRS has been or
will be sought on any of the issues discussed below. Furthermore, legislative,
judicial or administrative changes may occur, perhaps with retroactive effect,
which could affect the accuracy of the statements and conclusions set forth
herein as well as the tax consequences to Noteholders.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to Noteholders in light of their personal
investment or tax circumstances nor to certain types of holders who may be
subject to special treatment under the federal income tax laws (including,
without limitation, financial institutions, broker-dealers, insurance companies,
foreign persons, tax-exempt organizations, and persons who hold the Notes as
part of a straddle, hedging, or conversion transaction). The discussion is
generally directed to prospective purchasers who purchase Notes at the time of
original issue, who are citizens or residents of the United States, and who hold
the Notes as "capital assets" within the meaning of Section 1221 of the Code.
Taxpayers and preparers of tax returns (including those filed by any partnership
or other issuer) should be aware that under applicable Treasury Regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice is (i) given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers should
consult their own tax advisors and tax return preparers regarding the
preparation of any item on a tax return, even where the anticipated tax
treatment has been discussed herein. PROSPECTIVE INVESTORS SHOULD CONSULT WITH
THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER
TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES.
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Opinion
In the opinion of Tax Counsel, for federal income tax purposes, although no
transaction closely comparable to that contemplated herein has been the subject
of any Treasury Regulation, revenue ruling, or judicial decision, based on the
application of existing law to the facts as set forth in the applicable
agreements, (i) the Trust will not be treated as an association (or publicly
traded partnership) taxable as a corporation and (ii) the Notes will be treated
as indebtedness. Such opinion assumes that the Servicer, the Trust Depositor,
the Certificateholders and all the Noteholders will consistently treat the Notes
for all tax purposes as indebtedness secured by the assets of the Trust and that
the Trust will be disregarded as a separate entity for federal income tax
purposes pursuant to Treasury Regulations Section 301.7701-3(b)1(ii). An
opinion of counsel does not foreclose the possibility of a contrary
determination by the IRS or by a court of competent jurisdiction, or of a
contrary position by the IRS or Treasury Department in regulations or rulings
issued in the future.
Although it is the opinion of Tax Counsel that the Trust will not be
treated as an association (or publicly traded partnership) taxable as a
corporation and the Notes will be characterized as indebtedness for federal
income tax purposes, no assurance can be given that such characterization of the
Trust and the Notes will prevail. If the Trust were taxable as a corporation
for federal income tax purposes, it would be subject to corporate income tax on
its taxable income. The Trust's taxable income would include all its income on
the related Contracts and other assets, which may be reduced by its interest
expense on the Notes if the Notes are respected as debt of such corporation.
Any such corporate income tax could materially reduce cash available to make
payments on the Notes. If, contrary to the opinion of Tax Counsel, the IRS also
successfully asserted that one or more of the Notes did not represent debt for
federal income tax purposes, the Notes might be treated as equity interests in
the Trust. If so treated, the Trust might be taxable as corporation with the
adverse tax consequences described above (and the resulting taxable corporation
would not be able to reduce its taxable income by deductions for interest
expense on the Notes recharacterized as equity). Alternatively, if the IRS
treated the Notes as equity, it is also possible that the Trust might by treated
as a publicly traded partnership that would not be taxable as a corporation
because the Trust would meet certain qualifying income tests. Nonetheless,
treatment of the Notes as equity interests in such publicly traded partnership
could have adverse tax consequences to certain holders. For example, income to
certain tax-exempt entities (including pension funds) may constitute "unrelated
business taxable income," income to foreign holders generally would be subject
to U.S. tax and U.S. tax return filing and withholding requirements, individual
holders might be subject to certain limitations on their ability to deduct their
share of Trust expenses, and income from the Trust's assets would be taxable to
Noteholders without regard to whether cash distributions are made from the Trust
or the Noteholders' method of tax accounting.
The discussion that follows assumes that the Notes will be treated as
indebtedness for federal income tax purposes. The following discussion is also
based in part upon Treasury Regulations interpreting the original issue discount
("OID") provisions of the Code. The OID regulations, however, are subject to
varying interpretations and do not address all issues that would affect
Noteholders.
Taxation of Interest Income to Noteholders
Based upon Tax Counsel's interpretation of (i) the definition of "qualified
stated interest" and (ii) other provisions of the OID Code sections and
regulations, it is not expected that the Notes will be issued with OID (i.e.,
any excess of the stated redemption price at maturity over their issue price),
other than perhaps with a de minimis amount (i.e., 1/4 of the Notes stated
redemption price at maturity multiplied by the number of full years to
maturity). In such case, the stated interest on each class of Notes should be
treated as qualified stated interest and will be taxable as ordinary income for
federal income tax purposes when received or accrued in accordance with the
Noteholder's general method of tax accounting.
OID
If Notes were issued at a discount from their principal amounts or if the
stated interest were not treated as "qualified stated interest," the Notes would
be treated as having OID. Under the OID regulations currently in effect, in
order to have qualified stated interest, the stated interest must be
"unconditionally payable" in cash or property at least once annually. Interest
is unconditionally payable only if reasonable legal remedies exist to compel
timely payment or the debt instrument otherwise provides terms and conditions
that make the likelihood of late payment (other than a late payment that occurs
within a reasonable grace period) or nonpayment a remote contingency. Tax
Counsel believes that the likelihood of late payment or nonpayment of the stated
interest on the Notes should constitute a remote contingency; the IRS, however,
may disagree. In such case, the stated interest on the Notes would not be
qualified stated interest and the Notes would be considered to have been issued
with OID.
If the Notes are in fact issued with a greater than de minimis amount of
OID or are otherwise treated as having been issued with OID, the following rules
should apply. The excess of the "stated redemption price at maturity" of a Note
(generally equal to its principal amount as of the date of issuance plus all
interest other than "qualified stated interest"
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payable prior to or at maturity) over the original issue price (in this case,
the initial offering price at which a substantial amount of the Notes are sold
to the public) will constitute OID. A Noteholder must include OID in income as
interest over the term of the Note under a constant yield method. OID must be
included in income in advance of the receipt of cash representing that income.
In general, the amount of OID included in income is the sum of the "daily
portions" of the OID with respect to the Note for each day during the taxable
year the Noteholder held the Note. The daily portion generally is determined by
allocating to each day in an accrual period a ratable portion of the OID
allocable to such accrual period. The "accrual period" for an OID Note may be of
any length and may vary in length over the term of the Note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs on the first day or the final day of an accrual
period. The amount of OID allocable to an accrual period is generally equal to
the difference between (i) the product of the Note's adjusted issue price and
its yield to maturity and (ii) the amount of qualified stated interest payments
allocable to such accrual period. The "adjusted issue price" of an OID Note at
the beginning of any accrual period is the sum of its issue price plus the
amount of OID allocable to prior accrual periods minus the amount of prior
payments that were not qualified stated interest.
Alternatively, because the payments on the Notes may be accelerated by
reason of prepayments on the Contracts, OID, other than de minimis OID, on the
Notes, if any, may have to be accrued under Code section 1272(a)(6), which
allocates OID to each day in an accrual period by taking the ratable portion of
the excess of (i) the sum of the present value of the remaining payments on a
Note as of the close of the accrual period and the payments made during the
accrual period that were included in stated redemption price at maturity, over
(ii) the adjusted issue price of the Note at the beginning of the accrual
period. No regulations have been issued under Code section 1272(a)(6) so it is
not clear if such section would apply to the Notes if they are treated as having
OID. Legislation has been proposed which if enacted, would require any OID (or
interest) on the Notes to be computed in accordance with the rules of Section
1272(a)(6) and certain prepayment assumptions.
A holder of a Note issued with de minimis OID must include such OID in
income proportionately as principal payments are made on such Note.
Acquisition Premium
A holder that purchases a Note for an amount less than or equal to the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest but in excess of its adjusted issue price (any such
excess being "acquisition premium") and that does not make the election
described below under "Election to Treat All Interest as Original Issue
Discount" is permitted to reduce the daily portions of OID, if any, by a
fraction, the numerator of which is the excess of the holder's adjusted basis in
the Note immediately after its purchase over the adjusted issue price of the
Note, and the denominator of which is the excess of the sum of all amounts
payable on the Note after the purchase date, other than payments of qualified
stated interest, over the Note's adjusted issue price.
Market Discount
Whether or not the Notes are issued with OID, a subsequent purchaser (i.e.,
a purchaser who acquires a Note not at the time of original issue) of a Note at
a discount will be subject to the "market discount rules" of Sections 1276
through 1278 of the Code. In general, these rules provide that if the holder of
a Note purchases the Note at a market discount (i.e., a discount from its
original issue price plus any accrued OID that exceeds a de minimis amount
specified in the Code) and thereafter recognizes gain upon a disposition (or
receives a principal payment), the lesser of (i) such gain (or the principal
payment) or (ii) the accrued market discount (not previously included in income)
will be taxed as ordinary income. Generally, the accrued market discount will be
the total market discount on the Note multiplied by a fraction, the numerator of
which is the number of days the holder held the Note and the denominator of
which is the number of days from the date the holder acquired the Note until its
maturity date. The holder may elect, however, to determine accrued market
discount under the constant yield method. The adjusted basis of a Note subject
to such election will be increased to reflect market discount included in gross
income, thereby reducing any gain or increasing any loss on a subsequent sale or
taxable disposition. Holders should consult with their own tax advisors as to
the effect of making this election.
Limitations imposed by the Code, which are intended to match deductions
with the taxation of income, may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Note with accrued market discount. A Noteholder who elects to include market
discount in gross income as it accrues, however, is exempt from this rule.
Notwithstanding the above rules, market discount on a Note will be
considered to be zero if it is less than a de minimis amount, which is .25% of
the remaining principal balance of the Note multiplied by its expected weighted
average remaining life. If market discount is de minimis, the actual amount of
discount must be allocated to the remaining principal distributions on the Note,
and when such distribution is received, capital gain will be recognized equal to
discount allocated to such distribution.
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<PAGE>
Amortizable Bond Premium
In general, if a subsequent purchaser acquires a Note at a premium (i.e.,
an amount in excess of the amount payable upon the maturity thereof), such
Noteholder will be considered to have purchased the Note with "amortizable bond
premium" equal to the amount of such excess. A Noteholder may elect to deduct
the amortizable bond premium as it accrues under a constant yield method over
the remaining term of the Note. Under proposed regulations, if finalized,
accrued amortized bond premium may only be used as an offset against qualified
stated interest income when such income is included in the holder's gross income
under the holder's normal accounting system.
Election to Treat All Interest as Original Issue Discount
A holder may elect to include in gross income all interest that accrues on
a Note using the constant yield method described above under the heading "OID,"
with modifications described below. For purposes of this election, interest
includes stated interest, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. In applying the constant yield method to a Note
with respect to which this election has been made, the issue price of the Note
will equal the electing holder's adjusted basis in the Note immediately after
its acquisition, the issue date of the Note will be the date of its acquisition
by the electing holder, and no payments on the Note will be treated as payments
of qualified stated interest. This election, if made, may not be revoked
without the consent of the IRS. Holders should consult with their own tax
advisors as to the effect of making this election in light of their individual
circumstances.
Disposition of Notes
Generally, capital gain or loss will be recognized on a sale or other
taxable disposition of the Notes in an amount equal to the difference between
the amount realized (other than amounts attributable to, and taxable as, accrued
interest) and the seller's tax basis in the Notes. A Noteholder's tax basis in
a Note will generally equal his or her cost increased by any OID and market
discount, with respect to the Note and decreased by any bond premium previously
amortized and any principal payments previously received by such Noteholder with
respect to the Note. Subject to the market discount rules of the Code, any such
gain or loss will be capital gain or loss if the Note was held as a capital
asset. Capital gain or loss will be long-term if the Note was held by the
holder for more than one year and otherwise will be short-term. Any capital
losses realized generally may be used by a corporate taxpayer only to offset
capital gains, and by an individual taxpayer only to the extent of capital gains
plus $3,000 of other income.
Information Reporting and Backup Withholding
The Indenture Trustee will be required to report annually to the IRS, and
to each Noteholder, the amount of interest paid on the Notes (and the amount
withheld for federal income taxes, if any) for each calendar year, except as to
exempt recipients (generally, corporations, tax-exempt organizations, qualified
pension and profit-sharing trusts, individual retirement accounts, or
nonresident aliens who provide certification as to their status). Each holder
(other than holders who are not subject to the reporting requirements) will be
required to provide, under penalties of perjury, a certificate (Form W-9)
containing the holder's name, address, correct federal taxpayer identification
number and a statement that the holder is not subject to backup withholding.
Should a non-exempt Noteholder fail to provide the required certification, the
Trustee will be required to withhold (or cause to be withheld) 31% of the
interest otherwise payable to the holder, and remit the withheld amounts to the
IRS as a credit against the holder's federal income tax liability.
Tax Consequences to Foreign Investors
Based upon Tax Counsel's opinion that the Notes will be treated as
indebtedness for federal income tax purposes, the following information
describes the general U.S. federal income tax treatment of investors that are
not U.S. persons (each a "Foreign Person"). The term "Foreign Person" means any
person other than (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or the
income of which is includible in gross income for U.S. federal income tax
purposes, regardless of its source, or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States fiduciaries have the authority to control
all substantial decisions of the trust:
(a) Interest paid or accrued to a Foreign Person that is not effectively
connected with the conduct of a trade or business within the United
States by the Foreign Person, will generally be considered "portfolio
interest" and generally will not be subject to United States federal
income tax and withholding tax, as long as the Foreign Person (i) is
not actually or constructively a "10 percent shareholder" of the
Trust, Trust Depositor or HFI or a "controlled foreign corporation"
with respect to which the Trust Depositor is a "related person" within
the meaning of the Code, and (ii) provides
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<PAGE>
an appropriate statement (Form W-8) to the Trustee or paying agent
(generally the clearing agency, financial intermediary, or broker)
that is signed under penalties of perjury, certifying that the
beneficial owner of the Note is a Foreign Person and providing that
Foreign Person's name and address. If the information provided in this
statement changes, the Foreign Person must provide a new Form W-8
within 30 days. The Form W-8 is generally effective for three years.
If such interest were not portfolio interest, then it would be subject
to United States federal income and withholding tax at a rate of 30
percent unless reduced or eliminated pursuant to an applicable income
tax treaty. To qualify for any reduction as the result of an income
tax treaty, the Foreign Person must provide the paying agent with Form
1001. This form is also effective for three years.
(b) Any capital gain realized on the sale or other taxable disposition of
a Note by a Foreign Person will be exempt from United States federal
income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the
United States by the Foreign Person, and (ii) in the case of an
individual Foreign Person, the Foreign Person is not present in the
United States for 183 days or more in the taxable year. If an
individual Foreign Person is present in the U.S. for 183 days or more
during the taxable year, the gain on the disposition of the Notes
could be subject to a 30% withholding tax unless reduced by treaty.
(c) If the interest, gain or income on a Note held by a Foreign Person is
effectively connected with the conduct of a trade or business in the
United States by the Foreign Person, the holder (although exempt from
the withholding tax previously discussed if an appropriate statement
(Form 4224) is furnished to the paying agent) generally will be
subject to United States federal income tax on the interest, gain or
income at regular federal income tax rates. Form 4224 is effective for
only one calendar year. In addition, if the Foreign Person is a
foreign corporation, it may be subject to a branch profits tax equal
to 30 percent of its "effectively connected earnings and profits"
within the meaning of the Code for the taxable year, as adjusted for
certain items, unless it qualifies for a lower rate under an
applicable tax treaty.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to ERISA ("ERISA
Plans") and prohibits certain transactions between ERISA Plans and persons who
are "parties in interest" (as defined under ERISA) with respect to assets of
such Plans. Section 4975 of the Code prohibits a similar set of transactions
between certain plans or individual retirement accounts ("Code Plans," and
together with ERISA Plans, "Plans") and persons who are "disqualified persons"
(as defined in the Code) with respect to Code Plans. Certain employee benefit
plans, such as governmental plans and church plans (if no election has been
made under Section 410(d) of the Code), are not subject to the requirements of
ERISA or Section 4975 of the Code, and assets of such plans may be invested in
the Notes, subject to the provisions of other applicable federal and state law.
Any such plan which is qualified under Section 401(a) of the Code and exempt
from taxation under Section 501(a) of the Code is, however, subject to the
prohibited transaction rules set forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that investments be made in accordance with
the documents governing the ERISA Plan. Before investing in the Notes, an ERISA
Plan fiduciary should consider, among other factors, whether to do so is
appropriate in view of the overall investment policy and liquidity needs of the
ERISA Plan.
Prohibited Transactions
In addition, Section 406 of ERISA and Section 4975 of the Code prohibit
parties in interest and disqualified persons with respect to ERISA Plans and
Code Plans from engaging in certain transactions involving such Plans or "plan
assets" of such Plans, unless a statutory or administrative exemption applies to
the transaction. Section 4975 of the Code and Sections 502(i) and 502(1) of
ERISA provide for the imposition of certain excise taxes and civil penalties on
certain persons that engage or participate in such prohibited transactions. The
Trust Depositor, the Underwriter, the Servicer, the Indenture Trustee or the
Owner Trustee or certain affiliates thereof may be considered or may become
parties in interest or disqualified persons with respect to a Plan. If so, the
acquisition or holding of the Notes by, on behalf of or with "plan assets" of
such Plan may be considered to give rise to a "prohibited transaction" within
the meaning of ERISA and/or Section 4975 of the Code, unless an administrative
exemption described below or some other exemption is available.
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<PAGE>
The Notes may not be purchased with the assets of a Plan if the Trust
Depositor, the Underwriter, the Servicer, the Indenture Trustee, or the Owner
Trustee or an affiliate thereof either (a) has discretionary authority or
control with respect to the investment or management of such assets or (b) has
authority or responsibility to give, or regularly gives, investment advice with
respect to such assets pursuant to an agreement or understanding that such
advice will serve as a primary basis for investment decisions with respect to
such assets and that such advice will be based on the particular needs of the
Plan or (c) is an employer of employees covered under the Plan unless such
investment is made through an insurance company general or pooled separate
account or a bank collective investment fund and an exemption is available.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the Notes - for
example, Prohibited Transaction Class Exemption ("PTCE") 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager;" PTCE 95-60, which exempts certain transactions between insurance
company general accounts and parties in interest; PTCE 91-38, which exempts
certain transactions between bank collective investment funds and parties in
interest; PTCE 90-1, which exempts certain transactions between insurance
company pooled separate accounts and parties in interest; or PTCE 84-14, which
exempts certain transactions effected on behalf of a Plan by a "qualified
professional asset manager." There can be no assurance that any of these
exemptions will apply with respect to any Plan's investment in the Notes or,
even if an exemption were deemed to apply, that any exemption would apply to all
prohibited transactions that may occur in connection with such investment.
Due to the complexity of these rules and the penalties imposed, any
fiduciary or other Plan investor who proposes to invest assets of a Plan in the
Notes should consult with its counsel with respect to the potential consequences
under ERISA and Section 4975 of the Code of doing so.
PLAN OF DISTRIBUTION
General
Subject to the terms and conditions set forth in an underwriting agreement
dated August __, 1997 (the "Underwriting Agreement") for the sale of the Notes,
the Trust Depositor has agreed to sell to First Union Capital Markets Corp, [
], and [ ]. (the "Underwriters") and each of the Underwriters has
separately agreed to purchase from the Trust Depositor, the principal amount of
the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
Aggregate Principal Amount
to be Purchased
-------------------------------
Class A-1 Receivable-Backed Notes, Series 1997-1
------------------------------------------------
<S> <C>
First Union Capital Markets Corp. $
---------------
[ ] $
---------------
[ ] $
---------------
Aggregate Principal Amount
to be Purchased
-------------------------------
Class A-2 Receivable-Backed Notes, Series 1997-1
-------------------------------------------------
First Union Capital Markets Corp. $
---------------
[ ] $
---------------
[ ] $
---------------
Aggregate Principal Amount
to be Purchased
-------------------------------
Class B Receivable-Backed Notes, Series 1997-1
----------------------------------------------
First Union Capital Markets Corp. $
---------------
[ ] $
---------------
[ ] $
---------------
</TABLE>
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<PAGE>
Aggregate Principal Amount
to be Purchased
-----------------------
Class C Receivable-Backed Notes, Series 1997-1
----------------------------------------------
First Union Capital Markets Corp. $
--------------
[ ] $
--------------
[ ] $
--------------
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Notes offered hereby
if any of such Notes are purchased.
The Underwriter has advised the Issuer that the Underwriter proposes
initially to offer the Notes to the public at the price set forth on the cover
page hereof and to certain dealers at such price less a selling concession not
in excess of [ ]% of the initial principal amount of the Notes. The
Underwriters may allow and such dealers may reallow a concession not in excess
of [ ]% of the initial principal amount of the Notes.
The Underwriting Agreement provides that Heller Financial and the Trust
Depositor, jointly and severally, will indemnify the Underwriters against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended, or contribute to payments the Underwriter may be required to
make in respect thereof.
In addition, First Union Capital Markets Corp. ("First Union") will act as
the private placement agent for the Trust Depositor in connection with the sale
of the Subordinated Securities and will receive compensation therefor.
In the ordinary course of its business, the Underwriters and their
affiliates have engaged and may engage in commercial banking and investment
banking transactions with Heller Financial and its affiliates, including the
Trust Depositor and HFLI.
RATING OF THE NOTES
It is a condition to the issuance of the Notes that the Class A-1 Notes be
rated at least "Aaa" and "AAA", that the Class A-2 Notes be noted at least "Aaa"
and "AAA" that the Class B Notes be rated at least "A2" and "A", and that the
Class C Notes be rated at least "Baa2" and "BBB", by Moody's Investors Service,
Inc. and Fitch Investors Service, L.P., respectively.
Such rating will reflect only the views of the Rating Agency and will be
based primarily on the subordination of the Class A-2 Notes, Class B Notes,
Class C Notes and the Subordinated Securities (in the case of the Class A-1
Notes), the subordination of the Class B Notes, Class C Notes and the
Subordinated Securities (in the case of the Class A-2 Notes), the subordination
of the Class C Notes and the Subordinated Securities (in the case of the Class B
Notes) and the subordination of the Subordinated Securities (in the case of the
Class C Notes), as well as the value and creditworthiness of the Contracts and
Equipment. The ratings are not a recommendation to purchase, hold or sell the
Notes, inasmuch as such ratings do not comment as to market price or suitability
for a particular investor. Each rating may be subject to revision or withdrawal
at any time by the assigning Rating Agency. There is no assurance that any such
rating will continue for any period of time or that it will not be lowered or
withdrawn entirely by the Rating Agency if, in its judgment, circumstances so
warrant. A revision or withdrawal of such rating may have an adverse affect on
the market price of the Notes. The rating of the Notes addresses the likelihood
of the timely payment of interest and the ultimate payment of principal on the
Notes pursuant to their terms. The rating does not address the rate of
Prepayments that may be experienced on the Contracts and, therefore, does not
address the effect of the rate of Prepayments on the return of principal to the
Noteholders.
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<PAGE>
LEGAL MATTERS
Certain legal matters relating to the Notes, including certain federal
income tax matters, as well as other matters, will be passed upon for the Trust,
the Trust Depositor, the Seller/Servicer and the Administrator by Winston &
Strawn, Chicago, Illinois. Certain legal matters for the Underwriter will be
passed upon by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York.
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<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Term(s) Page(s)
<S> <C>
ADCB ............................................................... 15, 49
Accrual Period ..................................................... 13, 48
Acquisition Premium .................................................... 81
Act .................................................................. II-4
Additional Contract .................................................11, 43
Additional Contract Cutoff Date ......................................... 6
Adjusted Contract .......................................................11
Aggregate Discounted Contract Balance .................................. 15
Aggregate Principal Amount ............................................. 49
Applicable Class Percentage ........................................ 49, 69
Article 2A ......................................................... 25, 78
Available Amounts ...................................................12, 52
Business Day ............................................................ 7
Calculation Date ........................................................ 7
Cede .................................................................... 4
Cedel Participants ..................................................... 60
Certificates .....................................................8, 61, 62
Class A Interest Rate .................................................. 13
Class A Noteholders .................................................... 13
Class A Notes ........................................................... 1
Class A Principal Payment Amount ....................................... 50
Class B Interest Rate .................................................. 13
Class B Noteholders ................................................ 13, 71
Class B Notes ........................................................... 1
Class B Principal Payment Amount ....................................... 47
Class C Interest Rate .................................................. 13
Class C Noteholders .................................................... 13
Class C Notes ........................................................... 1
Class C Principal Payment Amount ....................................... 47
Class D-1 Certificateholders ............................................ 5
Class D-1 Certificates .................................................. 3
Class E Certificates.....................................................61
Cleanup Call Condition ............................................. 15, 58
Closing Date ............................................................ 6
Code ................................................................... 79
Code Plans ............................................................. 83
Collection Account ..................................................12, 55
Collection Period ....................................................... 7
Commission .............................................................. 4
Conditional Payment Rate ............................................... 43
Contract Files ......................................................... 62
Contracts ............................................................... 3
Contracts Pool .......................................................... 8
Cooperative ............................................................ 60
CPR .................................................................... 43
CSA ..................................................................... 8
Cutoff Date .......................................................... 3, 6
Defaulted Contract ..................................................... 55
Definitive Notes ....................................................... 61
Depositaries............................................................ 59
Depository.............................................................. 48
Determination Date...................................................... 51
Discount Rate ...................................................... 16, 50
Discounted Contract Balance ........................................ 16, 50
Distribution ............................................................58
Distribution Date .................................................... 3, 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DTC................................................................. 4
Early Termination Contract.......................................... 10
Eligible Contract................................................... 64
Eligible Investments................................................ 56
Eligible Secondary Contracts........................................ 65
End-User............................................................ 3
End-User Contracts.................................................. 3
Equipment........................................................... 3,40
ERISA............................................................... 83
ERISA Plans......................................................... 83
Euroclear........................................................... 4
Euroclear Operator.................................................. 60
Euroclear Participants.............................................. 60
Excess Concentration Amount......................................... 66
Excess Contract..................................................... 66
Exchange Act........................................................ 4
Excluded Amounts.................................................... 38
FDIC................................................................ 55
Financed Items...................................................... 3,40
Financing Agreement................................................. 8
First Union......................................................... 85
Foreign Person...................................................... 82
Heller Financial.................................................... 1,6
Heller Funding...................................................... 1
HFLI................................................................ 3,6
Holders............................................................. 61
Indenture........................................................... 1,7
Indenture Trustee................................................... 1,6
Indirect Participants............................................... 59
Ineligible Contract................................................. 65
Initial Class A Note Principal Balance.............................. 65
Initial Class B Note Principal Balance.............................. 7
Initial Class C Note Principal Balance.............................. 7
Initial Class D Note Principal Balance............................... 7
Insolvency Event.................................................... 25
Insurance Proceeds.................................................. 63
IPA................................................................. 8
IRS................................................................. 79
Issuer.............................................................. 1,6
Lease............................................................... 8
Lessee.............................................................. 9
Maturity Date....................................................... 15,48
MLA................................................................. 38
MLA Supplement...................................................... 38
Monthly Report...................................................... 58
Note Owners......................................................... 7
Noteholders......................................................... 13
Notes............................................................... 1,7
Obligor............................................................. 12
OID................................................................. 80
Operative Documents................................................. 47
Optional Prepayment................................................. 19
Owner Trustee....................................................... 1,6
Participants........................................................ 59
Permitted Liens..................................................... 64
Plans............................................................... 83
Prepaid Contract.................................................... 10
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Prepayment............................................. 19
Principal Amount....................................... 51
Program Agreement...................................... 12
Program Assignment..................................... 24
PTCE................................................... 83
Qualified Institution.................................. 55
Rating Agencies........................................ 18
Record Date............................................ 7
Recoveries............................................. 55
Redemption Price....................................... 15
Registration Statement................................. 4
Required Holders....................................... 57
Reserve Account........................................ 13
Reserve Account Initial Deposit........................ 13
Restricting Event...................................... 57
S&P.................................................... 18
Sale and Servicing Agreement........................... 3
Scheduled Payments..................................... 16, 51
Secondary Contracts.................................... 3
Secured Note........................................... 8, 39
Securities............................................. 8
Securities Act......................................... 4
Seller................................................. 2, 4
Service Transfer....................................... 67
Servicer............................................... 3, 6
Servicer Advance....................................... 17, 67
Servicer Default....................................... 67
Services............................................... 3, 12, 40
Servicing Charges...................................... 17
Servicing Fee.......................................... 17, 57
Servicing Fee Percentage............................... 57
Servicing Fee Rate..................................... 17
Software............................................... 3, 12, 40
Subordinate Certificates............................... 3, 12, 40
Subordinated Notes..................................... 7, 61
Substitute Contract.................................... 11, 43
Substitute Contract Cutoff Date........................ 6
Tax Counsel............................................ 79
Termination Notice..................................... 67
TIA.................................................... 73
Terms and Conditions................................... 60
Title Registry Equipment............................... 21, 75
Transfer and Sale Agreement............................ 3, 27, 62
Transfer Deposit Amount................................ 65
Transferred Assets..................................... 63
Transferred Contracts.................................. 8
Transferred Property................................... 21
Trust.................................................. 1, 6
Trust Agreement........................................ 6
Trust Assets........................................... 3, 8
Trust Company.......................................... 65
Trust Depositor........................................ 1, 6
Trust Termination Date................................. 62
UCC.................................................... 22, 23
Underwriter............................................ 84
Underwriting Agreement................................. 84
UNL Pool............................................... 41
Vendor Agreements...................................... 13
Vendor Assignment...................................... 13
Vendor Obligations..................................... 3, 40
Vendors................................................ 12, 41
VFD.................................................... 46
Warranty Contract...................................... 11, 66
</TABLE>
-3-
<PAGE>
================================================================================
No dealer, salesman or other person is authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Trust Depositor or the Underwriter. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any security
other than the Securities offered hereby, nor does it constitute an offer to
sell or a solicitation of an offer to buy any of the Securities to any person in
any jurisdiction in which the person making such offer or solicitation is not
qualified to do so or to anyone whom it is unlawful to make such an offer or
solicitation to such person. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstance create any implication
that the information contained herein is correct as of any date subsequent to
the date hereof.
_________________________
TABLE OF CONTENTS
Page
_________________________
Until ___________, 199 , 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 obligations of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotment or subscriptions.
================================================================================
================================================================================
HELLER FUNDING CORPORATION
_________________________
_________________________
_________________________
PROSPECTUS
_________________________
-----------, 199
================================================================================
-1-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution*
The following is an itemized list of the estimated expenses to be incurred in
connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee $ 909.09
Printing and Engraving Expenses 45,000.00
Trustee's Fees and Expenses 8,000.00
Legal Fees and Expenses 200,000.00
Blue Sky Fees and Expenses 8,000.00
Accountants' Fees and Expenses 25,000.00
Rating Agency Fees 30,000.00
Miscellaneous Fees 30,000.00
Total $346,909.09
</TABLE>
___________________________
* All amounts except the SEC Registration Fee are estimates of expenses incurred
or to be incurred in connection with the issuance and distribution of the
Notes in an aggregate principal amount assumed for these purposes to be equal
to $3,000,000 of Notes registered hereby.
Item 14. Indemnification of Directors and Officers
The General Corporation Law of Delaware (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those affiliated corporations against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of being or
having been such directors or officers, subject to specified conditions and
exclusions; gives a director or officer who successfully defends an action the
right to be so indemnified; and authorizes said corporation to buy director's
and officers' liability insurance. Such indemnification is not exclusive of any
other right to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or otherwise.
Heller Financial has also purchased liability policies which indemnify the
Registrant's officers and directors against loss arising from claims by reason
of their legal liability for acts as officers and directors, subject to
limitations and conditions as set forth in the policies.
Pursuant to agreements which the Registrant may enter into with underwriters or
agents (forms of which will be included as exhibits to this Registration
Statement), officers and directors of the Registrant, and affiliates thereof,
may be entitled to indemnification by such underwriters or agents against
certain liabilities, including liabilities under the Securities Act of 1933,
arising from information which has been or will be furnished to the Registrant
by such underwriters or agents that appears in the Registration Statement or any
Prospectus.
Item 15. Recent Sales of Unregistered Securities
None
<PAGE>
Item 16. Exhibits and Financial Statements
Exhibits
1.1 Form of Underwriting Agreement
3.1** Certificate of Incorporation of the Company
3.2** Bylaws of the Company
4.1 Form of Trust Agreement (including form of Certificates)
4.2 Form of Indenture (including form of Notes)*
5.1 Opinion of Winston & Strawn with respect to legality
8.1 Opinion of Winston & Strawn with respect to tax matters
10.1 Form of Sale and Servicing Agreement
10.2 Form of Administration Agreement
10.3 Form of Transfer and Sale Agreement
23.1 Consent of Winston & Strawn (included in Exhibit 5.1)
24.1** Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Indenture Trustee*
__________________________________
*To be filed by amendment
** Previously filed
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(a) That 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 provisions described under Item 14
above, 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 of 1933 and is, therefore, unenforceable. In
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 act and
will be governed by the final adjudication of such issue.
(b) That, 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 the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(c) That, 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.
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois, on August 8, 1997.
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
By: Heller Funding Corporation, as
Depositor of the Registrant
By: /s/ Deepak Rai
Name: Deepak Rai*
Title: Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ ** Chief Executive Officer and Director (Principal August 8, 1997
- ------------------------- Executive Officer)
Lauralee E. Martin
/s/ ** Chief Financial Officer (Principal Financial and August 8, 1997
- ------------------------- Accounting Officer)
Lawrence G. Hund
/s/ ** Director August 8, 1997
- -------------------------
David J. Friedman
/s/ Deepak Rai Director August 8, 1997
- -------------------------
Deepak Rai
/s/ ** Director August 8, 1997
- -------------------------
Jeffrey Hilzinger
</TABLE>
* Mr. Rai was appointed Attorney-in-fact pursuant to a power of attorney filed
with the Commission with this registration statement.
** By: /s/ Deepak Rai
--------------------------
Deepak Rai
Attorney-in-fact
-3-
<PAGE>
Registration No. 333-30207
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
HELLER FUNDING CORPORATION
(Exact name of Registrant as specified in its charter)
_____________________
EXHIBIT VOLUME
================================================================================
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
1.1 Form of Underwriting Agreement
3.1** Restated Certificate of Incorporation of the Company
3.2** Bylaws of the Company
4.1 Form of Trust Agreement (including form of Certificates
4.2 Form of Indenture (including form of Notes)
5.1 Opinion of Winston & Strawn with respect to legality
8.1 Opinion of Winston & Strawn with respect to tax matters
10.1 Form of Sale and Servicing Agreement
10.2 Form of Administration Agreement
10.3 Form of Transfer and Sale Agreement
23.1 Consent of Winston & Strawn (included in Exhibit 5.1)
24.1** Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Indenture Trustee*
</TABLE>
===========================
* To be filed by Amendment
** Previously filed
-i-
<PAGE>
Exhibit 1.1
HELLER FUNDING CORPORATION (Trust Depositor)
HELLER FINANCIAL, INC. (Servicer)
UNDERWRITING AGREEMENT
_________, 1997
First Union Capital Markets Corp.
301 South College Street, TW-10
Charlotte, North Carolina 28288-0610
[ ]
[ ]
Ladies and Gentlemen:
Heller Funding Corporation, a Delaware corporation (the "Trust
Depositor"), proposes to cause the Heller Equipment Receivables Trust 1997-1
(the "Trust") to issue the asset backed notes identified in Schedule I hereto
(the "Notes"). The Notes will be issued pursuant to and secured by an indenture
(the "Indenture") to be entered into between the Trust and ____________ as
trustee (the "Indenture Trustee"), the form of which has been filed as an
exhibit to the Registration Statement (as defined below). The Notes identified
in Schedule I hereto will be sold in a public offering through the underwriters
listed in Schedule II hereto, one or more of which may act as representative of
such underwriters (any underwriter through which Notes are sold shall be
referred to herein as an "Underwriter" or, collectively, all such Underwriters
may be referred to as the "Underwriters"; any representatives thereof may be
referred to herein as a "Representative"). To the extent not defined herein,
capitalized terms used herein have the meanings assigned to such terms in the
Sale and Servicing Agreement among the Trust Depositor, the Trust, the Indenture
Trustee and Heller Financial, Inc. as Servicer (the "Servicer") dated _____,
1997.
Section 1. Representations and Warranties. The Trust Depositor and
the Servicer, represent and warrant to each Underwriter that:
(a) The Trust Depositor has prepared and filed with the Securities
and Exchange Commission (the "Commission") in accordance with the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "Securities
Act"), a registration statement on Form S-1 (registration number 333-
30207), including a form of prospectus, relating to the Notes. The
registration statement, and any post-effective amendment thereto, each in
the form heretofore delivered to you and, excluding exhibits thereto, have
been declared
<PAGE>
First Union Capital Markets Corp. 2
_________, 1997
effective by the Commission. As used in this Agreement, "Effective Time"
means the date and the time as of which such registration statement, or the
most recent post-effective amendment thereto, if any, was declared
effective by the Commission and "Effective Date" means the date of the
Effective Time. The Trust Depositor has furnished to you, for use by the
Underwriters, copies of one or more preliminary prospectuses (each, a
"Preliminary Prospectus"), relating to the Notes. Except where the context
otherwise requires, the registration statement, as amended at the Effective
Time, including all documents filed as a part thereof, and including any
information contained in a prospectus subsequently filed with the
Commission pursuant to Rule 424(b) under the Act and deemed to be part of
the registration statement as of the Effective Time pursuant to Rule 430A
under the Act, is herein called the "Registration Statement", and the
prospectus, in the form filed by the Trust Depositor with the Commission
pursuant to Rule 424(b) under the Act or, if no such filed is required, the
form of final prospectus included in the Registration Statement at the time
it became effective, is hereinafter called the "Prospectus";
(b) The Registration Statement relating to the Notes, has been filed
with the Commission and such Registration Statement has become effective.
No stop order suspending the effectiveness of the Registration Statement
has been issued and no proceeding for that purpose has been instituted or,
to the knowledge of the Trust Depositor or the Servicer, threatened by the
Commission;
(c) The Registration Statement conforms, and any amendments or
supplements thereto and the Prospectus will conform, in all material
respects to the requirements of the Securities Act and the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), and do not and will
not, as of the applicable effective date as to the Registration Statement
and any amendment thereto, as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, and as of the Closing
Date, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to (i) that part of the
Registration Statement which shall constitute the Statement of Eligibility
and Qualification (Form T-1) of the Indenture Trustee under the Trust
Indenture Act or (ii) any Underwriters' Information (as defined in Section
10(b) hereof) contained therein. The Indenture conforms in all respects to
the requirements of the Trust Indenture Act and the rules and regulations
of the Commission thereunder.
(d) The representations and warranties of the Trust Depositor in
Sections ____________ of the Sale and Servicing Agreement will be true and
correct as of the Closing Date.
(e) The representations and warranties of the Servicer in Section
_____ of the Sale and Servicing Agreement will be true and correct as of
the Closing Date.
(f) The Servicer and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective
<PAGE>
First Union Capital Markets Corp. 3
_____________, 1997
jurisdictions of incorporation, are duly qualified to do business and are
in good standing as foreign corporations in each jurisdiction in which
their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power and
authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged, except where the failure
to so qualify or have such power or authority could not have, individually
or in the aggregate, a material adverse effect on the condition (financial
or otherwise), results of operations, business or prospects of the Servicer
and its subsidiaries taken as a whole.
(g) All the outstanding shares of capital stock of the Trust
Depositor have been duly authorized and validly issued, are fully paid and
nonassessable and, except to the extent set forth in the Registration
Statement, are owned by the Servicer directly or indirectly through one or
more wholly-owned subsidiaries, free and clear of any claim, lien,
encumbrance, security interest, restriction upon voting or transfer or any
other claim of any third party.
(h) (i) the Sale and Servicing Agreement, when duly executed by the
Trust Depositor and the Servicer and delivered by such parties, will
constitute a valid and binding agreement of the Trust Depositor and the
Servicer enforceable against them in accordance with its terms; (ii) the
Indenture, when duly executed by the Indenture Trustee and delivered by the
Indenture Trustee, will constitute a valid and binding agreement of the
Trust enforceable against the Trust in accordance with its terms; (iii) the
Notes, when duly executed, authenticated, issued and delivered as provided
in the Indenture, will be duly and validly issued and outstanding and will
constitute valid and binding obligations of the Trust entitled to the
benefits of the Indenture and enforceable in accordance with its terms; and
(iv) the Indenture, the Sale and Servicing Agreement, the Trust Agreement
between the Trust Depositor and ________, as Owner Trustee and the Transfer
and Sale Agreement among Heller Financial Inc. as the Servicer and a
Seller, Heller Financial Leasing, Inc., as a Seller, and together with
Heller Financial Inc, the "Sellers", and the Trust Depositor (collectively,
the "Transaction Agreements") and the Notes conform to the descriptions
thereof contained in the Prospectus.
(i) The execution, delivery and performance of this Agreement, the
Transaction Agreements to which the Servicer or its subsidiary, as the case
may be, is a party and the issuance and sale of the Notes, the consummation
of the transactions contemplated hereby and thereby will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Servicer or any of
its subsidiaries is a party or by which the Servicer or any of its
subsidiaries is bound or to which any of the property or assets of the
Servicer or any of its subsidiaries is subject, nor will such actions
result in any violation of the provisions of the charter or by-laws of the
Servicer or any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Servicer or any of its subsidiaries or any of their
<PAGE>
First Union Capital Markets Corp. 4
_______________, 1997
properties or assets; and except for the registration of the Notes under
the Securities Act, the qualification of the Indenture under the Trust
Indenture Act, such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable
state securities laws in connection with the purchase and distribution of
the Notes by the Underwriters and the filing of any financing statements
required to perfect the Trust's interest in the Trust Assets, no consent,
approval, authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the execution,
delivery and performance of this Agreement or the Transaction Agreements,
the issuance and sale of the Notes and the consummation of the transactions
contemplated hereby and thereby.
(j) There are no contracts or other documents which are required to
be described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act and which have not been so described or
filed.
(k) There are no legal or governmental proceedings pending to which
the Servicer or any of its subsidiaries is a party or of which any property
or assets of the Servicer or any of its subsidiaries is the subject which,
individually or in the aggregate, if determined adversely to the Servicer
or any of its subsidiaries, are reasonably likely to have a material
adverse effect on the condition (financial or otherwise), results of
operations, business or prospects of the Servicer and its subsidiaries
taken as a whole; and to the best of the Servicer's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(l) Neither the Servicer nor any of its subsidiaries (i) is in
violation of its charter or by-laws, (ii) is in default in any material
respect, and no event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance
of any term, covenant or condition contained in any material indenture,
mortgage, deed of trust, loan agreement 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 or (iii) is in violation in any respect of any law,
ordinance, governmental rule, regulation or court decree to which it or its
property or assets may be subject, except any violation or default that
could not have a material adverse effect on the condition (financial or
otherwise), results of operations, business or prospects of the Servicer
and its subsidiaries taken as a whole.
(m) This Agreement has been duly authorized, executed and delivered
by each of the Trust Depositor and the Servicer; and
(n) Neither the Trust nor the Trust Depositor is required to be
registered under the Investment Company Act of 1940, as amended.
Section 2. Purchase and Sale. Subject to the terms and conditions
and in reliance upon the covenants, representations and warranties herein set
forth, the Trust Depositor agrees to sell to each Underwriter, and each
Underwriter agrees, severally and not
<PAGE>
First Union Capital Markets Corp. 5
_______________, 1997
jointly, to purchase from the Trust Depositor, the principal amount of Notes set
forth opposite such Underwriter's name in Schedule II hereto. The purchase
price for the Notes shall be as set forth in Schedule I hereto.
Section 3. Delivery and Payment. Payment for the Notes shall be made
to the Trust Depositor or to its order by wire transfer of same day funds at the
office of Simpson Thacher & Bartlett in New York, New York at 10:00 A.M., New
York City time, on the Closing Date (as hereinafter defined), or at such other
time on the same or such other date as the Representative and the Trust
Depositor may agree upon. The time and date of such payment for the Notes as
specified in Schedule I hereto are referred to herein as the "Closing Date." As
used herein, the term "Business Day" means any day other than a day on which
banks are permitted or required to be closed in New York City.
Payment for the Notes shall be made against delivery to the
Representative for the respective accounts of the several Underwriters of the
Notes registered in the name of Cede & Co. as nominee of The Depository Trust
Company and in such denominations as the Representative shall request in writing
not later than two full Business Days prior to the Closing Date. The Trust
Depositor shall make the Notes available for inspection by the Representative in
New York, New York not later than one full Business Day prior to the Closing
Date.
Section 4. Offering by Underwriters. It is understood that the
several Underwriters propose to offer the Notes for sale to the public, which
may include selected dealers, as set forth in the Prospectus.
Section 5. Covenants of the Trust Depositor. The Trust Depositor
covenants and agrees with the Underwriters:
(a) To prepare the Prospectus in a form approved by the
Representative and to 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.
(b) During the period that a prospectus relating to the Notes is
required to be delivered under the Securities Act in connection with sales
of such Notes (such period being hereinafter sometimes referred to as the
"prospectus delivery period"), before filing any amendment or supplement to
the Registration Statement or the Prospectus, the Trust Depositor will
furnish to the Representative a copy of the proposed amendment or
supplement for review and will not file any such proposed amendment or
supplement to which the Representative reasonable objects.
(c) During the prospectus delivery period, the Trust Depositor will
advise the Representative promptly after it receives notice thereof, (i)
when any amendment to the Registration Statement shall have become
effective; (ii) of any request by the Commission for any amendment or
supplement to the Registration Statement or the
<PAGE>
First Union Capital Markets Corp. 6
_______, 1997
Prospectus or for any additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding
for that purpose, (iv) of the issuance by the Commission of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or the initiation or threatening of any proceedings for that
purpose and (v) of any notification with respect to any suspension of the
qualification of the Notes for offer and sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and will use
its best efforts to prevent the issuance of any such stop order or
suspension and, if any is issued, will promptly use its best efforts to
obtain the withdrawal thereof.
(d) If, at any time during the prospectus delivery period, any event
occurs as a result of which the Prospectus as then 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, the Trust Depositor promptly will prepare and file with the
Commission, an amendment or a supplement which will correct such statement
or omission or effect such compliance.
(e) The Trust Depositor will endeavor to qualify the Notes for offer
and sale under the securities or Blue Sky laws of such jurisdictions as the
Representative shall reasonably request and will continue such
qualification in effect so long as reasonably required for distribution of
the Notes; provided, however, that the Trust Depositor shall not be
obligated to qualify to do business in any jurisdiction in which it is not
currently so qualified; and provided, further, that the Trust Depositor
shall not be required to file a general consent to service of process in
any jurisdiction.
(f) The Trust Depositor will furnish to the Representative, without
charge, two copies of the Registration Statement (including exhibits
thereto), one of which will be signed, and to each Underwriter conformed
copies of the Registration Statement (without exhibits thereto) and, during
the prospectus delivery period, as many copies of any Preliminary
Prospectus and the Prospectus and any supplement thereto as the
Underwriters may reasonably request.
(g) For a period from the date of this Agreement until the retirement
of the Notes, or until such time as the Underwriters shall cease to
maintain a secondary market in the Notes, whichever first occurs, the Trust
Depositor will deliver to the Underwriters (i) the annual statements of
compliance, (ii) the annual independent certified public accountants'
reports furnished to the Indenture Trustee, (iii) all documents required to
be distributed to Noteholders of the Trust and (iv) all documents filed
with the Commission pursuant to the Exchange Act or any order of the
Commission thereunder, in each case as provided to the Indenture Trustee or
filed with the Commission, as soon as such statements and reports are
furnished to the Indenture Trustee or filed or as soon thereafter as
practicable.
<PAGE>
First Union Capital Markets Corp. 7
_____, 1997
(h) To the extent, if any, that the rating provided with respect to
the Notes by the rating agency or agencies that initially rate the Notes is
conditional upon the furnishing of documents or the taking of any other
actions by the Trust Depositor, the Trust Depositor shall furnish such
documents and take any such other actions.
(i) The Trust Depositor will cause the Trust to make generally
available to Noteholders and to the Representative as soon as practicable
an earnings statement covering a period of at least twelve months beginning
with the first fiscal quarter of the Trust occurring after the Effective
Date of the Registration Statement, which shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 of the Commission
promulgated thereunder.
(j) For a period of 90 days from the date hereof, the Trust Depositor
will not offer for sale, sell, contract to sell or otherwise dispose of,
directly or indirectly, or file a registration statement for, or announce
any offering of, any securities collateralized by, or evidencing an
ownership interest in, any asset-backed securities of the Trust Depositor
or the Trust (other than the Notes purchased hereunder) without the prior
written consent of the Underwriters.
Section 6. Conditions to the Obligations of the Underwriters. The
respective obligations of the several Underwriters hereunder are subject to the
accuracy, when made and on the Closing Date, of the representations and
warranties of the Trust Depositor and the Servicer contained herein, to the
accuracy of the statements of the Trust Depositor and the Servicer made in any
certificates pursuant to the provisions hereof, to the performance by the Trust
Depositor and the Servicer of their respective obligations hereunder and to each
of the following additional terms and conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424 in the manner and within the applicable time period prescribed
for such filing by the rules and regulations of the Commission under the
Securities Act and in accordance with Section 5(a) of this Agreement; and,
prior to the Closing Date, no stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued and
no proceedings for such purpose shall have been initiated or threatened by
the Commission; and all requests for additional information from the
Commission with respect to the Registration Statement shall have been
complied with to the reasonable satisfaction of the Representative.
(b) (i) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Transaction
Agreements, the Notes, the Registration Statement, the Preliminary
Prospectus and the Prospectus, and all other legal matters relating to such
agreements and the transactions contemplated hereby and thereby shall be
reasonably satisfactory in all material respects to counsel for the
Underwriters, and the Trust Depositor shall have furnished to such counsel
all documents and information that they may reasonably request to enable
them to pass upon such matters and (ii) prior to or contemporaneously with
the purchase of Notes hereunder, all transactions contemplated to be
consummated under such Transaction
<PAGE>
First Union Capital Markets Corp. 8
_____, 1997
Documents on the Closing Date (including, without limitation, the issuance
and placement of any subordinated, privately-placed securities) shall have
been so consummated to the reasonable satisfaction of the Underwriters.
(c) Winston & Strawn shall have furnished to the Representative their
written opinion, as U.S. counsel to the Trust Depositor and the Servicer,
addressed to the Underwriters and dated the Closing Date, in form and
substance reasonably satisfactory to the Underwriters.
(d) ________________ shall have furnished to the Representative his
written opinion, as _______________ to the Servicer, addressed to the
Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriters.
(e) Winston & Strawn shall have furnished to the Representative their
written opinion, as U.S. counsel to the Trust Depositor and the Servicer,
addressed to the Underwriters and dated the Closing Date, in form and
substance reasonably satisfactory to the Underwriters, with respect to the
characterization of the transfer of the Assets by the Sellers to the Trust
Depositor pursuant to the Transfer and Sale Agreement as a sale and the
non-consolidation of the Trust Depositor and the Servicer.
(f) The Representative shall have received from Simpson Thacher &
Bartlett, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to such matters as the Underwriters may require,
and the Trust Depositor shall have furnished to such counsel such documents
as they reasonably request for enabling them to pass upon such matters.
(g) (i) ___________________ shall have furnished to the
Representative their written opinion, as counsel to the Indenture Trustee,
addressed to the Underwriters and dated the Closing Date, in form and
substance reasonably satisfactory to the Underwriters and (ii)
___________________ shall have furnished to the Representative their
written opinion, as counsel to the Owner Trustee, addressed to the
Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriters.
(h) Each of the Trust Depositor and the Servicer shall have furnished
to the Representative a certificate, dated the Closing Date, of any of its
Chairman of the Board, President or Vice President and its chief financial
officer stating that (i) such officers have carefully examined the
Registration Statement and the Prospectus, (ii) the Prospectus does not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, (iii) the representations and warranties of the
Servicer or the Trust Depositor, as the case may be, contained in this
Agreement and the Transaction Agreements are true and correct in all
material respects on and as of the Closing Date, (iv) the Servicer or the
Trust Depositor, as the case may be, has complied in all material respects
with all agreements and satisfied in all material respects all conditions
on its part to be
<PAGE>
First Union Capital Markets Corp. 9
_____, 1997
performed or satisfied hereunder and under such agreements at or prior to
the Closing Date, (v) no stop order suspending the effectiveness of the
Registration Statement has been issued and is outstanding and no
proceedings for that purpose have been instituted and not terminated or, to
the best of his or her knowledge, are contemplated by the Commission, and
(vi) since the date of its most recent financial statements, there has been
no material adverse change in the financial position or results of
operations of the Servicer or the Trust Depositor, as applicable, or the
Trust or any change, or any development including a prospective change, in
or affecting the condition (financial or otherwise), results of operations
or business of the Servicer, the Trust Depositor or the Trust except as set
forth in or contemplated by the Registration Statement and the Prospectus.
(i) Subsequent to the date of this Agreement, there shall not have
occurred (i) any change, or any development involving a prospective change,
in or affecting particularly the business or properties of the Trust
Depositor or the Servicer which materially impairs the investment quality
of the Notes; (ii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the over-the-counter market shall
have been suspended or limited, or minimum prices shall have been
established on either of such exchanges or such market by the Commission,
by such exchange or by any other regulatory body or governmental authority
having jurisdiction, or trading in securities of the Trust Depositor or the
Servicer on any exchange or in the over-the-counter market shall have been
suspended or (iii) a general moratorium on commercial banking activities
shall have been declared by Federal or New York State authorities or (iv)
an outbreak or escalation of hostilities or a declaration by the United
States of a national emergency or war or such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of the Representative,
impracticable or inadvisable to proceed with the public offering or the
delivery of the Notes on the terms and in the manner contemplated in the
Prospectus.
(j) With respect to the letter of __________________, delivered to
the Underwriters concurrently with the execution of this Agreement (the
"initial letter"), the Trust Depositor shall have furnished to the
Underwriters a letter (the "bring-down letter") of such accountants,
addressed to the Underwriters and dated the Closing Date (i) confirming
that they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualifications of accountants under Rule 2-01 of Regulation
S-X of the Commission, (ii) stating, as of the date of the bring-down
letter (or with respect to matters involving changes or developments since
the respective dates as of which specified financial information is given
in the Prospectus, as of a date not more than five days prior to the date
of such bring-down letter), the conclusions and findings of such firm with
respect to the financial information and other matters covered by its
initial letter and (iii) confirming in all material respects the
conclusions and findings set forth in its initial letter.
<PAGE>
First Union Capital Markets Corp. 10
__________, 1997
(k) The Underwriters shall receive evidence satisfactory to them
that, on or before the Closing Date, UCC-1 financing statements have been
or are being filed in each office in each jurisdiction in which such
financing statements are required to perfect the first priority security
interests created by the Sale and Servicing Agreement reflecting the
interest of the Trust Depositor in the Receivables and the proceeds
thereof.
(l) Subsequent to the execution and delivery of this Agreement, (i)
no downgrading shall have occurred in the rating accorded the Notes or any
of the Trust Depositor's other debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) of the Securities Act and (ii) no
such organization shall have publicly announced that it has under
surveillance or review (other than an announcement with positive
implications of a possible upgrading), its rating of the Notes or any of
the Trust Depositor's other debt securities.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
Section 7. Termination. The obligations of the Underwriters
hereunder may be terminated by the Representative, in its absolute discretion,
by notice given to and received by the Trust Depositor and the Servicer prior to
delivery of and payment for the Notes if, prior to that time, any of the events
described in Section 6(i) or Section 6(m) shall have occurred.
Section 8. Defaulting Underwriters. (a) If, on the Closing Date,
any Underwriter or Underwriters default in the performance of its or their
obligations under this Agreement, the Representative may make arrangements for
the purchase of such Notes by other persons satisfactory to the Trust Depositor
and the Representative, including any of the Underwriters, but if no such
arrangements are made by the Closing Date, then each remaining non-defaulting
Underwriter shall be severally obligated to purchase the Notes which the
defaulting Underwriter or Underwriters agreed but failed to purchase on the
Closing Date in the respective proportions which the principal amount of Notes
set forth opposite the name of each remaining non-defaulting Underwriter in
Schedule I hereto bears to the aggregate principal amount of Notes set forth
opposite the names of all the remaining non-defaulting Underwriters in Schedule
I hereto; provided, however, that the remaining non-defaulting Underwriters
shall not be obligated to purchase any of the Notes on the Closing Date if the
aggregate principal amount of Notes which the defaulting Underwriter or
Underwriters agreed but failed to purchase on such date exceeds one-eleventh of
the aggregate principal amount of the Notes to be purchased on the Closing Date,
and any remaining non-defaulting Underwriter shall not be obligated to purchase
in total more than 110% of the principal amount of the Notes which it agreed to
purchase on the Closing Date pursuant to the terms of Section 2. If the
foregoing maximums are exceeded and the remaining Underwriters or other
underwriters satisfactory to the Representative and the Trust Depositor do not
elect to purchase the Notes which the defaulting Underwriter or Underwriters
agreed but failed to purchase, this
<PAGE>
First Union Capital Markets Corp. 11
__________, 1997
Agreement shall terminate without liability on the part of any non-defaulting
Underwriter or the Trust Depositor, except that the provisions of Sections 9 and
13 shall not terminate and shall remain in effect. As used in this Agreement,
the term "Underwriter" includes, for all purposes of this Agreement unless the
context otherwise requires, any party not listed in Schedule I hereto who,
pursuant to this Section 8, purchases Notes which a defaulting Underwriter
agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Underwriter
of any liability it may have for damages caused by its default. If other
Underwriters are obligated or agree to purchase the Notes of a defaulting
Underwriter, either the Representative or the Trust Depositor may postpone the
Closing Date for up to seven full business days in order to effect any changes
that in the opinion of counsel for the Trust Depositor or counsel for the Under
writers may be necessary in the Registration Statement, the Prospectus or in any
other document or arrangement, and the Trust Depositor agrees to file promptly
any amendment or supplement to the Registration Statement or the Prospectus that
effects any such changes.
Section 9. Reimbursement of Underwriters' Expenses. If (i) the Trust
Depositor shall fail to tender the Notes for delivery to the Underwriters for
any reason permitted under this Agreement or (ii) the Underwriters shall decline
to purchase the Notes for any reason permitted under this Agreement, the Trust
Depositor shall reimburse the Underwriters for the fees and expenses of their
counsel and for such other out-of-pocket expenses as shall have been reasonably
incurred by them in connection with this Agreement and the proposed purchase of
the Notes, and upon demand the Trust Depositor shall pay the full amount thereof
to the Representative. If this Agreement is terminated pursuant to Section 8 by
reason of the default of one or more Underwriters, the Trust Depositor shall not
be obligated to reimburse any defaulting Underwriter on account of those
expenses.
Section 10. Indemnification. (a) The Servicer and the Trust
Depositor shall, jointly and severally, indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Securities Act (collectively referred to for the purposes of this
Section 10 as the Underwriter) against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which that Underwriter
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement as originally filed or in any amendment thereof or
supplement thereto, or in any Preliminary Prospectus or the Prospectus or in any
amendment thereof or supplement thereto or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse each Underwriter
for any legal or other expenses reasonably incurred by that Underwriter directly
in connection with investigating or preparing to defend or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that neither the Servicer nor the Trust Depositor shall be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue statement in or
omission or alleged omission from any Registration Statement as originally filed
or in any amendment thereof or supplement thereto,
<PAGE>
First Union Capital Markets Corp. 12
__________, 1997
or in any Preliminary Prospectus or the Prospectus or in any amendment thereof
or supplement thereto in reliance upon and in conformity with the Underwriters'
Information.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Trust Depositor, each of its directors, each officer of the
Trust Depositor who signed the Registration Statement and each person, if any,
who controls the Trust Depositor within the meaning of the Securities Act
(collectively referred to for the purposes of this Section 10 as the Trust
Depositor), against any loss, claim, damage or liability, joint or several, or
any action in respect thereof, to which the Trust Depositor may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement as originally filed or in any amendment thereof or supplement thereto,
or in any Preliminary Prospectus or the Prospectus or in any amendment thereof
or supplement thereto or (ii) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that the
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with the written information furnished
to the Trust Depositor through the Representative by or on behalf of such
Underwriter specifically for use therein (the "Underwriters' Information"), and
shall reimburse the Trust Depositor for any legal or other expenses reasonably
incurred by the Trust Depositor in connection with investigating or preparing to
defend or defending against or appearing as third party witness in connection
with any such loss, claim, damage or liability (or any action in respect
thereof) as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
10 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 10 except to the extent it has
been materially prejudiced by such failure; and, provided, further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 10.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Representative shall have the right to employ counsel to represent jointly
the Representative and the other Underwriters (and their respective controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought under this Section 10) if, in the reasonable
judgment of the Representative, it is
<PAGE>
First Union Capital Markets Corp. 13
__________, 1997
advisable for the Representative and the other Underwriters and controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the Trust Depositor
and the Servicer. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 10(a) and 10(b), shall use all reasonable
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall be liable for any settlement of
any such action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
The obligations of the Servicer, the Trust Depositor and the
Underwriters in this Section 10 are in addition to any other liability which the
Servicer, the Trust Depositor or the Underwriters, as the case may be, may
otherwise have.
Section 11. Contribution. If the indemnification provided for in
this Section 11 is unavailable or insufficient to hold harmless an indemnified
party under Section 10(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
any action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Servicer and the Trust Depositor
on the one hand and the Underwriters on the other from the offering of the Notes
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Servicer and the Trust Depositor on the one hand and the Underwriters on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or any action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Servicer and the Trust Depositor on the one hand and the Underwriters on the
other with respect to such offering shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Notes purchased hereunder
(before deducting expenses) received by the Trust Depositor bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Notes purchased hereunder, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Servicer or the Trust Depositor on the
one hand or the Underwriters on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Servicer, the Trust Depositor and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 11 were to be 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 into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability referred to above in
this Section 11 shall be deemed to include, for purposes of this Section 11, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such
<PAGE>
First Union Capital Markets Corp. 14
__________, 1997
claim or any action. Notwithstanding the provisions of this Section 11, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Notes underwritten by it and distributed
to the public were offered to the public less the amount of any damages which
such Underwriter has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. 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. The Underwriters' obligations
to indemnify and contribute as provided in this Section 11 are several in
proportion to their respective underwriting obligations and not joint.
Section 12. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Underwriters, the Trust
Depositor, the Servicer, and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Underwriters, the Trust Depositor
and the Servicer and their respective successors and the controlling persons and
officers and directors referred to in Sections 10 and 11 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
Section 13. Expenses. The Trust Depositor and the Servicer, jointly
and severally, agrees with the Underwriters to pay (i) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Notes and any
taxes payable in that connection; (ii) the costs incident to the preparation,
printing and filing under the Securities Act of the Registration Statement and
any amendments and exhibits thereto; (iii) the costs of distributing the
Registration Statement as originally filed and each amendment thereto and any
post-effective amendments thereof (including, in each case, exhibits), any
Preliminary Prospectus and the Prospectus, all as provided in this Agreement;
(iv) the costs of reproducing and distributing this Agreement and any other
underwriting and selling group documents by mail, telex or other means of
communications; (v) the fees and expenses of qualifying the Notes under the
securities laws of the several jurisdictions as provided in Section 5(e) and of
preparing, printing and distributing Blue Sky Memoranda and Legal Investment
Surveys (including the related reasonable and documented fees and expenses of
counsel to the Underwriters); (vi) any fees charged by rating agencies for
rating the Notes; (vii) all fees and expenses of the Indenture Trustee and its
counsel; (viii) any transfer taxes payable in connection with its sale of the
Notes pursuant to this Agreement; and (ix) all other costs and expenses incident
to the performance of the obligations of the Trust Depositor and the Servicer
under this Agreement; provided that, except as otherwise provided in this
Section 13, the Underwriters shall pay their own costs and expenses, including,
the costs and expenses of their counsel and the expenses of advertising any
offering of the Notes made by the Underwriters.
Section 14. Survival. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Trust Depositor,
the Servicer and the Under writers contained in this Agreement or made by or on
their behalf, respectively, pursuant to this Agreement, shall survive the
delivery of and payment for the Notes and shall remain in
<PAGE>
First Union Capital Markets Corp. 15
__________, 1997
full force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any of them or any person
controlling any of them.
Section 15. Notices. All communication hereunder shall be in writing
and, (i) if sent to the Underwriters will be mailed, delivered or telecopied and
confirmed to them at First Union Capital Markets Corp., Asset Securitization
Division, 301 South College Street, TW-10, Charlotte, North Carolina, 28288-
0610, Telecopy Number: (704) 374-3254; provided, however, that any notice to an
Underwriter pursuant to Section 9(c) shall be delivered or sent by mail,
delivery or telecopy to such Underwriter at its address set forth in its
acceptance telex to the Representative, which address will be supplied to any
other party hereto by the Representative upon request; if sent to the Trust
Depositor, will be mailed, delivered or telecopied and confirmed to them at the
address of the Trust Depositor set forth in the Registration Statement,
Attention: Chief Financial Officer; and (iii) if sent to the Servicer, will be
mailed, delivered or telecopied and confirmed to them at the address of the
Servicer set forth in the Registration Statement, Attention: Vice President and
Treasurer. Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof. The Trust Depositor and the Servicer
shall be entitled to act and rely upon any request, consent, notice or agreement
given or made on behalf of the Underwriters by the Representative.
Section 16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section 17. Submission to Jurisdiction; Appointment of Agent for
Service; Currency Indemnity. (a) To the fullest extent permitted by applicable
law, each of the Trust Depositor and the Servicer irrevocably submits to the
jurisdiction of any Federal or State court in the City, County and State of New
York, United States of America, in any suit or proceeding based on or arising
under this Agreement, and irrevocably agrees that all claims in respect of such
suit or proceeding may be determined in any such court. Each of the Trust
Depositor and the Servicer hereby irrevocably and fully waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. Each of the
Trust Depositor and the Servicer hereby irrevocably designates and appoints CT
Corporation (the "Process Agent"), as its authorized agent upon whom process may
be served in any such suit or proceeding, it being understood that the
designation and appointment of CT Corporation as such authorized agent shall
become effective immediately without any further action on the part of the Trust
Depositor or the Servicer. Each of the Trust Depositor and the Servicer
represents to each Underwriter that it has notified the Process Agent of such
designation and appointment and that the Process Agent has accepted the same in
writing. Each of the Trust Depositor and the Servicer hereby irrevocably
authorizes and directs the Process Agent to accept such service. Each of the
Trust Depositor and the Servicer further agrees that service of process upon the
Process Agent and written notice of said service to the Trust Depositor or the
Servicer, as the case may be, mailed by first class mail or delivered to the
Process Agent at its principal office, shall be deemed in every respect
effective service of process upon the Trust Depositor or the Servicer, as the
case may be, in any such suit or proceeding. Nothing herein shall affect the
right of any Underwriter or any person controlling any Underwriter to serve
process in any other manner permitted by law. Each of the Trust Depositor and
the Servicer agrees
<PAGE>
First Union Capital Markets Corp. 16
__________, 1997
that a final action in any such suit or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
lawful manner.
(b) The obligation of the parties to make payments hereunder is in
U.S. dollars (U.S. dollars and such other currencies referred to above being
called the "Obligation Currency") and such obligation shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency or any other
realization in such other currency, whether as proceeds of set-off, security,
guarantee, distributions, or otherwise, except to the extent to which such
tender, recovery or realization shall result in the effective receipt by the
party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable hereunder, and the party liable to make such
payment agrees to indemnify the party which is to receive such payment (as an
additional, separate and independent cause of action) for the amount (if any) by
which such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation to
indemnify shall not be affected by judgment being obtained for any other sums
due under this Agreement.
Section 18. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
Section 19. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
Section 20. Effectiveness. This Agreement shall become effective
upon execution and delivery.
<PAGE>
17
If you are in agreement with the foregoing, please sign the
counterpart hereof and return it to the Trust Depositor, whereupon this letter
and your acceptance shall become a binding agreement among the Trust Depositor,
the Servicer and the several Underwriters.
Very truly yours,
HELLER FUNDING CORPORATION
By:
-------------------------------------
Name:
Title:
HELLER FINANCIAL, INC.
By:
-------------------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed
and accepted as of the date hereof.
FIRST UNION CAPITAL MARKETS CORP.
By:
---------------------------------
Name:
Title:
<PAGE>
================================================================================
TRUST AGREEMENT
by and between
HELLER FUNDING CORPORATION
as Trust Depositor,
and
[_____________________],
as Owner Trustee
Dated as of August 1, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE ONE Page
----
<S> <C> <C>
DEFINITIONS.....................................................................................1
Section 1.01. Capitalized Terms................................................................1
Section 1.02. Other Definitional Provisions....................................................3
Section 1.03. Usage of Terms...................................................................3
Section 1.04. Section References...............................................................3
Section 1.05. Accounting Terms.................................................................3
ARTICLE TWO
ORGANIZATION....................................................................................4
Section 2.01. Name.............................................................................4
Section 2.02. Office...........................................................................4
Section 2.03. Purposes and Powers..............................................................4
Section 2.04. Appointment of Owner Trustee.....................................................5
Section 2.05. Capital Contribution of Owner Trust Estate.......................................5
Section 2.06. Declaration of Trust.............................................................5
Section 2.07. Liability of Trust Depositor.....................................................5
Section 2.08. Title to Trust Property..........................................................5
Section 2.09. Situs of Trust...................................................................5
Section 2.10. Representations and Warranties of the Trust Depositor............................6
Section 2.11. Federal Income Tax Treatment.....................................................6
ARTICLE THREE
TRUST CERTIFICATE AND TRANSFER OF INTEREST......................................................8
Section 3.01. Ownership........................................................................8
Section 3.02. The Trust Certificate............................................................8
Section 3.03. Authentication and Delivery of Trust Certificate.................................8
Section 3.04. Registration of Transfer and Exchange of Trust Certificate.......................8
Section 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates..........................9
Section 3.06. Persons Deemed Owners............................................................9
Section 3.07. Access to List of Certificateholder's Names and Addresses........................9
Section 3.08. Maintenance of Office or Agency..................................................9
Section 3.09. Temporary Trust Certificate......................................................9
Section 3.10. Appointment of Paying Agent.....................................................10
Section 3.11. Ownership by Trust Depositor of Trust Certificate...............................10
ARTICLE FOUR........................................................................................11
ACTIONS BY OWNER TRUSTEE.......................................................................11
Section 4.01. Prior Notice to Owner with Respect to Certain Matters...........................11
Section 4.02. Action by Owner with Respect to Certain Matters.................................11
Section 4.03. Action by Owner with Respect to Bankruptcy......................................11
Section 4.04. Restrictions on Owner's Power...................................................11
ARTICLE FIVE
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
APPLICATION OF TRUST FUNDS;
CERTAIN DUTIES.........................................................................................................13
Section 5.01. Establishment of Trust Account..........................................................................13
Section 5.02. Application of Trust Funds..............................................................................13
Section 5.03. Method of Payment.......................................................................................13
Section 5.04. No Segregation of Moneys; No Interest...................................................................13
Section 5.05. Accounting and Reports to the Certificateholder,
the Internal Revenue Service and Others.................................................................13
Section 5.06. Signature on Returns; Tax Matters Partner...............................................................14
ARTICLE SIX
AUTHORITY AND DUTIES OF OWNER TRUSTEE..................................................................................15
Section 6.01. General Authority.......................................................................................15
Section 6.02. General Duties..........................................................................................15
Section 6.03. Action Upon Instruction.................................................................................15
Section 6.04. No Duties Except as Specified in this Agreement or in Instructions......................................16
Section 6.05. No Action Except Under Specified Documents or Instructions..............................................16
Section 6.06. Restrictions............................................................................................16
ARTICLE SEVEN
CONCERNING THE OWNER TRUSTEE...........................................................................................17
Section 7.01. Acceptance of Trusts and Duties.........................................................................17
Section 7.02. Furnishing of Documents.................................................................................18
Section 7.03. Representations and Warranties..........................................................................18
Section 7.04. Reliance; Advice of Counsel.............................................................................18
Section 7.05. Not Acting in Individual Capacity.......................................................................18
Section 7.06. Owner Trustee Not Liable for Trust Certificate, Notes or Contracts......................................19
Section 7.07. Owner Trustee May Own Trust Certificate and Notes.......................................................19
ARTICLE EIGHT
COMPENSATION OF OWNER TRUSTEE..........................................................................................20
Section 8.01. Owner Trustee's Fees and Expenses.......................................................................20
Section 8.02. Indemnification.........................................................................................20
Section 8.03. Payments to the Owner Trustee...........................................................................20
ARTICLE NINE
TERMINATION OF TRUST AGREEMENT.........................................................................................21
Section 9.01. Termination of Trust Agreement..........................................................................21
Section 9.02. Dissolution upon Bankruptcy of Trust
Depositor or Withdrawal or Removal of Trust Depositor...................................................21
ARTICLE TEN
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES.................................................................22
Section 10.01. Eligibility Requirements for Owner Trustee.............................................................22
Section 10.02. Resignation or Removal of Owner Trustee................................................................22
Section 10.03. Successor Owner Trustee................................................................................22
Section 10.04. Merger or Consolidation of Owner Trustee...............................................................23
Section 10.05. Appointment of Co-Trustee or Separate Trustee..........................................................23
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE ELEVEN
<S> <C> <C>
MISCELLANEOUS.......................................................................................................25
Section 11.01. Supplements and Amendments..........................................................................25
Section 11.02. No Legal Title to Trust Estate in Owner.............................................................25
Section 11.03. Limitations on Rights of Others.....................................................................26
Section 11.04. Notices.............................................................................................26
Section 11.05. Severability of Provisions..........................................................................27
Section 11.06. Counterparts........................................................................................27
Section 11.07. Successors and Assigns..............................................................................27
Section 11.09. No Petition.........................................................................................27
Section 11.10. No Recourse.........................................................................................28
Section 11.11. Headings............................................................................................28
Section 11.12. Governing Law.......................................................................................28
Section 11.13. Trust Certificate Transfer Restrictions.............................................................28
Section 11.14. Trust Depositor Payment Obligation..................................................................28
EXHIBITS
Exhibit A - Form of Certificate of Trust...........................................................................A-1
Exhibit B - Form of Trust Certificate..............................................................................B-1
</TABLE>
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TRUST AGREEMENT dated as of August 1, 1997, between HELLER FUNDING
CORPORATION, a Delaware corporation, as Trust Depositor (the "Trust Depositor"),
and [________________], a Delaware banking corporation, as owner trustee (the
"Owner Trustee").
WHEREAS, in connection herewith, the Trust Depositor is willing to assume
certain obligations pursuant hereto; and
WHEREAS, in connection herewith, the Trust Depositor is willing to purchase
the Trust Certificate (as defined herein) to be issued pursuant to this
Agreement and to assume certain obligations pursuant hereto;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Capitalized Terms. Except as otherwise provided in this
Agreement, whenever used in this Agreement the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
"Administration Agreement" means the administration agreement, dated as of
the date hereof, among the Trust, the Trust Depositor, the Indenture Trustee and
Heller Financial, Inc., as administrator.
"Agreement" means this Trust Agreement, as the same may be amended and
supplemented from time to time.
"Applicant" shall have the meaning set forth in Section 3.07.
"Benefit Plan" means (i) an employee benefit plan (as such term is defined
in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(ii) a plan described in Section 4975(e)(1) of the Code or (iii) any entity
whose underlying assets include plan assets by reason of a plan's investment in
the entity.
"Business Trust Statute" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code (S) 3801 et seq., as the same may be amended from time to time.
"Certificate Balance" means $[ ].
"Certificate Distribution Account" means the account established and
maintained as such pursuant to Section 5.01.
"Certificate of Trust" means the Certificate of Trust filed for the Trust
pursuant to Section 3810(a) of the Business Trust Statute, substantially in the
form of Exhibit A hereto.
"Certificate Register" and "Certificate Registrar" mean the register
maintained and the register (or any successor thereto) appointed pursuant to
Section 3.04.
"Certificateholder" or "Holder" means with respect to a Definitive Trust
Certificate the Person in whose name the Trust Certificate is registered in the
Certificate Register, except that, solely for the purposes of giving any
consent, waiver, request or demand pursuant to this Agreement, the interest
evidenced by any Trust Certificate registered in the name of the Trust
Depositor, Heller Financial, Inc. or any of their respective Affiliates shall
not be taken into account in determining whether the requisite percentage
necessary to effect any such consent, waiver, request or demand in respect of
the Trust Certificate shall have been obtained.
"Closing Date" means August __, 1997.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Definitive Trust Certificates" shall have the meaning set forth in Section
3.09.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" shall have the meaning assigned to such term in Section 8.02.
"Heller Financial" means Heller Financial, Inc., a Delaware Corporation.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.02.
"Indenture" means the Indenture dated as of the date hereof between the
Trust and [ ], as Indenture Trustee.
"Note Depository Agreement" means the Agreement dated as of the Closing
Date among the Trust, the Indenture Trustee, the Administrator and DTC, as the
Clearing Agency, relating to the Notes, as the same may be amended and
supplemented from time to time.
"Notes" means the Class A-1 Notes, Class A-2 Notes, the Class B Notes, the
Class C Notes and the subordinated Notes in each case issued pursuant to the
Indenture.
"Owner" means the Holder of the Trust Certificate.
"Owner Trustee" means [______________], a Delaware corporation, not in its
individual capacity but solely as owner trustee under this Agreement, and any
successor Owner Trustee hereunder.
"Owner Trustee Corporate Trust Office" means the office of the Owner
Trustee at which its corporate trust business shall be administered, which
initially shall be [_____________________________________], Attn:
[________________], or such other office at such other address as the Owner
Trustee may designate from time to time by notice to the Certificateholder, the
Servicer, the Trust Depositor and Heller Financial.
"Paying Agent" means any paying agent or co-paying agent appointed pursuant
to Section 3.10.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof) unincorporated organization or government or any agency or political
subdivision thereof.
"Record Date" means, with respect to any Distribution Date, the last
Business Day of the preceding calendar month.
"Sale and Servicing Agreement" means the sale and servicing agreement,
dated as of the date hereof, among the Trust, as Issuer, the Trust Depositor,
Heller Financial, as servicer, and [ ], as
Indenture Trustee as the same may be amended or supplemented from time to time.
"Secretary of State" means the Secretary of State of the State of Delaware.
"Tax Matters Partner" shall have the meaning provided in Section 5.06(b)
hereof.
"Treasury Regulations" means regulations, including proposed or temporary
regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
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"Trust" means the trust established by this Agreement.
"Trust Certificate" means the trust certificate evidencing the beneficial
equity interest of an Owner in the Trust, substantially in the form of Exhibit B
hereto.
"Trust Depositor" means Heller Funding Corporation in its capacity as Trust
Depositor hereunder, and its successors.
"Trust Estate" means all right, title and interest of the Trust in and to
the property and rights assigned to the Trust pursuant to Article Two of the
Sale and Servicing Agreement, all funds on deposit from time to time in the
Trust Accounts and the Certificate Distribution Account and all other property
of the Trust from time to time, including any rights of the Owner Trustee and
the Trust pursuant to the Sale and Servicing Agreement and the Administration
Agreement.
"Underwriters" means First Union Capital Markets Corp., [________________],
and [________________].
Section 1.02. Other Definitional Provisions. Capitalized terms used that
are not otherwise defined herein shall have the meanings ascribed thereto in the
Sale and Servicing Agreement or, if not defined therein, in the Indenture.
Section 1.03. Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation".
Section 1.04. Section References. All section references, unless
otherwise indicated, shall be to Sections in this Agreement.
Section 1.05. Accounting Terms. All accounting terms used but not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
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ARTICLE TWO
ORGANIZATION
Section 2.01. Name. The Trust created hereby shall be known as "Heller
Equipment Asset Receivables Trust 1997-1", in which name the Owner Trustee may
conduct the activities of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
Section 2.02. Office. The office of the Trust shall be in care of the
Owner Trustee at the Owner Trustee Corporate Trust Office or at such other
address in Delaware as the Owner Trustee may designate by written notice to the
Owner and the Trust Depositor.
Section 2.03. Purposes and Powers.
(a) The sole purpose of the Trust is to manage the Trust Estate and collect
and disburse the periodic income therefrom for the use and benefit of the Owner,
and in furtherance of such purpose to engage in the following ministerial
activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificate pursuant to this Agreement and to sell the Notes and
the Trust Certificate;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificate, to purchase the Contracts, and to pay the
organizational, start-up and transactional expenses of the Trust
and to pay the balance to the Trust Depositor pursuant to the
Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owner pursuant to the Sale and Servicing
Agreement any portion of the Trust Estate released from the Lien
of, and remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Transaction
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith; and
(vi) subject to compliance with the Transaction Documents, to engage
in such other activities as may be required in connection with
conservation of the Trust Estate and the making of distributions
to the Owner and the Noteholders.
The Trust shall not engage in any activities other than in connection with the
foregoing. Nothing contained herein shall be deemed to authorize the Owner
Trustee to engage in any business operations or any activities other than those
set forth in the introductory sentence of this Section. Specifically, the Owner
Trustee shall have no authority to engage in any business operations, or acquire
any assets other than those specifically included in the Trust Estate under
Section 1.01, or otherwise vary the assets held by the Trust. Similarly, the
Owner Trustee shall have no discretionary duties other than performing those
ministerial acts set forth above necessary to accomplish the purpose of this
Trust as set forth in the introductory sentence of this Section.
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Section 2.04. Appointment of Owner Trustee. The Trust Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein, and the
Owner Trustee hereby accepts such appointment.
Section 2.05. Capital Contribution of Owner Trust Estate. The Trust
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Trust Depositor, as of the date hereof,
of the foregoing contribution, which shall constitute the Trust Estate and shall
be deposited in the Certificate Distribution Account. The Trust Depositor shall
pay organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.
Section 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Trust Estate in trust upon and subject to the conditions
set forth herein for the sole purpose of conserving the Trust Estate and
collecting and disbursing the periodic income therefrom for the use and benefit
of the Owner, subject to the obligations of the Trust under the Transaction
Documents. It is the intention of the parties hereto that the Trust constitute
a business trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such business trust. It is the intention
of the parties hereto that the Trust be disregarded as a separate entity for
federal income tax purposes pursuant to Treasury Regulation Section 301.7701-
3(b)(1)(ii) as in effect for the periods after January 1, 1997. The parties
agree not to take any action inconsistent with such intended federal income tax
treatment. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein and in the Business Trust Statute for
the sole purpose and to the extent necessary to accomplish the purpose of this
Trust as set forth in the introductory sentence of Section 2.03.
Section 2.07. Liability of Trust Depositor.
(a) Pursuant to Section 3803(a) of the Business Trust Statute, the Trust
Depositor shall be liable directly to and will indemnify any injured party or
any other creditor of the Trust for all losses, claims, damages, liabilities and
expenses of the Trust to the extent that the Trust Depositor would be liable if
the Trust were a partnership under the Delaware Revised Uniform Limited
Partnership Act in which Trust Depositor were a general partner (including any
Illinois personal property replacement tax that is imposed on the Trust as a
partnership); provided, however, that Trust Depositor shall not be liable for
any losses incurred by a Certificateholder in the capacity of an investor in the
Trust Certificate or a Noteholder in the capacity of an investor in the Notes.
In addition, any third party creditors of the Trust (other than in connection
with the obligations described in the immediately preceding sentence for which
the Trust Depositor shall not be liable) shall be deemed third party
beneficiaries of this paragraph. The obligations of the Trust Depositor under
this paragraph shall be evidenced by the Trust Certificate described in Section
3.11.
(b) Other than to the extent set forth in Section 2.07(a), no Owner,
solely by virtue of its being the Holder of the Trust Certificate, shall have
any personal liability for any liability or obligation of the Trust.
Section 2.08. Title to Trust Property. Legal title to the Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Trust
Estate to be vested in an Owner Trustee or Owner Trustees, in which case title
shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be.
Section 2.09. Situs of Trust. The Trust will be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Illinois or the State of
Delaware. The Trust shall not have any employees in any state other than
Delaware; provided, however, that nothing herein shall restrict or prohibit the
Owner Trustee from having employees within or without the State of Delaware.
Payments will be received by the Trust only in Delaware and payments will be
made by the Trust only from Delaware. The only office of the Trust will be at
the Owner Trustee Corporate Trust Office.
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Section 2.10. Representations and Warranties of the Trust Depositor.
The Trust Depositor hereby represents and warrants to the Owner Trustee
that:
(i) The Trust Depositor is duly organized and validly existing as a
corporation organized and existing and in good standing under the
laws of the State of Delaware, with power and authority to own its
properties and to conduct its business and had at all relevant times,
and has, power, authority and legal right to acquire and own the
Contracts.
(ii) The Trust Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business requires such qualifications.
(iii) The Trust Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Trust
Depositor has full power and authority to sell and assign the
property to be sold and assigned to and deposited with the Owner
Trustee on behalf of the Trust as part of the Trust Estate and has
duly authorized such sale and assignment and deposit with the Owner
Trustee on behalf of the Trust by all necessary corporate action; and
the execution, delivery and performance of this Agreement have been
duly authorized by the Trust Depositor by all necessary corporate
action.
(iv) The consummation of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof do 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 bylaws of the Trust Depositor, or any
indenture, agreement or other instrument to which the Trust Depositor
is a party or by which it is bound; nor result in the creation or
imposition of any Lien upon any of the properties of the Trust
Depositor pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Transaction Documents);
nor violate any law or any order, rule or regulation applicable to
the Trust Depositor of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Trust Depositor or its
properties.
(v) There are no proceedings or investigations pending, or to the Trust
Depositor's best knowledge threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over the Trust Depositor or its properties: (A)
asserting the invalidity of this Agreement, any of the other
Transaction Documents or the Trust Certificate, (B) seeking to
prevent the issuance of the Trust Certificate or the consummation of
any of the transactions contemplated by this Agreement or any of the
other Transaction Documents, (C) seeking any determination or ruling
that might materially and adversely affect the performance by the
Trust Depositor of its obligations under, or the validity or
enforceability of, this Agreement, any of the other Transaction
Documents or the Trust Certificate or (D) involving the Trust
Depositor and which might adversely affect the federal income tax or
other federal, state or local tax attributes of the Trust
Certificate.
Section 2.11. Federal Income Tax Treatment.
(a) It is the intention of the Trust Depositor that the Trust be
disregarded as a separate entity for federal income tax purposes pursuant to
Treasury Regulations Section 301.7701-3(b)(1)(ii) as in effect for periods after
January 1, 1997. The Trust Certificate constitutes the sole equity interest in
the Trust and must at all times be held by either the Trust Depositor or its
transferee as sole owner. The Trust Depositor agrees not to take any action
inconsistent with such intended federal income tax treatment. Because for
federal income tax purposes the Trust will be disregarded
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as a separate entity, Trust items of income, gain, loss and deduction for any
month as determined for federal income tax purposes shall be allocated entirely
to the Trust Depositor (or its assignee) as the sole Certificateholder.
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ARTICLE THREE
TRUST CERTIFICATE AND TRANSFER OF INTERESTS
Section 3.01. Ownership. Upon the formation of the Trust by the
contribution by the Trust Depositor pursuant to Section 2.05 and until the
issuance of the Trust Certificate, the Trust Depositor shall be the sole
beneficiary of the Trust. The Trust Certificate must at all times be held by
either the Trust Depositor or its transferee as sole owner.
Section 3.02. The Trust Certificate. The Trust Certificate shall be
substantially in the form of Exhibit B hereto. The Trust Certificate shall be
issed in an amount equal to the Certificate Balance. The Trust Certificate
shall be executed by the Owner Trustee on behalf of the Trust by manual or
facsimile signature of an authorized officer of the Owner Trustee and shall be
deemed to have been validly issued when so executed. The Trust Certificate
bearing the manual or facsimile signature of individuals who were, at the time
when such signatures were affixed, authorized to sign on behalf of the Owner
Trustee shall be valid and binding obligation of the Trust, notwithstanding that
such individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of such Trust Certificate or did not hold such
offices at the date of such Trust Certificate. The Trust Certificate shall be
dated the date of its authentication.
Section 3.03. Authentication and Delivery of Trust Certificate. The Owner
Trustee shall cause to be authenticated and delivered upon the order of the
Trust Depositor, in exchange for the Contracts and the other assets of the
Trust, simultaneously with the sale, assignment and transfer to the Trust of the
Contracts, and the constructive delivery to the Owner Trustee of the Contract
Files and the other assets of the Trust, a Trust Certificate duly authenticated
by the Owner Trustee, in the amount of the Certificate Balance evidencing the
entire ownership of the Trust and Notes issued by the Owner Trustee and
authenticated by the Indenture Trustee in aggregate principal amount of, in the
case of (i) Class A Notes, $[ ], (ii) Class B Notes, $[ ]
and (iii) Class C Notes, $[ ]. No Trust Certificate shall be entitled
to any benefit under this Agreement, or be valid for any purpose, unless there
appears on such Trust Certificate a certificate of authentication substantially
in the form set forth in the form of Trust Certificate attached hereto as
Exhibit B, executed by the Owner Trustee or its authenticating agent, by manual
signature, and such certificate upon any Trust Certificate shall be conclusive
evidence, and the only evidence, that such Trust Certificate has been duly
authenticated and delivered hereunder. Upon issuance, authorization and delivery
pursuant to the terms hereof, the Trust Certificate will be entitled to the
benefits of this Agreement.
Section 3.04. Registration of Transfer and Exchange of Trust Certificate.
(a) The Certificate Registrar shall keep or cause to be kept, a
Certificate Register, subject to such reasonable regulations as it may
prescribe. The Certificate Register shall provide for the registration of Trust
Certificate and transfers and exchanges of the Trust Certificate as provided
herein. The Owner Trustee is hereby initially appointed Certificate Registrar
for the purpose of registering the Trust Certificate and transfers and exchanges
of the Trust Certificate as herein provided. In the event that, subsequent to
the Closing Date, the Owner Trustee notifies the Servicer that it is unable to
act as Certificate Registrar, the Servicer shall appoint another bank or trust
company, having an office or agency located in the City of Chicago, Illinois,
agreeing to act in accordance with the provisions of this Agreement applicable
to it, and otherwise acceptable to the Owner Trustee, to act as successor
Certificate Registrar hereunder.
(b) Upon surrender for registration of transfer of any Trust Certificate
at the Owner Trustee Corporate Trust Office, the Owner Trustee shall execute,
authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee, one new
Trust Certificate having the same aggregate principal amount.
(c) Every Trust Certificate presented or surrendered for registration of
transfer shall be accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and the Certificate Registrar duly executed by
the Holder thereof or his attorney duly authorized in writing.
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(d) No service charge shall be made for any registration of transfer or
exchange of the Trust Certificate, but the Owner Trustee may require payment of
a sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer of the Trust Certificate.
(e) All Trust Certificates surrendered for registration of transfer shall
be canceled and subsequently destroyed by the Owner Trustee.
Section 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates. If
(i) any mutilated Trust Certificate is surrendered to the Certificate Registrar,
or the Certificate Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Trust Certificate, and (ii) there is delivered
to the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice that such Trust Certificate has been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee or
its authenticating agent shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Trust Certificate, a new
Trust Certificate of like tenor and fractional undivided interest. In
connection with the issuance of any new Trust Certificate under this Section,
the Owner Trustee may require the payment by the Holder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto. Any duplicate Trust Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Trust
Certificate shall be found at any time.
Section 3.06. Persons Deemed Owners. Prior to due presentation of a Trust
Certificate for registration of transfer, the Owner Trustee, the Certificate
Registrar and any of their respective agents may treat the Person in whose name
any Trust Certificate is registered as the owner of such Trust Certificate for
the purpose of receiving distributions pursuant to Section 5.02 and for all
other purposes whatsoever, and none of the Owner Trustee, the Certificate
Registrar, any Paying Agent or any of their respective agents shall be affected
by any notice of the contrary.
Section 3.07. Access to List of Certificateholder's Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Servicer and the
Trust Depositor, within 15 days after receipt by the Certificate Registrar of a
written request therefor from the Servicer or the Trust Depositor, the name and
address of the Certificateholder as of the most recent Record Date in such form
as the Servicer or the Trust Depositor may reasonably require. Every
Certificateholder, by receiving and holding a Trust Certificate, agrees with the
Servicer, the Trust Depositor and the Owner Trustee that none of the Servicer,
the Trust Depositor or the Owner Trustee shall be held accountable by reason of
the disclosure of any such information as to the name and address of the
Certificateholder hereunder, regardless of the source from which such
information was derived.
Section 3.08. Maintenance of Office or Agency. The Owner Trustee shall
maintain in [_____], an office or offices or agency or agencies where the Trust
Certificate may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Owner Trustee in respect of the Trust
Certificate and this Agreement may be served. The Owner Trustee hereby
designates the Owner Trustee Corporate Trust Office as its office for such
purposes. The Owner Trustee shall give prompt written notice to the Trust
Depositor, the Servicer and to the Certificateholder of any change in the
location of the Certificate Register or any such office or agency.
Section 3.09. Temporary Trust Certificate. Pending the preparation of the
definitive fully registered Trust Certificate (the "Definitive Trust
Certificate"), the Owner Trustee, on behalf of the Trust, may execute,
authenticate and deliver, temporary Trust Certificate that is printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the Definitive Trust Certificate in
lieu of which it is issued. If a temporary Trust Certificate is issued, the
Trust Depositor will cause Definitive Trust Certificate to be prepared without
unreasonable delay. After the preparation of the Definitive Trust Certificate,
the temporary Trust Certificate shall be exchangeable for the Definitive Trust
Certificate upon surrender of the temporary Trust Certificate at the office or
agency to be maintained as provided in Section 3.08, without charge to the
Holder. Upon surrender for cancellation of the temporary Trust Certificate, the
Owner Trustee shall execute and authenticate and deliver in exchange therefor a
like principal amount of the Definitive Trust Certificate. Until so exchanged,
the temporary Trust Certificate shall in all respects be entitled to the same
benefits hereunder as a Definitive Trust Certificate.
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Section 3.10. Appointment of Paying Agent. The Paying Agent shall make
distributions to the Certificateholder from the Certificate Distribution Account
pursuant to Section 5.02(a) and shall report the amounts of such distributions
to the Owner Trustee. Any Paying Agent shall have the revocable power to
withdraw funds from the Certificate Distribution Account for the purpose of
making the distributions referred to above. The Owner Trustee may revoke such
power and remove the Paying Agent if the Owner Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Agreement in any material respect. The Paying Agent initially shall
be [ ], and any co-paying agent chosen by the Paying Agent that is acceptable to
the Owner Trustee. Each Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Owner Trustee. In the event that [ ]
shall no longer be the Paying Agent, the Owner Trustee shall appoint a successor
to act as Paying Agent (which shall be a bank or trust company). The Owner
Trustee shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Owner Trustee to execute and deliver to the Owner Trustee an
instrument in which such successor Paying Agent or additional Paying Agent shall
agree with the Owner Trustee that, as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Certificateholder in trust for the benefit of the Certificateholder entitled
thereto until such sums shall be paid to such Certificateholder. The Paying
Agent shall return all unclaimed funds to the Owner Trustee and upon removal of
a Paying Agent such Paying Agent shall also return all funds in its possession
to the Owner Trustee. The provisions of Sections 7.01, 7.03, 7.04 and 8.01 shall
apply to the Owner Trustee also in its role as Paying Agent, for so long as the
Owner Trustee shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
Section 3.11. Ownership by Trust Depositor of Trust Certificate. Trust
Depositor shall on the Closing Date purchase from the Underwriters a Trust
Certificate representing the Certificate Balance.
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ARTICLE FOUR
ACTIONS BY OWNER TRUSTEE
Section 4.01. Prior Notice to Owner with Respect to Certain Matters.
Subject to the provisions and limitation of Section 4.04, with respect to the
following matters, the Owner Trustee shall not take action unless at least 30
days before the taking of such action, the Owner Trustee shall have notified the
Certificateholder in writing of the proposed action, the Indenture Trustee shall
have consented to such action in the event any Notes are outstanding and the
Owner shall not have notified the Owner Trustee in writing prior to the 30th day
after such notice is given that such Owner has withheld consent or provided
alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims or
lawsuits brought in connection with the collection of the Contracts)
and the compromise of any action, claim or lawsuit brought by or
against the Trust (except with respect to the aforementioned claims or
lawsuits for collection of the Contracts);
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the
Business Trust Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and
such amendment materially and adversely affects the interest of the
Owner;
(e) the amendment, change or modification of the Administration Agreement,
except to cure any ambiguity or to amend or supplement any provision
in a manner or add any provision that would not materially and
adversely affect the interests of the Owner; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this
Agreement of a successor Certificate Registrar, or the consent to the
assignment by the Note Registrar, Paying Agent, Indenture Trustee or
Certificate Registrar of its obligations under the Indenture or the
Agreement, as applicable.
Section 4.02. Action by Owner with Respect to Certain Matters. Subject
to the provisions and limitations of Section 4.04, the Owner Trustee shall not
have the power, except upon the direction of the Owner, to (a) remove the
Administrator pursuant to Section 8 of the Administration Agreement, (b) appoint
a successor Administrator pursuant to Section 8 of the Administration Agreement,
(c) remove the Servicer pursuant to Section 8.01 of the Sale and Servicing
Agreement, (d) except as expressly provided in the Transaction Documents, sell
the Contracts after the termination of the Indenture, (e) initiate any claim,
suit or proceeding by the Trust or compromise any claim, suit or proceeding
brought by or against the Trust, (f) authorize the merger or consolidation of
the Trust with or into any other business trust or entity (other than in
accordance with Section 3.10 of the Indenture) or (g) amend the Certificate of
Trust. The Owner Trustee shall take the actions referred to in the preceding
sentence only upon written instructions assigned by the Owner.
Section 4.03. Action by Owner with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in a
bankruptcy relating to the Trust without the prior approval of the Owner and the
delivery to the Owner Trustee by such Owner of a certificate certifying that
such Owner reasonably believes that the Trust is insolvent.
Section 4.04. Restrictions on Owner's Power. The Owner shall not direct
the Owner Trustee to take or to refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner
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Trustee under this Agreement or any of the Transaction Documents or would be
contrary to the purpose of this Trust as set forth in Section 2.03, nor shall
the Owner Trustee be obligated to follow any such direction, if given.
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ARTICLE FIVE
APPLICATION OF TRUST FUNDS;
CERTAIN DUTIES
Section 5.01. Establishment of Trust Account. The Owner Trustee, for the
benefit of the Certificateholder, shall establish and maintain in the name of
the Trust an Eligible Account (the "Certificate Distribution Account"), bearing
a designation clearly indicating that the funds deposited therein are held for
the benefit of the Certificateholder.
The Owner Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control of
the Owner Trustee for the benefit of the Certificateholder. If, at any time,
the Certificate Distribution Account ceases to be an Eligible Account, the Owner
Trustee (or the Trust Depositor on behalf of the Owner Trustee, if the
Certificate Distribution Account is not then held by the Owner Trustee or an
Affiliate thereof) shall within ten Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Certificate Distribution Account as an Eligible Account and shall transfer
any cash and/or any investments to such new Certificate Distribution Account.
Section 5.02. Application of Trust Funds.
(a) On each Distribution Date, the Owner Trustee will distribute to
Certificateholder amounts deposited in the Certificate Distribution Account
pursuant to Section 7.05 of the Sale and Servicing Agreement with respect to
such Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to the
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 9.06 of the Sale and Servicing Agreement with
respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocation of income) to the Certificateholder, such tax shall
reduce the amount otherwise distributable to the Certificateholder in accordance
with this Section. The Owner Trustee is hereby authorized and directed to retain
from amounts otherwise distributable to the Owner sufficient funds for the
payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Owner Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed with
respect to the Certificateholder shall be treated as cash distributed to such
Certificateholder at the time it is withheld by the Trust and remitted to the
appropriate taxing authority. If there is a possibility that withholding tax is
payable with respect to a distribution, the Owner Trustee may in its sole
discretion withhold such amounts in accordance with the paragraph (c).
Section 5.03. Method of Payment. Subject to Section 9.01(c) respecting
the final payment upon retirement of the Certificate, distributions required to
be made to the Certificateholder of record on the related Record Date shall be
made by check mailed to such Certificateholder at the address of such Holder
appearing in the Certificate Register.
Section 5.04. No Segregation of Moneys; No Interest. Subject to Sections
5.01 and 5.02, moneys received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law or the Sale and
Servicing Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.
Section 5.05. Accounting and Reports to the Certificateholder, the
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain (or
cause to be maintained) the books of the Trust on a calendar year basis and the
accrual method of accounting, (b) deliver to the Owner, as may be required by
the Code and applicable Treasury Regulations, such information as may be
required (including Schedule K-1) to enable the Owner to prepare its federal and
state income tax returns, (c) file such tax returns relating to the Trust and
make such elections as from time to time
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may be required or appropriate under any applicable state or federal statute or
any rule or regulation thereunder so as to maintain the federal income tax
treatment for the Trust as set forth in Section 2.11, (d) cause such tax
returns to be signed in the manner required by law and (e) collect or cause to
be collected any withholding tax as described in and in accordance with Section
5.02(c) with respect to income or distributions to Owner. The Owner Trustee
shall elect under Section 1278 of the Code to include in income currently any
market discount that accrues with respect to the Contracts. The Owner Trustee
shall not make the election provided under Section 754 or Section 761 of the
Code.
Section 5.06. Signature on Returns; Tax Matters Partner.
(a) The Trust Depositor shall sign on behalf of the Trust the tax returns
of the Trust.
(b) If Subchapter K of the Code should be applicable to the Trust, the
Trust Depositor shall be designated the "tax matters partner" of the Trust
pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
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ARTICLE SIX
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.01. General Authority. Subject to the provisions and
limitations of Sections 2.03 and 2.06, the Owner Trustee is authorized and
directed to execute and deliver the Transaction Documents to which the Trust is
to be a party and each certificate or other document attached as an exhibit to
or contemplated by the Transaction Documents to which the Trust is to be a party
and any amendment or other agreement, as evidenced conclusively by the Owner
Trustee's execution thereof. In addition to the foregoing, the Owner Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Transaction Documents. The Owner Trustee is further
authorized form time to time to take such action as the Administrator recommends
with respect to the Transaction Documents.
Section 6.02. General Duties. Subject to the provisions and limitations
of Sections 2.03 and 2.06, it shall be the duty of the Owner Trustee to
discharge (or cause to be discharged through the Administrator all of its
responsibilities pursuant to the terms of this Agreement and the Transaction
Documents to which the Trust is a party and to administer the Trust in the
interest of the Owner, subject to the Transaction Documents and in accordance
with the provisions of this Agreement. Without limiting the foregoing, the
Owner Trustee shall on behalf of the Trust file and prove any claim or claims
that may exist against Heller Financial in connection with any claims paying
procedure as part of an insolvency or receivership proceeding involving Heller
Financial. Notwithstanding the foregoing, the Owner Trustee shall be deemed to
have discharged its duties and responsibilities hereunder and under the
Transaction Documents to the extent the Administrator has agreed in the
Administration Agreement to perform any act or to discharge any duty of the
Owner Trustee hereunder or under any Transaction Document, and the Owner Trustee
shall not be held liable for the default or failure of the Administrator to
carry out its obligations under the Administration Agreement.
Section 6.03. Action Upon Instruction.
(a) Subject to Article Four, in accordance with the terms of the
Transaction Documents the Owner may by written instruction direct the Owner
Trustee in the management of the Trust.
(b) The Owner Trustee shall not be required to take any action hereunder
or under any other Transaction Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trustee or is contrary
to the terms hereof or of any other Transaction Document or is otherwise
contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any other Transaction Document, the Owner Trustee shall promptly give notice (in
such form as shall be appropriate under the circumstances) to the Owner
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Owner received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instruction within ten days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Agreement and the
other Transaction Documents, as it shall deem to be in the best interests of the
Owner, and shall have no liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the applicability
of any provision of this Agreement or any other Transaction Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or in
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Owner
requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within ten days
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of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Agreement or the other Transaction Documents, as it shall
deem to be in the best interests of the Owner, and shall have no liability to
any Person for such action or inaction.
Section 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of or
otherwise deal with the Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or any document or written instruction received by the Owner
Trustee pursuant to Section 6.03; and no implied duties or obligations shall be
read into this Agreement or any other Transaction Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Commission filing for the
Trust or to record this Agreement or any other Transaction Document. The Owner
Trustee nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any liens on any part of the
Trust Estate that result from actions by, or claims against, the Owner Trustee
that are not related to the ownership or the administration of the Trust Estate.
Section 6.05. No Action Except Under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) in accordance with the other Transaction Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.03.
Section 6.06. Restrictions. The Owner Trustee shall not take any action
(i) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (ii) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for federal or state income tax
purposes. The Owner shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.
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ARTICLE SEVEN
CONCERNING THE OWNER TRUSTEE
Section 7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Trust Estate upon the terms of the Transaction Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder or
under any other Transaction Document under any circumstances, except (i) for its
own willful misconduct or negligence or (ii) in the case of the inaccuracy of
any representation or warranty contained in Section 7.03 expressly made by the
Owner Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment made
by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the instructions of
the Administrator or any Owner;
(c) no provision of this Agreement or any other Transaction Document shall
require the Owner Trustee to expend or risk funds or otherwise incur
any financial liability in the performance of any of its rights or
powers hereunder or under any Transaction Document if the Owner
Trustee shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Transaction
Documents, including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution
hereof by the Trust Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Trust Estate, or for or
in respect of the validity or sufficiency of the Transaction
Documents, other than the certificate of authentication on the Trust
Certificate, and the Owner Trustee shall in no event assume or incur
any liability, duty, or obligation to any Noteholder or to any Owner,
other than as expressly provided for herein or expressly agreed to in
the Transaction Documents;
(f) the Owner Trustee shall not be liable for the default or misconduct of
the Administrator, the Trust Depositor, the Indenture Trustee or the
Servicer under any of the Transaction Documents or otherwise and the
Owner Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the other Transaction
Documents that are required to be performed by the Administrator under
the Administration Agreement, the Indenture Trustee under the
Indenture or the Servicer, or the Trust Depositor under the Sale and
Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by the Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or
in relation to this Agreement or any other Transaction Document, at
the request, order or direction of the Owner, unless such Owner has
offered to the Owner Trustee security or indemnity satisfactory to it
against the costs, expenses and liabilities that may be incurred by
the Owner Trustee therein or thereby. The right of the Owner Trustee
to perform any discretionary act enumerated in this Agreement or in
any other Transaction Document
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shall not be construed as a duty, and the Owner Trustee shall not be
answerable for other than its negligence or willful misconduct in the
performance of any such act.
Section 7.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Owner promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Transaction Documents.
Section 7.03. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Trust Depositor and the Owner that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all
requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize the execution
an delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized
to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will
contravene any federal or Delaware law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee
or any judgment or order binding on it, or constitute any default
under its charter documents or bylaws or any indenture, mortgage,
contract, agreement or instrument to which it is a party or by which
any of its properties may be bound or result in the creation or
imposition of any lien, charge or encumbrance on the Trust Estate
resulting from actions by or claims against the Owner Trustee
individually which are unrelated to this Agreement or the other
Transaction Documents.
Section 7.04. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Owner
Trustee may accept a certified copy of a resolution of the board of directors or
other governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the method of determination of which is
not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the other
Transaction Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into by any of them, and the
Owner Trustee shall not be liable for the conduct or misconduct of such agents
or attorneys shall have been selected by the Owner Trustee with reasonable care,
and (ii) may consult with counsel, accountants and other skilled persons to be
selected with reasonable care and employed by it. The Owner Trustee shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the written opinion or advice of any such counsel, accountants
or other such persons.
Section 7.05. Not Acting in Individual Capacity. Except as provided in
this Article Seven, in accepting the trusts hereby created, [______________]
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any other Transaction Document
shall look only to the Trust Estate for payment or satisfaction thereof.
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Section 7.06. Owner Trustee Not Liable for Trust Certificate, Notes or
Contracts. The recitals contained herein and in the Trust Certificate (other
than the signature and countersignature of the Owner Trustee and the certificate
of authentication on the Trust Certificate) shall be taken as the statements of
the Trust Depositor, and the Owner Trustee assumes no responsibility for the
correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, any other Transaction Document or the
Trust Certificate (other than the signature and countersignature of the Owner
Trustee and the certificate of authentication on the Trust Certificate) or the
Notes, or of any Contract or related documents. The Owner Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Contract, or the perfection and priority of
any security interest created by any Contract in any Equipment or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Trust Estate or its ability to generate the payments to be
distributed to Certificateholder under this Agreement or the Noteholders under
the Indenture, including, without limitation, the existence, condition and
ownership of any Equipment; the existence and enforceability of any insurance
thereon; the existence and contents of any Contract on any computer or other
record thereof; the validity of the assignment of any Contract to the Trust or
of any intervening assignment; the completeness of any Contract; the performance
or enforcement of any Contract; the compliance by the Trust Depositor or the
Servicer with any warranty or representation made under any Transaction Document
or in any related document or the accuracy of any such warranty or
representation; or any action of the Administrator, the Indenture Trustee or the
Servicer or any subservicer taken in the name of the Owner Trustee.
Section 7.07. Owner Trustee May Own Trust Certificate and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificate or Notes and may deal with the Trust Depositor, the
Administrator, the Indenture Trustee and the Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
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ARTICLE EIGHT
COMPENSATION OF OWNER TRUSTEE
Section 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon and which shall be paid consistent with Section 7.05(a)
of the Sale and Servicing Agreement. Additionally, the Owner Trustee shall be
entitled to be reimbursed by the Trust Depositor for its other reasonable
expenses hereunder, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and counsel as the Owner
Trustee may employ in connection with the exercise and performance of its rights
and its duties hereunder.
Section 8.02. Indemnification. The Trust Depositor shall be liable as
primary obligor for, and shall indemnify the Owner Trustee and its successors,
assigns and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the other Transaction Documents, the Trust
Estate, the administration of the Trust Estate or the action or inaction of the
Owner Trustee hereunder, except only that the Trust Depositor shall not be
liable for or required to indemnify an Indemnified Party from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 7.01. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In the event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Owner Trustee's choice of
legal counsel shall be subject to the approval of the Trust Depositor, which
approval shall not be unreasonably withheld.
Section 8.03. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article shall be deemed not to be a part of the
Trust Estate immediately after such payment.
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ARTICLE NINE
TERMINATION OF TRUST AGREEMENT
Section 9.01. Termination of Trust Agreement.
(a) This Agreement (other than Article Eight) and the Trust shall
terminate and be of no further force or effect upon the earlier of (i) final
distribution by the Owner Trustee of all moneys or other property or proceeds of
the Trust Estate in accordance with terms of the Indenture, the Sale and
Servicing Agreement and Article Five, (ii) the expiration of 21 years from the
death of the survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the Court of St. James's, living on the date
hereof and (iii) the time provided in Section 9.02. The bankruptcy, liquidation,
dissolution, death or incapacity of any Owner, other than the Trust Depositor as
described in Section 9.02, shall not (i) operate to terminate this Agreement or
the Trust, (ii) entitle such Owner's legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of all or any part of the Trust or Trust Estate or (iii) otherwise
affect the rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), neither the Trust Depositor nor
any Holder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which the Certificateholder shall surrender its Trust Certificate to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to the Certificateholder mailed within
five Business Days of receipt of notice of such termination from the Servicer
given pursuant to Section 10.01 of the Sale and Servicing Agreement, stating (i)
the Distribution Date upon or with respect to which final payment of the Trust
Certificate shall be made upon presentation and surrender of the Trust
Certificate at the office of the Paying Agent therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Trust Certificate at the office of the
Paying Agent therein specified. The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at
the time such notice is given to the Certificateholder. Upon presentation and
surrender of the Trust Certificates, the Paying Agent shall cause to be
distributed to the Certificateholder amounts distributable on such Distribution
Date pursuant to Section 5.02.
(d) In the event that the Certificateholder shall not surrender its Trust
Certificate for cancellation within six months after the date specified in the
above mentioned written notice, the Owner Trustee shall give a second written
notice to such Certificateholder to surrender its Trust Certificate for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice the Trust Certificate shall not have been
surrendered for cancellation, the Owner Trustee may take appropriate steps, or
may appoint an agent to take appropriate steps, to contact the Certificateholder
concerning surrender of its Trust Certificates, and the cost thereof shall be
paid out of the funds and other assets that shall remain subject to this
Agreement. Any funds remaining in the Trust after exhaustion of such remedies
shall be distributed by the Owner Trustee to the Trust Depositor.
(e) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Business Trust Statute.
Section 9.02. Dissolution upon Bankruptcy of Trust Depositor or Withdrawal
or Removal of Trust Depositor. In the event that an Insolvency Event shall occur
with respect to the Trust Depositor or the Trust Depositor shall withdraw,
liquidate or be removed from the Trust, this Agreement shall be terminated in
accordance with Section 9.01 90 days after the date of such event.
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ARTICLE TEN
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) a rating of at least Baa3 by Moody's. If
such corporation shall publish reports of condition at least annually pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose 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. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.02.
Section 10.02. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator. Upon receiving such
notice of resignation, the Administrator shall promptly appoint a successor
Owner Trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Owner Trustee and one copy to the successor
Owner Trustee. If no successor Owner Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.01 and shall fail to resign after written
request therefor by the Administrator, or if at any time the Owner Trustee shall
be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Administrator, may remove the Owner Trustee. If the
Administrator shall remove the Owner Trustee under the authority of the
immediately preceding sentence, the Administrator shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing
Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each Rating Agency.
Section 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator, and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective, and such successor
Owner Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee.
The predecessor Owner Trustee shall upon payment of its fees and expenses
deliver to the successor Owner Trustee all documents and statements and monies
held by it under this Agreement; and the Administrator and the predecessor Owner
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to the
Certificateholder, the Indenture Trustee, the Noteholders and each Rating
Agency. If the
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Administrator shall fail to mail such notice within ten days after acceptance of
such appointment by the successor Owner Trustee, the successor Owner Trustee
shall cause such notice to be mailed at the expense of the Administrator.
Section 10.04. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such corporation shall be eligible pursuant to Section 10.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to each Rating Agency.
Section 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or any financed Equipment may at the time be located, the
Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator and Owner Trustee to act as co-trustee, jointly
with the Owner Trustee, or as separate trustee or separate trustees, of all or
any part of the Trust Estate, and to vest in such Person, in such capacity, such
title to the Trust or any part thereof and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If the
Administrator shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, the Owner Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 10.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(a) all rights, powers, duties and obligations conferred or imposed upon
the Owner Trustee shall be conferred upon and exercised or performed
by the Owner Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Owner Trustee joining in such
act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed, the Owner
Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Estate or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Owner Trustee;
(b) no trustee under this Agreement shall be personally liable by reason
of any act or omission of any other trustee under this Agreement; and
(c) the Administrator and the Owner Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-
trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of or affording protection to, the Owner
Trustee. Each such instrument shall be filed with the Owner Trustee and a copy
thereof given to the Administrator.
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Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.
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ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Supplements and Amendments.
(a) The Agreement may be amended by the Trust Depositor, and the Owner
Trustee, without the consent of any of the Noteholders or the Certificateholder,
to cure any ambiguity, to correct or supplement any provisions in this Agreement
or to add any other provisions with respect to matters or questions arising
under this Agreement that shall not be inconsistent with the provisions of this
Agreement; provided, however, that any such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder or the Certificateholder.
(b) This Agreement may also be amended from time to time by the Trust
Depositor, and the Owner Trustee, with the consent of the Holders (as such term
is defined in the Indenture) of Notes evidencing not less than 66 2/3% of the
Outstanding Amount of the Notes, each voting as a separate Class and the
consent of the Certificateholder (which consent of any Holder of a Note or Trust
Certificate given pursuant to this Section or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holders and on all future
Holder of such Note or Trust Certificate, as the case may be, issued upon the
transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made thereon), for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the Noteholders or
the Certificateholder; provided, however, that no such amendment shall increase
or reduce in any manner the amount of, or accelerate or delay the timing of, (i)
collections of payments on Contracts or distributions that shall be required to
be made for the benefit of the Noteholders or the Certificateholder or any
Interest Rate or the Pass-Through Rate or (ii) eliminate the Certificateholder
consent or reduce the aforesaid percentage of the Outstanding Amount of the
Notes required to consent to any such amendment, without the consent of the
Holders of all outstanding Notes and Trust Certificate.
(c) Prior to the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent, together with a copy thereof, to the Indenture Trustee, the
Administrator and each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder. It shall not be necessary for
the consent of Certificateholder, Noteholders or the Indenture Trustee pursuant
to this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of the
Certificateholder provided for in this Agreement or in any other Transaction
Document) and of evidencing the authorization of the execution thereof by the
Certificateholder shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
(e) Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
(f) Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
Section 11.02. No Legal Title to Trust Estate in Owner. The Owner shall
not have legal title to any part of the Trust Estate. The Owner shall be
entitled to receive distributions with respect to its undivided ownership
interest herein only in accordance with Articles Five and Nine. No transfer, by
operation of law or otherwise, of any right, title or interest of the Owner to
and in its ownership interest in the Trust Estate shall operate to terminate
this Agreement or the
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trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of legal title to any part of the Trust Estate.
Section 11.03. Limitations on Rights of Others. Except for Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Trust Depositor, the Owner, the Administrator and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.07), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Trust Estate or under or in respect of this Agreement or
any covenants, conditions or provisions contained herein.
Section 11.04. Notices. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows:
(i) If to the Servicer or Seller:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Attention:
Telecopier No.:
(ii) If to the Trust Depositor:
Heller Funding Corporation
500 West Monroe Street
Chicago, Illinois 60661
Telecopier No.:
(iii) If to the Indenture Trustee:
[ ]
[ ]
[ ]
Attention: Indenture Trust Administration
Telecopier No.:
(iv) If to the Owner Trustee:
[________________]
[________________]
[________________]
[________________]
Attention: [________________]
Telecopier No.: [________________]
(v) If to Moody's:
Moody's Investor's Service, Inc.
99 Church Street
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<PAGE>
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Fitch:
Telecopier No.:
(vii) If to the Underwriters:
First Union Capital Markets Corp.
One First Union Center, TW-6
301 South College Street
Charlotte, North Carolina 28288-0610
Attention: Asset Securitization Division
Telecopier No.:
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
Section 11.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Trust
Certificate or the rights of the Holder thereof.
Section 11.06. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Trust Depositor, and the Owner Trustee and their respective successors and
permitted assigns and each Owner and its successors and permitted assigns, all
as herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of such
Owner.
Section 11.08. Covenants of the Trust Depositor. In the event that (a)
the Certificate Balance shall be reduced by Realized Losses and (b) any
litigation with claims in excess of $1,000,000 to which the Trust Depositor is a
party which shall be reasonably likely to result in a material judgment against
the Trust Depositor that the Trust Depositor will not be able to satisfy shall
be commenced, during the period beginning immediately following the commencement
of such litigation and continuing until such litigation is dismissed or
otherwise terminated (and, if such litigation has resulted in a final judgment
against the Trust Depositor, such judgment has been satisfied), the Trust
Depositor shall not pay any dividend to the Servicer, or make any distribution
on or in respect of its capital stock to the Servicer, or repay the principal
amount of any indebtedness of the Trust Depositor held by the Servicer, unless
(i) after giving effect to such payment, distribution or repayment, the Trust
Depositor's liquid assets shall not be less than the amount of actual damages
claimed in such litigation or (ii) the Rating Agencies shall not downgrade the
then existing rating on the Certificate with respect to any such payment,
distribution or repayment. The Trust Depositor will not at any time institute
against the Trust any bankruptcy proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificate, the Notes, the Trust Agreement or any of the Transaction
Documents.
Section 11.09. No Petition.
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(a) The Trust Depositor will not at any time institute against the Trust
any bankruptcy proceedings under any United States federal or state bankruptcy
or similar law in connection with any obligations relating to the Trust
Certificate, the Notes, this Agreement or any of the other Transaction
Documents.
(b) The Owner Trustee, by entering into this Agreement, each
Certificateholder, by accepting a Trust Certificate, and the Indenture Trustee
and each Noteholder, by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Trust
Depositor or the Trust, or join in any institution against the Trust Depositor,
or the Trust of, any bankruptcy proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Trust Certificate, the Notes, this Agreement or any of the other Transaction
Documents.
Section 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificate
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Trust Depositor, the Servicer, the Seller, the
Administrator, the Owner Trustee, the Indenture Trustee or any of the respective
Affiliates and no recourse may be had against such parties or their assets,
except as my be expressly set forth or contemplated in this Agreement, the Trust
Certificate or the other Transaction Documents.
Section 11.11. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 11.12. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.13. Trust Certificate Transfer Restrictions. The Trust
Certificate may not be acquired by or for the account of a Benefit Plan. By
accepting and holding a Trust Certificate, the Holder thereof shall be deemed to
have represented and warranted that it is not a Benefit Plan nor will it hold
such Trust Certificate for the account of a Benefit Plan. By accepting and
holding a Trust Certificate, the Holder thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
Section 11.14. Trust Depositor Payment Obligation. The Trust Depositor
shall be responsible for payment of the Administrator's compensation pursuant to
Section 3 of the Administration Agreement and shall reimburse the Administrator
for all expenses and liabilities of the Administrator incurred thereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.
HELLER FUNDING CORPORATION,
as Trust Depositor
By:
-------------------------------------
Printed Name:
----------------------
Title:
------------------------------
[ ], as Owner Trustee
--------------
By:
-------------------------------------
Printed Name:
----------------------
Title:
------------------------------
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<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
This Certificate of Trust of Heller Equipment Asset Receivables Trust 1997-
1 (the "Trust"), dated August __, 1997, is being duly executed and filed by
[______________], a Delaware corporation, as Owner Trustee, to form a business
trust under the Delaware Business Trust Act (12 Del. Code, (S) 3801 et seq.).
1. Name. The name of the business trust formed hereby is Heller
Equipment Asset Receivables Trust 1997-1.
2. Delaware Trustee. The name and business address of the Owner Trustee
of the Trust in the State of Delaware is 1100 North Market Street, Wilmington,
Delaware l9890.
IN WITNESS WHEREOF, the undersigned, being the sole Owner Trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
[ ],
--------------
not in its individual capacity but solely as
Owner Trustee
By:
--------------------------------------------
Printed Name:
-- --------------------------
Title:
-------------------------------------
A-1
<PAGE>
EXHIBIT B
THIS TRUST CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE NOTES TO THE
EXTENT DESCRIBED IN THE SALE AND SERVICING AGREEMENT AND INDENTURE REFERRED TO
HEREIN.
THIS TRUST CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
HELLER FUNDING CORPORATION, HELLER FINANCIAL, INC., HELLER FINANCIAL LEASING,
INC. OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE TRUST
AGREEMENT. THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
PLEDGED IN UNLESS THE CONDITIONS SET FORTH IN SECTION 3.04 OF THE TRUST
AGREEMENT HAVE BEEN COMPLIED WITH.
THIS CERTIFICATE IS TRANSFERRABLE ONLY IN WHOLE AND NOT IN PART.
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1 CERTIFICATE
NO. Trust Certificate
------------ Principal Balance $
---------------
Fractional Interest %
-------
THIS CERTIFIES THAT ___________ is the registered owner of equity $________
nonassessable, fully-paid, fractional undivided interest in the Heller Equipment
Asset Receivables Trust 1997-1 (the "Trust") formed by Heller Funding
Corporation, a Delaware corporation (the "Trust Depositor").
The Trust was created pursuant to a Trust Agreement, dated as of August 1,
1997 (as amended and supplemented from time to time, the "Trust Agreement"),
among Heller Funding Corporation, as Trust Depositor (the "Trust Depositor"),
and Heller Financial Leasing, Inc., as a Seller (the "Seller") and
[______________], as owner trustee (the "Owner Trustee"), a summary of certain
of the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in (i) the Trust Agreement, (ii) the Sale and Servicing
Agreement, dated as of August 1, 1997 (the "Sale and Servicing Agreement"),
among the Trust, Heller Funding Corporation, as depositor (the "Trust
Depositor"), Heller Financial, Inc. ("Heller Financial"), as Servicer (in such
capacity, the "Servicer") and [
], as Indenture Trustee (the "Indenture Trustee") or (iii) the Indenture, dated
as of August 1, 1997 (the "Indenture"), between the Trust and the Indenture
Trustee.
This Trust Certificate is the duly authorized Trust Certificate designated
as "[ ]% Heller Equipment Asset Receivables Backed Certificate" (the
"Trust Certificate"). Also issued under the Indenture are three classes of
notes designated as "[ ]% Heller Equipment Asset Receivables Backed
Notes, Class A" and "[ ]% Heller Equipment Asset Receivables Backed Notes,
Class B", and "[ ]% Heller Equipment Asset Receivables Backed Notes,
Class C" (collectively, the "Notes"). This Trust Certificate is issued under
and is subject to the terms, provisions and conditions of the Trust Agreement,
to which Trust Agreement the Holder of this Trust Certificate by virtue of its
acceptance hereof assents and by which such Holder is bound. The property of
the Trust includes, among other things, (i) all the right, title and interest of
the Trust Depositor in and to the Contracts listed on the List of Contracts
delivered on the Closing Date (including, without limitation, all security
interests and all rights to receive payments which are collected pursuant
thereto on or after the Cutoff Date, including any liquidation proceeds
therefrom, but excluding any rights to receive payments which were collected
pursuant thereto prior to the Cutoff Date), (ii) all rights of the Trust
Depositor under any physical damage or other individual insurance policy (and
rights under a "forced placed" policy, if any) relating to any such Contract, an
Obligor or a piece of Equipment securing such Contract, (iii) all security
B-1
<PAGE>
interests in each such Equipment, (iv) all documents contained in the related
Contract Files, (v) all rights (but not the obligations) of the Trust Depositor
under any related Equipment dealer agreements between dealers (i.e., the
originators of such Contracts) and the Trust Depositor, (vi) all rights of the
Trust Depositor in the Lockbox, the Lockbox Account and related Lockbox
Agreement to the extent they relate to such Contracts, (vii) all rights (but not
the obligations) of the Trust Depositor under the Transfer and Sale Agreement,
including but not limited to the Trust Depositor's rights under Article V
thereof, (viii) the remittances, deposits and payments made into the Trust
Accounts from time to time and amounts in the Trust Accounts from time to time
(and any investments of such amounts), and (ix) all proceeds and products of the
foregoing (the property in clauses (i)-(viii) above.
Under the Trust Agreement, there will be distributed on the fifteenth day
of each month or if such day is not a Business Day the next succeeding Business
Day commencing [ ], 1997 (each, a "Distribution Date"),
commencing on [ ], 1997 and ending no later than the Distribution
Date in [ ], 2003 to the person in whose name this Trust Certificate
is registered at the close of business on the 1st day of the immediately
preceding calendar month (each, a "Record Date"), the amount to be distributed
to the Certificateholder pursuant to the Trust Agreement on such Distribution
Date.
The holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders to the extent described in the
Sale and Servicing Agreement and the Indenture.
It is the intent of the Seller, the Servicer, the Trust Depositor, Owner
Trustee, Indenture Trustee and the Certificateholder that, for purposes of
federal income, state and local income and single business tax and any other
income taxes, the Trust will be disregarded as a separate entity for federal
income tax purposes pursuant to Treasury Regulations Section 301.7701-
3(b)(1)(ii) and that all items of income, deduction, gain, loss or credit of the
Trust will be treated as such items of the Certificateholder. The Trust
Depositor and any other Certificateholder, by acceptance of a Trust Certificate,
agrees to treat, and to take no action inconsistent with such treatment of, the
Trust Certificate for federal income tax purposes.
Each Certificateholder, by its acceptance of a Trust Certificate or
beneficial interest in a Trust Certificate, covenants and agrees that such
Certificateholder will not at any time institute against the Trust or the Trust
Depositor, or join in any institution against the Trust or the Trust Depositor
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Trust Certificate, the Notes, the Trust Agreement or any of the other
Transaction Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee or its Agent by wire transfer or check
mailed to the Certificateholder of record in the Certificate Register without
the presentation or surrender of this Trust Certificate or the making of any
notation hereon. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Trust Certificate will
be made after due notice by the Owner Trustee of the pendency of such
distribution and only upon presentation and surrender of this Trust Certificate
at the office or agency maintained for that purpose by the Owner Trustee in the
City of [_____].
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual signature, this Trust
Certificate shall not entitle the holder hereof to any benefit under the Trust
Agreement or any other Transaction Document or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
B-2
<PAGE>
[REVERSE OF CERTIFICATE]
The Trust Certificate does not represent an obligation of, or an interest
in the Trust Depositor, Heller Financial, as the Seller or Servicer, the Owner
Trustee, the Indenture Trustee or any of their respective Affiliates and no
recourse may be had against such parties or their assets, except as expressly
set forth or contemplated herein or in the Trust Agreement or the other
Transaction Documents. In addition, this Trust Certificate is not guaranteed by
any governmental agency or instrumentality and is limited in right of payment to
certain collections and recoveries with respect to the Contracts and certain
other amounts, in each case as more specifically set forth herein and in the
Sale and Servicing Agreement. A copy of each of the Sale and Servicing Agreement
and the Trust Agreement may be examined by any Certificateholder upon written
request during normal business hours at the principal office of the Trust
Depositor and at such other places, if any, designated by the Trust Depositor.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trust Depositor and the rights of the Certificateholder under the Trust
Agreement at any time by the Trust Depositor and the Owner Trustee with the
consent of the Holder of the Trust Certificate and the holders of the Notes
evidencing not less than 66 2/3% of the Outstanding Amount of the Notes. Any
such consent by the Holder of this Trust Certificate shall be conclusive and
binding on such Holder and on all future Holders of this Trust Certificate and
of any Trust Certificate issued upon the transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent is made upon this
Trust Certificate. The Trust Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holder of the Trust
Certificate.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in [_____], accompanied by a written instrument of transfer
in form satisfactory to the Owner Trustee and the Certificate Registrar in
Chicago, Illinois executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon a new Trust Certificate evidencing the same
aggregate interest in the Trust will be issued to the designated transferee. The
Certificate Registrar appointed under the Trust Agreement is [ ].
Except as provided in the Trust Agreement, the Trust Certificate is
issuable only as a registered Trust Certificates without coupons. No service
charge will be made for any registration of transfer of such Trust Certificate,
but the Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any of their respective
agents may treat the Person in whose name this Trust Certificate is registered
as the owner hereof for all purposes, and none of the Owner Trustee, the
Certificate Registrar or any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholder of
all amounts required to be paid to such holder pursuant to the Trust Agreement
and the Sale and Servicing Agreement and the deposition of all property held as
part of the Trust Estate. The Trust Depositor may at its option purchase the
Trust Estate at a price specified in the Sale and Servicing Agreement, and such
purchase of the Contracts and other property of the Trust will affect early
retirement of the Trust Certificate; however, such right of purchase is
exercisable only as of any Distribution Date on which the Pool Balance has
declined to less than 10% of the Pool Balance.
B-3
<PAGE>
The Trust Certificate may not be acquired by a Benefit Plan. By accepting
and holding this Trust Certificate, the Holder hereof or, in the case of Book-
Entry Trust Certificate, by accepting a beneficial interest in this Trust
Certificate, the related Certificate Owner, shall be deemed to have represented
and warranted that it is not a Benefit Plan and is not acquiring this Trust
Certificate or an interest therein for the account of such an entity.
B-4
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Trust Certificate to be duly
executed.
Dated: August __, 1997 HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
By: [______________], not in its individual capacity
but or solely as Owner Trustee
By: -------------------------------------------------
Authorized Signatory
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This the Trust Certificate referred to in the within-mentioned Trust
Agreement.
[______________], [______________],
not in its individual capacity but solely not in its individual capacity but
as Owner Trustee or solely as Owner Trustee
By:
---------------------------, as
By: Authorized Signatory
-------------------------------
Authorized Signatory
By:
-------------------------------
Authorized Signatory
B-5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------------------------------
to transfer said Trust Certificate on the books of the Certificate Registrar,
will full power of substitution in the premises.
Dated:
-------------------
Signature Guaranteed:
<TABLE>
<S> <C>
- -------------------------------------- --------------------------------------
NOTICE: Signature(s) must be NOTICE: The signature to this
guaranteed by an eligible guarantor assignment must correspond with the
institution. name of the registered owner as it
appears on the face of the within
Trust Certificate in every
particular, without alteration or
enlargement or any change whatever.
</TABLE>
Document Number: 0211615.03
B-6
<PAGE>
EXHIBIT 4.2
================================================================================
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1,
as Issuer,
and
[___________],
not in its individual capacity but solely in its capacity
as Indenture Trustee
-----------------------------------
INDENTURE
Dated as of August [__], 1997
-----------------------------------
$[______] Receivable Backed Notes, Class A-1
$[______] Receivable Backed Notes, Class A-2
$[______] Receivable Backed Notes, Class B
$[______] Receivable Backed Notes, Class C
$[______] Receivable Backed Notes, Class D
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions....................................................... 1
Section 1.02. Incorporation by Reference of Trust Indenture Act................. 5
Section 1.03. Rules of Construction............................................. 5
ARTICLE TWO
THE NOTES
Section 2.01. Form.............................................................. 7
Section 2.02. Execution, Authentication and Delivery............................ 7
Section 2.03. Temporary Notes................................................... 7
Section 2.04. Registration; Registration of Transfer and Exchange............... 7
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes........................ 9
Section 2.06. Persons Deemed Owner.............................................. 9
Section 2.07. Payment of Principal and Interest; Defaulted Interest............. 9
Section 2.08. Cancellation...................................................... 10
Section 2.09. Book-Entry Notes.................................................. 10
Section 2.10. Notices to Clearing Agency........................................ 11
Section 2.11. Definitive Notes.................................................. 11
Section 2.12. Release of Collateral............................................. 11
Section 2.13. Tax Treatment..................................................... 11
ARTICLE THREE
COVENANTS
Section 3.01. Payment of Principal and Interest................................. 12
Section 3.02. Maintenance of Office or Agency................................... 12
Section 3.03. Money for Payments to be Held in Trust............................ 12
Section 3.04. Existence......................................................... 13
Section 3.05. Protection of Collateral.......................................... 13
Section 3.06. Opinions as to Collateral......................................... 14
Section 3.07. Performance of Obligations; Servicing of Contracts................ 14
Section 3.08. Negative Covenants................................................ 15
Section 3.09. Issuer May Consolidate, etc. Only on Certain Terms................ 15
Section 3.10. Successor or Transferee........................................... 17
Section 3.11. No Other Business................................................. 17
Section 3.12. No Borrowing...................................................... 17
Section 3.13. Notice of Events of Default....................................... 17
Section 3.14. Further Instruments and Acts...................................... 17
Section 3.15. Compliance with Laws.............................................. 17
Section 3.16. Amendments of Sale and Servicing Agreement and Trust Agreement.... 17
Section 3.17. Removal of Administrator.......................................... 17
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture........................... 18
</TABLE>
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<TABLE>
<S> <C>
Section 4.02. Application of Trust Money........................................ 19
Section 4.03. Repayment of Moneys Held by Paying Agent.......................... 19
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default................................................. 20
Section 5.02. Rights Upon Event of Default...................................... 20
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee; Authority of Indenture Trustee................. 21
Section 5.04. Remedies.......................................................... 22
Section 5.05. Optional Preservation of the Contracts............................ 23
Section 5.06. Priorities........................................................ 23
Section 5.07. Limitation of Suits............................................... 23
Section 5.08. Unconditional Rights of Noteholders to Receive
Principal and Interest............................................ 24
Section 5.09. Restoration of Rights and Remedies................................ 24
Section 5.10. Rights and Remedies Cumulative.................................... 24
Section 5.11. Delay or Omission Not a Waiver.................................... 24
Section 5.12. Control by Noteholders............................................ 24
Section 5.13. Waiver of Past Defaults........................................... 25
Section 5.14. Undertaking for Costs............................................. 25
Section 5.15. Waiver of Stay or Extension Laws.................................. 25
Section 5.16. Action on Notes................................................... 25
Section 5.17. Performance and Enforcement of Certain Obligations................ 25
ARTICLE SIX
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee....................................... 27
Section 6.02. Rights of Indenture Trustee....................................... 28
Section 6.03. Individual Rights of Indenture Trustee............................ 28
Section 6.04. Indenture Trustee's Disclaimer.................................... 28
Section 6.05. Notice of Defaults................................................ 29
Section 6.06. Reports by Indenture Trustee to Holders........................... 29
Section 6.07. Compensation and Indemnity........................................ 29
Section 6.08. Replacement of Indenture Trustee.................................. 29
Section 6.09. Successor Indenture Trustee by Merger............................. 30
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee................................................. 30
Section 6.11. Eligibility....................................................... 31
Section 6.12. Preferential Collection of Claims Against Issuer.................. 32
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and
Addresses of Noteholders.......................................... 33
Section 7.02. Preservation of Information: Communication to Noteholders......... 33
Section 7.03. Reports by Issuer................................................. 33
Section 7.04. Reports by Indenture Trustee...................................... 33
ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money............................................... 35
</TABLE>
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<TABLE>
<S> <C>
Section 8.02. Trust Accounts.................................................... 35
Section 8.03. General Provisions Regarding Accounts............................. 35
Section 8.04. Release of Collateral............................................. 36
Section 8.05. Opinion of Counsel................................................ 36
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders............ 37
Section 9.02. Supplemental Indentures With Consent of Noteholders............... 38
Section 9.03. Execution of Supplemental Indentures.............................. 39
Section 9.04. Effect of Supplemental Indenture.................................. 39
Section 9.05. Conformity With Trust Indenture Act............................... 39
Section 9.06. Reference in Notes to Supplemental Indentures..................... 39
ARTICLE TEN
REDEMPTION OF NOTES
Section 10.01. Redemption........................................................ 40
Section 10.02. Form of Redemption Notice......................................... 40
Section 10.03. Notes Payable on Redemption Date.................................. 40
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc......................... 41
Section 11.02. Form of Documents Delivered to Indenture Trustee.................. 42
Section 11.03. Acts of Noteholders............................................... 42
Section 11.04. Notices........................................................... 43
Section 11.05. Notices to Noteholders; Waiver.................................... 43
Section 11.06. Alternate Payment and Notice Provisions........................... 44
Section 11.07. Effect of Headings and Table of Contents.......................... 44
Section 11.08. Successors and Assigns............................................ 44
Section 11.09. Separability...................................................... 44
Section 11.10. Benefits of Indenture............................................. 44
Section 11.11. Legal Holidays.................................................... 44
Section 11.12. Governing Law..................................................... 44
Section 11.13. Counterparts...................................................... 44
Section 11.14. Recording of Indenture............................................ 44
Section 11.15. Trust Obligation.................................................. 44
Section 11.16. No Petition....................................................... 45
Section 11.17. Inspection........................................................ 45
Section 11.18. Conflict with Trust Indenture Act................................. 45
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A - Form of Sale and Servicing Agreement........................ A-1
Exhibit B - Form of Class A-1 Note...................................... B-1
Exhibit C - Form of Class A-2 Note...................................... C-1
Exhibit D - Form of Class B Note........................................ D-1
Exhibit E - Form of Class C Note........................................ E-1
Exhibit F - Form of Class D Note........................................ F-1
Exhibit G - Form of Note Assignment..................................... G-1
Exhibit H - Form of Note Depository Agreement........................... H-1
</TABLE>
iv
<PAGE>
This Indenture, dated as of August [__], 1997 (this "Indenture"), is
between Heller Equipment Asset Receivables Trust 1997-1, a Delaware business
trust (the "Issuer") and [________] in its capacity as indenture trustee (the
"Indenture Trustee") and not in its individual capacity.
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Issuer's [___]% Equipment
Receivable Backed Notes, Class A-1 (the "Class A-1 Notes"), [__]% Equipment
Receivable Backed Notes, Class A-2, (the "Class A-2 Notes"), [___]% Equipment
Receivable Backed Notes, Class B (the "Class B Notes") and [___]% Equipment
Receivable Backed Notes, Class C (the "Class C Notes"); [___]% Equipment
Receivable Backed Notes, Class D (the "Class D Notes" and, together with the
Class A-1 Notes, Class A-2 Notes and Class C Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby grants, transfers, assigns and otherwise conveys to the
Indenture Trustee on the Closing Date, on behalf of and for the benefit of the
Holders of the Notes, without recourse, all of the Issuer's right, title and
interest in, to and under the Transferred Assets as may be held from time to
time by the Issuer (as each such defined term is defined in Section 1.01)
(collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction and all other sums owing
by the Issuer hereunder or under any other Transaction Document, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the
Notes, acknowledges such Grant, accepts the trust under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Holders of the Notes may be adequately and effectively
protected.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
(a) Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Indenture.
"Act" shall have the meaning specified in Section 11.03(a).
"Administration Agreement" means the Administration Agreement, dated as of
the date hereof, among the Administrator, the Issuer, the Trust Depositor and
the Indenture Trustee.
"Administrator" means Heller Financial, Inc. or any successor Administrator
under the Administration Agreement.
"Authorized Officer" means, with respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter) and, so long as
the Administration Agreement is in effect, any Vice President or more senior
officer of the Administrator who is authorized to act for the Administrator in
matters relating to the Issuer and to be acted upon by the Administrator
pursuant to the Administration Agreement and who is identified on the list of
Authorized Officers delivered by the Administrator to the Indenture Trustee on
the Closing Date (as such list may be modified or supplemented from time to time
thereafter).
<PAGE>
"Book Entry Notes" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.09.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banking institutions in the city of Chicago, Illinois, Wilmington,
Delaware or New York, New York are authorized or obligated by law, executive
order or governmental decree to be closed.
"Certificate of Trust" means the Certificate of Trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Class" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Collateral" means the Collateral Granted to the Indenture Trustee under
this Indenture, including all proceeds thereof.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trusts business shall be
administered which office at date of the execution of this Agreement is located
at [__________], Attention: Indenture Trust Administration; or at such other
address as the Indenture Trustee may designate from time to time by notice to
the Noteholders and the Issuer, or the principal corporate trust office of any
successor Indenture Trustee (the address of which the successor Indenture
Trustee will notify the Noteholders and the Issuer).
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Definitive Notes" shall have the meaning specified in Section 2.09.
"DTC" means The Depository Trust Company, and its successors.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Event of Default" shall have the meaning specified in Section 5.01.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"General Partner" means each Certificateholder obligated to pay the
expenses of the Issuer pursuant to Section 2.07 of the Trust Agreement.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys
2
<PAGE>
payable 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 that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" or "Note Owner" means, with respect to a Book-
Entry Note, the Person who is the owner of such Book-Entry Note, as reflected on
the books of the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency) and with respect to a Definitive Note the Person in whose name
a Note is registered on the Note Register.
"Indenture Securities" means the Notes.
"Indenture Security Holder" means a Noteholder.
"Indenture Trustee" means [__________], as Indenture Trustee under this
Indenture, or any successor Indenture Trustee under this Indenture.
"Independent" means, when used with respect to any specified Person, that
the Person (i) is in fact independent of the Issuer, any other obligor upon the
Notes, the Trust Depositor, the Seller and any of their respective Affiliates,
(ii) does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Sellers or any of
their respective Affiliates, and (iii) is not connected with the Issuer, any
such other obligor, the Sellers or any Affiliate of any of the foregoing Persons
as an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an 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 the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"Issuer Order" and "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"Note Depository Agreement" means the agreement dated as of the Closing
Date, among the Issuer, the Administrator, the Indenture Trustee and DTC, as the
initial Clearing Agency, relating to the Notes, substantially in the form of
Exhibit G hereto.
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.04.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to,
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Issuer and who shall be satisfactory to the Indenture Trustee and
which shall comply with any applicable requirements of Section 11.01, and shall
be in form and substance satisfactory to the Indenture Trustee.
"Outstanding" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
3
<PAGE>
(i) Notes theretofore cancelled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent 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 or provision for such notice
has been made, satisfactory to the Indenture Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which 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 in determining whether the Holders of the requisite
Outstanding Amount have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any other Transaction Document,
Notes owned by the Issuer, any other obligor upon the Notes, the Trust
Depositor, any Seller or any of their respective Affiliates 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 that the
Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned
that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes, the Trust Depositor, any Seller or any
of their respective Affiliates.
"Outstanding Amount" means the aggregate principal amount of all Notes of
one Class or of all Classes, as the case may be, Outstanding at the date of
determination.
"Owner Trustee" means [ ], not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11
and is authorized by the Issuer to make the distributions from the Note
Distribution Account, including payment of principal of or interest on the Notes
on behalf of the Issuer.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Redemption Date" means in the case of a redemption of the Notes pursuant
to Section 10.01(a) or a payment to Noteholders pursuant to Section 10.01(b),
the Distribution Date specified by the Servicer or the Issuer pursuant to
Section 10.01(a) or 10.01(b), as the case may be.
"Redemption Date Amount" means (i) in the case of a redemption of the Notes
pursuant to Section 10.01(a), an amount equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon at the weighted
average of the Interest Rate for each Class of Notes being so redeemed to but
excluding the Redemption Date, or (ii) in the case of a payment made to
Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (i)
above.
"Registered Holder" means the Person in whose name a Note is registered on
the Note Register on the applicable Record Date.
4
<PAGE>
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office (or any successor group of the
Indenture Trustee), including any Vice President, assistant secretary or other
officer or assistant officer of the Indenture Trustee customarily performing
functions similar to those performed by the people who at such time shall be
officers, respectively, or to whom any corporate trust matter is referred at the
Corporate Trust Office of the Indenture Trustee because of his knowledge of and
familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of the date hereof, among the Issuer, the Trust Depositor and the
Servicer, substantially in the form of Exhibit A hereto.
"State" means any one of the 50 states of the United States, or the
District of Columbia or any of its territories.
"Successor Servicer" shall have the meaning specified in Section 3.07(e).
"Termination Date" means the date on which the Indenture Trustee shall have
received payment and performance of all amounts and obligations which the Issuer
may owe to or on behalf of the Indenture Trustee for the benefit of the
Noteholders under this Indenture or the Notes.
"Trust Agreement" means the Trust Agreement, dated as of the date hereof,
between the Trust Depositor and the Owner Trustee.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used herein that are not otherwise defined shall have
the meanings ascribed thereto in the Sale and Servicing Agreement.
Section 1.02. Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
5
<PAGE>
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular.
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns; and
(vii) the words "hereof," "herein" and "hereunder" and words of
similar import when used in this Indenture shall refer to this Indenture as
a whole and not to any particular provision of this Indenture; Section,
subsection and Schedule references contained in this Indenture are
references to Sections, subsections and Schedules in or to this Indenture
unless otherwise specified.
6
<PAGE>
ARTICLE TWO
THE NOTES
Section 2.01. Form. The Notes, in each case together with the Indenture
Trustee's certificate of authentication, shall be in substantially the forms set
forth as Exhibits to this Indenture 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 the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibits hereto are part of the terms of this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile. Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized 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 and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall, upon receipt of an Issuer Order, authenticate
and deliver for original issue (i) Class A-1 Notes in an aggregate principal
amount of $[______], (ii) Class A-2 Notes in an aggregate principal amount of
$[_______], (iii) Class B Notes in an aggregate principal amount of $[_______],
(iv) Class C Notes in an aggregate principal amount of $[_______] and (v) Class
D Notes in an aggregate principal amount of $[______]. The aggregate principal
amount of such Classes of Notes Outstanding at any time may not exceed such
respective amounts, except as otherwise provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $1,000 and in
integral multiples of $1,000 in excess thereof.
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 by the Indenture
Trustee by the manual signature of one of its authorized signatories, 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 2.03. Temporary Notes. Pending the preparation of Book-Entry
Notes or Definitive Notes, the Issuer may execute, and upon receipt of an Issuer
Order the Indenture Trustee shall authenticate and deliver, temporary Notes that
are printed, lithographed, typewritten, mimeographed or otherwise produced, of
the tenor of the definitive Notes in lieu of which they are issued and with such
variations not inconsistent with the terms of this Indenture 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 Book-Entry Notes or
Definitive Notes to be prepared without unreasonable delay. After the
preparation of Book-Entry Notes or Definitive Notes, the temporary Notes shall
be exchangeable for Book-Entry Notes or Definitive Notes upon surrender of the
temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more Notes, the Issuer shall execute and the
Indenture Trustee shall authenticate and deliver in exchange therefor a like
tenor and principal amount of definitive Notes of authorized denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as Book-Entry Notes or Definitive Notes.
Section 2.04. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept 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. The
Indenture Trustee shall be "Note Registrar"
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for the purpose of registering Notes and transfers of Notes as herein provided.
Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties of
Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Register, and the Indenture Trustee shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Executive Officer
thereof as to the names and addresses of the Holders of the Notes and the
principal amounts and the amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of the
same Class in any authorized denominations, of a like aggregate amount, 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 shall authenticate and the Noteholder shall obtain from the
Indenture Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.
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 transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located in the city in which the Corporate Trust Office is
located, or by a member firm of a national securities exchange, and such other
documents as the Indenture Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Indenture 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 Notes, other than exchanges pursuant to Section 2.03 not involving
any transfer.
The preceding provisions of this Section notwithstanding, the Issuer shall
not be required to make and the Note Registrar need not register transfers or
exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
(i) the Note Registrar and the Trustee will be entitled to deal with the
Clearing Agency for all purposes of this Indenture (including the payment of
principal of and interest on the Notes and the giving of instructions or
directions hereunder) as the sole holder of the Notes, and shall have no
obligation to the Note Owners;
(ii) the rights of Note Owners will be exercised only through the Clearing
Agency and will be limited to those established by law and agreements between
such Note Owners and the Clearing Agency and/or the Clearing Agency Participants
pursuant to the Depository Agreement;
(iii) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a specified
percentage of the Outstanding Amount of the Notes, the Clearing Agency will be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Note
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Owners and/or Clearing Agency Participants owning or representing, respectively,
such required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Trustee; and
(iv) without the consent of the Issuer and the Trustee, no such Note may
be transferred by the Depository except to a successor Depository that agrees to
hold such Note for the account of the Owners or except upon the election of the
Owner thereof or a subsequent transferee to hold such Note in physical form.
Neither the Trustee nor the Registrar shall have any responsibility to monitor
or restrict the transfer of beneficial ownership in any Note an interest in
which is transferable through the facilities of the Depository.
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by them to hold the Issuer and the Indenture
Trustee, then, in the absence of notice to the Issuer, the Note Registrar or the
Indenture Trustee 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 replacement Note of the same Class; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer, and the Indenture Trustee shall be entitled to
recover such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of such Person, 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 expense
incurred by the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer or
the Indenture Trustee may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee or the Note Registrar) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost of stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes 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 Notes.
Section 2.06. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee, and any
of their respective agents may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Indenture Trustee nor any of their respective agents
shall be affected by notice to the contrary.
Section 2.07. Payment of Principal and Interest; Defaulted Interest.
(a) Each Class of Notes shall accrue interest at the related Interest
Rate, and such interest shall be payable on each Distribution Date as specified
therein, subject to Section 3.01. Any installment of interest or principal, if
any, payable on any Note which is punctually paid or duly provided for by the
Issuer on the applicable Distribution Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered on the Record
Date,
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by wire transfer in immediately available funds to the account designated by
such nominee and except for the final installment of principal payable with
respect to such Note on a Distribution Date or on the related Final Distribution
Date, as the case may be (and except for the Redemption Price for any Note
called for redemption pursuant to Section 10.01(a)), which shall be payable as
provided below. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable on each Distribution Date
to the extent provided in the form of the related Note set forth as an Exhibit
hereto. Notwithstanding the foregoing, the entire unpaid principal amount of the
Notes shall be due and payable, if not previously paid, on the date on which an
Event of Default shall have occurred and be continuing, unless the Required
Holders have waived such Event of Default in the manner provided in Section
5.02. All principal payments on each Class of Notes shall be made pro rata to
the Noteholders of such Class entitled thereto. The Indenture Trustee shall
notify the Person in whose name a Note is registered at the close of business on
the Record Date preceding the Distribution Date on which the Issuer expects that
the final installment of principal of and interest on such Note will be paid.
Such notice shall be mailed within five Business Days of receipt of notice of
termination of the Trust pursuant to Section 9.01(c) of the Trust Agreement and
shall specify that such final installment will be payable only upon presentation
and surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the related payment date. The Issuer shall fix or cause to be fixed any
such special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to the Indenture Trustee and each
Noteholder a notice that states the special record date, the payment date and
the amount of defaulted interest to be paid.
Section 2.08. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time unless the Issuer shall direct by an Issuer Order that
they be destroyed or returned to it; provided that such Issuer Order is timely
and the Notes have not been previously disposed of by the Indenture Trustee.
Section 2.09. Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of a typewritten Note or Notes representing the Book-Entry
Notes, to be delivered to DTC, the initial Depository, by, or on behalf of, the
Issuer. Such Notes shall initially be registered on the Note Register in the
name of Cede & Co., the nominee of the initial Clearing Agency, and no
Noteholder will receive a Definitive Note representing such Noteholder's
interest in such Note, except as provided in Section 2.11. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Noteholders pursuant to Section 2.11:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the Notes
and the giving of instructions or directions hereunder) as the sole holder
of the Notes, and shall have no obligation to the Noteholders;
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(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Noteholders shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Noteholders and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Note Depository Agreement,
unless and until Definitive Notes are issued pursuant to Section 2.11, the
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and interest
on the Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Noteholders evidencing a
specified percentage of the Outstanding Amount, the Clearing Agency shall
be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Noteholders and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Notes and has delivered such
instructions to the Indenture Trustee.
Section 2.10. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Noteholders pursuant to Section
2.11, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders of the Notes to the Clearing Agency,
and shall have no obligation to the Noteholders.
Section 2.11. Definitive Notes. If (i)(A) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities as described in the Note
Depository Agreement, and (B) Indenture Trustee or the Administrator is unable
to locate a qualified successor, (ii) the Administrator at its option advises
the Indenture Trustee in writing that it elects to terminate the book-entry
system through the Clearing Agency, or (iii) after the occurrence of an Event of
Default, the Noteholders representing not less than 66 2/3% of the Outstanding
Amount of such Class of Notes advises the Indenture Trustee and the Clearing
Agency through the Clearing Agency Participants in writing that the continuation
of a book-entry system through the Clearing Agency is no longer in the best
interests of the related Noteholders, then the Indenture Trustee shall notify
all Noteholders of the related Class of Notes, through the Clearing Agency, of
the occurrence of any such event and of the availability of Definitive Notes of
the related Class of Notes to Noteholders requesting the same. Upon surrender to
the Indenture Trustee of the Note or Notes representing the Book-Entry Notes by
the Clearing Agency, accompanied by registration instructions, the Issuer shall
execute and the Indenture Trustee shall authenticate the Definitive Notes in
accordance with the instructions of the Clearing Agency. None of the Issuer, the
Note Registrar or the Indenture Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes of a Class, the Indenture Trustee shall recognize the Noteholders of the
Definitive Notes as Noteholders hereunder.
The Indenture Trustee shall not be liable if the Indenture Trustee or the
Administrator is unable to locate a qualified successor Clearing Agency. The
Definitive Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
Section 2.12. Release of Collateral. Subject to Section 11.01 and the
terms of the Transaction Documents, the Indenture Trustee shall release property
from the lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officer's Certificate.
Section 2.13. Tax Treatment. The Issuer and the purchasers of the Notes
intend, and will take all actions consistent with the intention, that the Notes
be treated as indebtedness which is solely secured by the assets of the Trust
for all federal, state, local, and foreign income and franchise tax purposes and
that, pursuant to Treasury Regulations Section 301.7701-3(b)(1)(ii) as in effect
for periods after January 1, 1997, the Trust be disregarded as a separate entity
from the Trust Depositor for federal income tax purposes. The Issuer, by
entering into this Indenture, and each
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Noteholder, by its acceptance of its Note agree to treat the Notes for federal,
state and local income, single business and franchise tax purposes as
indebtedness.
ARTICLE THREE
COVENANTS
Section 3.01. Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
subject to Section 8.02(c), the Issuer will cause to be distributed all amounts
on deposit in the Note Distribution Account on a Distribution Date deposited
therein pursuant to the Sale and Servicing Agreement (i) for the benefit of the
Class A-1 Notes, to the Class A-1 Noteholders, (ii) for the benefit of the Class
A-2 Notes, to the Class A-2 Noteholders, (iii) for the benefit of the Class B
Notes, to the Class B Noteholders, (iv) for the benefit of the Class C Notes, to
the Class C Noteholders and (v) for the benefit of the Class D Notes, to the
Class D Noteholders. Amounts properly withheld under the Code by any Person from
a payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
Section 3.02. Maintenance of Office or Agency. The Issuer will maintain in
Wilmington, Delaware, an office or agency where Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. The Issuer will give prompt written notice to the Indenture
Trustee of the location, and 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 furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments to be Held in Trust. As provided in
Section 8.02, all payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Collection Account and the
Note Distribution Account pursuant to Section 8.02(b) shall be made on behalf of
the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts
so withdrawn from the Collection Account and the Note Distribution Account for
payments of Notes shall be paid over to the Issuer except as provided in this
Section.
On or before the Business Day immediately preceding each Distribution Date
and Redemption Date, the Issuer shall deposit or cause to be deposited in the
Note Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless the Paying Agent is the Indenture Trustee) shall
promptly notify the Indenture Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer (or any other obligor upon the Notes) in the making of any payment
required to be made with respect to the Notes;
(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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(iv) immediately resign as a Paying Agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of Notes
if at any time it ceases to meet the standards required to be met by a
Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, 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 the 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.
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be discharged from such trust and
upon receipt of an Issuer Request shall be deposited by the Indenture Trustee in
the Collection Account; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Issuer for payment thereof, and all
liability of the Indenture Trustee or such Paying Agent with respect to such
trust money shall thereupon cease; provided, however, that if such money or any
portion thereof had been previously deposited by the Issuer with the Indenture
Trustee for the payment of principal or interest on the Notes, and provided,
further, 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 of New
York, 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 or for the
account of the Issuer. 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
Holders whose Notes have been called but not have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
Paying Agent, at the last address of record for each such Holder).
Section 3.04. Existence. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States, in which
case the Issuer will keep in full effect its existence, rights and franchises
under the laws of such other jurisdiction) and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Collateral.
Section 3.05. Protection of Collateral. The Issuer intends the security
interest Granted pursuant to this Indenture in favor of the Indenture Trustee on
behalf of the Noteholders to be prior to all other liens in respect of the
Collateral, and the Issuer shall take all actions necessary to obtain and
maintain, for the benefit of the Indenture Trustee on behalf of the Noteholders,
a first lien on and a first priority, perfected security interest in the
Collateral. The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
all as prepared by the Servicer and delivered to the Issuer, and will take such
other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Collateral;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) created by this Indenture or carry out more effectively
the purposes hereof;
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(iii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Collateral and the rights of
the Indenture Trustee and the Noteholders in such Collateral against the
claims of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Collateral when due.
The Issuer hereby designates the Indenture Trustee its agent and attorney-in-
fact to execute all financing statements, continuation statements or other
instruments required to be executed pursuant to this Section.
Section 3.06. Opinions as to Collateral.
(a) Promptly after the execution and delivery of this Indenture, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel to the
effect that, in the opinion of such counsel, either (i) all financing statements
and continuation statements have been executed and filed that are necessary to
create and continue the Indenture Trustee's first priority perfected security
interest in the collateral for the benefit of the Noteholders, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) no such action shall be necessary to perfect such
security interest; and
(b) Within 90 days after beginning of each calendar year beginning with
the first calendar year beginning more than three months after the Initial
Cutoff Date, the Issuer shall furnish to the Indenture Trustee an Opinion of
Counsel, dated as of a date during such 90-day period, to the effect that, in
the opinion of such counsel, either (i) all financing statements and
continuation statements have been executed and filed that are necessary to
create and continue the Indenture Trustee's first priority perfected security
interest in the collateral (subject to the rights of the Insurer under the
Insurance Agreement) for the benefit of the Noteholders, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) no such action shall be necessary to perfect such
security interest.
Section 3.07. Performance of Obligations; Servicing of Contracts.
(a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any such Person's material covenants or obligations under any instrument or
agreement included in the Collateral or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in the Transaction Documents or such other instrument or
agreement.
(b) The Issuer may contract with other Persons to assist it in performing
its duties and obligations under this Indenture, and any performance of such
duties by a Person identified to the Indenture Trustee in an Officer's
Certificate shall be deemed to be action taken by the Issuer. The Indenture
Trustee shall not be responsible for the action or inaction of the Servicer or
the Administrator. Initially, the Issuer has contracted with the Servicer and
the Administrator to assist the Issuer in performing its duties under this
Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the other Transaction Documents and
in the instruments and agreements included in the Collateral, including but not
limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement in accordance with and within the time periods
provided for herein and therein. Except as otherwise expressly provided therein,
the Issuer shall not waive, amend, modify, supplement or terminate any
Transaction Document or any provision thereof without the consent of the
Indenture Trustee or the Holders of at least a majority of the Outstanding
Amount.
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(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default, the Issuer shall promptly notify the Indenture Trustee and each Rating
Agency thereof. Upon any termination of the Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee. As soon as a successor Servicer is appointed, the Issuer
shall notify the Indenture Trustee and the Rating Agencies of such appointment,
specifying in such notice the name and address of such successor Servicer.
(e) The Issuer agrees that it will not waive timely performance or
observance by the Servicer or the Sellers of their respective duties under the
Transaction Documents if the effect thereof would adversely affect the Holders
of the Notes.
Section 3.08. Negative Covenants. Until the Termination Date, the Issuer
shall not:
(i) except as expressly permitted by the Transaction Documents,
sell, transfer, exchange or otherwise dispose of any of the properties or
assets of the Issuer, including those included in the Collateral, unless
directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code or applicable state law) or
assert any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Collateral; or
(iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien created by this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person
to be released from any covenant; or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created on
or extend to or otherwise arise upon or burden the Collateral or any part
thereof or any interest therein or the proceeds thereof (other than
Permitted Liens), (C) permit the lien created by this Indenture not to
constitute a valid first priority (other than with respect to any such tax,
mechanics' or other lien) security interest in the Collateral, or (D)
amend, modify or fail to comply with the provisions of the Transaction
Documents without the prior written consent of the Indenture Trustee,
except where the Transaction Documents allow for amendment or modification
without the consent or approval of the Indenture Trustee; or
(iv) dissolve or liquidate in whole or in part.
Section 3.09. Issuer May Consolidate, etc. Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing under
the laws of the United States or any State and shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Indenture
Trustee, in form and substance satisfactory to the Indenture Trustee, the
due and punctual payment of the principal of and interest on all Notes and
the performance or observance of every agreement and covenant of this
Indenture and each other Transaction Document on the part of the Issuer to
be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
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(iv) the Issuer shall have received an Opinion of Counsel which
shall be delivered to and shall be satisfactory to the Indenture Trustee to
the effect that such transaction will not have any material adverse tax
consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (v) above or that no such actions will
be taken) each stating that such consolidation or merger and such
supplemental indenture comply with this Article Three and that all
conditions precedent herein provided for relating to such transaction have
been compiled with; and
(vii) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger has a net worth, immediately after such
consolidation or merger, that is (A) greater than zero and (B) not less
than the net worth of the Issuer immediately prior to giving effect to such
consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all of
its properties or assets, including those included in the Collateral, to any
Person (except as expressly permitted by the Transaction Documents), unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer shall (A) be a United States citizen or
a Person organized and existing under the laws of the United States or any
State, (B) expressly assume, by an indenture supplemental hereto, executed
and delivered to the Indenture Trustee, in form and substance satisfactory
to the Indenture Trustee, the due and punctual payment of the principal of
and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture and each other Transaction
Document on the part of the Issuer to be performed or observed, all as
provided herein, (C) expressly agree by means of such supplemental
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of Holders of the Notes and
(D) unless otherwise provided in such supplemental indenture, expressly
agree to indemnify, defend and hold harmless the Issuer against and from
any loss, liability or expense arising under or related to this Indenture
and the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which shall
be delivered to and shall be satisfactory to the Indenture Trustee to the
effect that such transaction will not have any material adverse tax
consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (v) above or that no such actions will
be taken) each stating that such conveyance or transfer and such
supplemental indenture comply with this Article Three and that all
conditions precedent herein provided for relating to such transaction have
been complied with (including any filings required by Exchange Act); and
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(vii) the Issuer has a net worth, immediately after such conveyance or
transfer, that is (A) greater than zero and (B) not less than the net worth
of the Issuer immediately prior to giving effect to such conveyance or
transfer.
Section 3.10. Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with same
effect as if such Person has been named as the Issuer herein.
(b) Upon a conveyance or transfer of all or substantially all the assets
or properties of the Issuer pursuant to Section 3.10(b), the Issuer will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery of written notice to the Indenture Trustee stating that the Issuer
is to be so released.
Section 3.11. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Indenture and the other Transaction
Documents and activities incidental thereto.
Section 3.12. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes and (ii) any other Indebtedness permitted
by or arising under the other Transaction Documents. The proceeds of the Notes
and the Certificates shall be used exclusively to fund the Issuer's purchase of
the Contracts and the other assets specified in the Sale and Servicing
Agreement, to fund the Reserve Fund and to pay the transactional expenses of the
Issuer.
Section 3.13. Notice of Events of Default. The Issuer agrees to give the
Indenture Trustee and each Rating Agency prompt written notice of each Event of
Default hereunder and a Servicer Default under the Sale and Servicing Agreement.
Section 3.14. Further Instruments and Acts. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
Section 3.15. Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
other Transaction Document.
Section 3.16. Amendments of Sale and Servicing Agreement and Trust
Agreement. The Issuer shall not agree to any amendment to Section 11.01 of the
Trust Agreement to eliminate the requirements thereunder that the Indenture
Trustee or the Holders of the Notes consent to amendments thereto as provided
therein.
Section 3.17. Removal of Administrator. So long as any Notes are issued
and outstanding, the Issuer shall not remove the Administrator without cause
unless the Rating Agency Condition shall have been satisfied in connection with
such removal.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections [3.01, 3.03, 3.04,
3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.15 and 3.16], (v) the rights, obligations
and immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.07 and the obligations of the Indenture
Trustee under Section 4.02) and (vi) the rights of Noteholders as beneficiaries
hereof with respect to the property so deposited with the Indenture Trustee
payable to all or any of them, and the Indenture Trustee, on demand of and at
the expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the Notes,
when
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 2.05 and (ii) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to
the Issuer or discharged from such trust, as provided in Section 3.03)
have been delivered to the Indenture Trustee for cancellation;
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the applicable
Maturity Date within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Indenture Trustee for the
giving of notice of redemption by the Indenture Trustee in the
name, and at the expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Indenture Trustee cash or direct obligations of or obligations
guaranteed by the United States (which will mature prior to the date
such amounts are payable), in trust in an Eligible Deposit Account
(which shall be the Collection Account or Note Distribution Account)
for such purpose, in an amount sufficient to pay and discharge the
entire indebtedness on such Note not theretofore delivered to the
Indenture Trustee for cancellation when due to the final scheduled
Distribution Date (if Notes shall have been called for redemption
pursuant to Section 10.01(a)), as the case may be;
(B) the Issuer has paid or performed or caused to be paid or performed
all amounts and obligations which the Issuer may owe to or on behalf of the
Indenture Trustee for the benefit of the Noteholders under this Indenture
or the Notes; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate and an Opinion of Counsel and (if required by the TIA or the
Indenture Trustee) an Independent Certificate from a firm of certified
public accountants, each meeting the applicable requirements of Section
11.01(a) and, subject to Section 11.02, stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with and the Rating Agency Condition has
been satisfied.
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Section 4.02. Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Section 4.01 shall be held in trust and applied by
it, 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 Holders of the particular Notes for the payment or
redemption of which such moneys have been deposited with the Indenture Trustee,
of all sums due and to become due thereon for principal and interest; but such
moneys need not be segregated from other funds except to the extent required
herein or in the Sale and Servicing Agreement or required by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
Section 4.04. Release of Collateral. Subject to Section 11.01 and the
terms of the Transaction Documents, the Indenture Trustee shall release property
from the lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officer's Certificate and an Opinion of Counsel and
Independent Certificates in accordance with TIA (S)(S)314(c) and 314(d)(1) or an
Opinion of Counsel in lieu of such Independent Certificates to the effect that
the TIA does not require any such Independent Certificates.
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ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) failure to pay on each Distribution Date the full amount of
accrued interest on any Note;
(b) failure to pay the then outstanding principal amount of any Note,
if any, on its related Maturity Date;
(c) (i) failure on the part of any Seller to make any payment or
deposit required under the Sale and Servicing Agreement or Transfer and
Sale Agreement within three Business Days after the date the payment or
deposit is required to be made, or (ii) failure on the part of any Seller,
the Trust Depositor, the Trust or the Owner Trustee to observe or perform
any other covenants or agreements of such entity set forth in the Transfer
and Sale Agreement, Sale and Servicing Agreement or the Indenture, which
failure has a material adverse effect on the Noteholders and which
continues unremedied for a period of 60 days after written notice;
provided, that no such 60-day cure period shall apply in the case of a
failure by the Sellers to perform their joint and several agreement to
repurchase or substitute for Ineligible Contracts, and further provided,
that only a five day cure period shall apply in the case of a failure by
any Seller, the Trustee or the Owner Trustee to observe their respective
covenants not to grant a security interest in or otherwise intentionally
create a lien on the Contracts;
(d) any representation or warranty made by any Seller, the Trust
Depositor, the Trustee or the Owner Trustee in the Sale and Servicing
Agreement or the Indenture or any information required to be given by any
Seller or the Trust Depositor to the Indenture Trustee to identify the
Contracts proves to have been incorrect in any material respect when made
and continues to be incorrect in any material respect for a period of 60
days after written notice and as a result of which the interests of the
Noteholders are materially and adversely affected; provided, however, that
an Event of Default shall not be deemed to occur thereunder if the Seller
has repurchased the related Contracts through the Trust Depositor during
such period in accordance with the provisions of the Sale and Servicing
Agreement and the Transfer and Sale Agreement;
(e) the occurrence of an Insolvency Event relating to any Seller, the
Trust Depositor, the Trust or the Servicer; or
(f) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
Section 5.02. Rights Upon Event of Default
If an Event of Default referred to in subparagraph (e) of Section 5.01has
occurred, then and in every such case the unpaid principal of the Notes,
together with interest accrued but unpaid thereon, and all other amounts due to
the Noteholders under the Indenture, shall immediately and without further act
become due and payable.
In the case of any event described in clause (a), (b), (c), (d), or (f)
above, an Event of Default with respect to the Notes will be deemed to have
occurred provided such Event of Default may be waived if the Required Holders
provide written notice to the Trust Depositor, Indenture Trustee and the
Servicer of such waiver. In the event the Indenture Trustee has actual
knowledge of an Event of Default, it shall give written notice thereof to the
Trust Depositor, each Seller, the Servicer, the Owner Trustee and the Rating
Agencies.
If an Insolvency Event relating to the Trust Depositor occurs, pursuant to
the Trust Agreement and the Sale and Servicing Agreement, on the day of such
Insolvency Event, the Trust Depositor shall promptly give notice to the
Indenture Trustee of the Insolvency Event, and the Indenture Trustee shall,
unless notified to the contrary by the Controlling Party, promptly act pursuant
to and in accordance with the terms thereof to sell, dispose of or otherwise
liquidate the Contracts in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from any such sale, disposition or liquidation
of Contracts will be deposited in the Collection Account and allocated as
described in the Sale and Servicing Agreement and herein.
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Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee; Authority of Indenture Trustee.
(a) The Issuer covenants that if the Notes are accelerated following the
occurrence of an Event of Default, the Issuer will, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of the Notes, the whole
amount then due and payable on such Notes for principal and interest, with
interest, with interest upon the overdue principal, and, to the extent payment
at such rate of interest shall be legally enforceable, upon overdue installments
of interest, at the applicable Interest Rate and in addition thereto such
further amount as shall be sufficient to cover costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee and its agents and counsel.
(b) The Indenture Trustee following the occurrence of an Event of Default,
shall have full right, power and authority to take, or defer from taking, any
and all acts with respect to the administration, maintenance or disposition of
the Collateral.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may in its discretion (except as provided in Section 5.03(d)), proceed to
protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective 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 or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this Indenture
if an Event of Default shall have occurred and be continuing, if the Issuer
fails to perform its obligations under Section 10.01(b) when and as due, the
Indenture Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Noteholders by such appropriate proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for specific performance 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 or legal or equitable right vested in the Indenture
Trustee by this Indenture or by law, provided that the Indenture Trustee shall
only be entitled to take any such actions to the extent such actions (i) are
taken only to enforce the Issuer's obligations to redeem the principal amount of
Notes, and (ii) are taken only against the Collateral any investments therein
and any proceeds thereof.
(e) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Collateral, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any 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 pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes 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
reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
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(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Trustee except as a result of negligence or bad faith.
(f) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
compensation affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(g) All rights of action and of asserting claims under this Indenture or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(h) In any Proceedings brought by the Indenture Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture),
the Indenture Trustee shall be held to represent all of the Holders of the
Notes, and it shall not be necessary to make any Noteholder a party to any such
proceedings.
Section 5.04. Remedies. If an Event of Default shall have occurred and
be continuing the Indenture Trustee (subject to Section 5.05) shall:
(i) institute Proceedings in its own name and as or on behalf of a
trustee of an express trust for the collection of all amounts then payable
on the Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect from
the Issuer and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC and any
other remedy available to the Indenture Trustee and take any other
appropriate action to protect and enforce the rights and remedies of the
Indenture Trustee on behalf of the Noteholders under this Indenture or the
Notes; and
(iv) direct the Owner Trustee to sell the Collateral or any portion
thereof or rights or interest therein, at one or more public or private
sales called and conducted in any manner permitted by law;
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provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Collateral following an Event of Default, other than an Event
of Default described in Section 5.01(i) or (ii), unless (A) the Holders of
100% of the Principal Amount of the Notes consent thereto, (B) the proceeds
of such sale or liquidation distributable to the Noteholders are sufficient
to discharge in full all amounts then due and unpaid upon such Notes for
principal and interest or (C) the Indenture Trustee determines that the
Collateral will not continue to provide sufficient funds for the payment of
principal of and interest on the Notes as they would have become due if the
Notes had not been declared due and payable, and the Indenture Trustee
provides prior written notice to each Rating Agency and obtains the consent
of the Required Holders. In determining such sufficiency or insufficiency
with respect to clauses (B) and (C), the Indenture Trustee may, but need
not, obtain and rely upon an opinion of an Independent investment banking
or accounting firm or national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Collateral for such
purpose; provided, however, upon the occurrence of an Event of Default
described in Section 5.01(e), caused solely from an event described in such
subparagraph occurring with respect to the Trust Depositor, the related
Contracts of the Trust will be liquidated by the Indenture Trustee and the
Trust will be terminated 90 days after the date of such Insolvency Event,
unless, before the end of such 90-day period, the related Trustee shall
have received written instructions from the Required Holders to the effect
that each such Required Holders disapprove of the liquidation of such
Contracts and termination of such Trust.
Section 5.05. Optional Preservation of the Contracts. Following an Event of
Default and if such Event of Default has not been rescinded and annulled, and
except as otherwise provided above, the Indenture Trustee may, but need not,
elect to maintain possession of the Collateral. It is the desire of the parties
hereto and the Noteholders that there be at all times sufficient funds for the
payment of principal and interest on the Notes, and the Indenture Trustee shall
take such desire into account when determining whether or not to maintain
possession of the Collateral. In determining whether to maintain possession of
the Collateral, the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Collateral for such purpose.
Section 5.06. Priorities.
(a) If the Indenture Trustee collects any money or property pursuant to
this Article Five, it shall pay out the money or property in the following order
and priority:
first, so much of such payment as shall be required to reimburse the
Indenture Trustee for any tax, expense, charge or other loss incurred by
the Indenture Trustee (to the extent not previously reimbursed),
(including, without limitation, the expense of sale, taking or other
proceeding, attorneys' fees and expenses, court costs, and any other
expenditures incurred or expenditures or advances made by the Indenture
Trustee in the protection, exercise or enforcement of any right, power or
remedy or any damages sustained by the Indenture Trustee, liquidated or
otherwise, upon the Event of Default giving rise to such expenditures or
advances) shall be applied by the Indenture Trustee in reimbursement of
such expenses;
second, so much of such payment remaining as shall be required to
reimburse the Noteholders in full for certain indemnity payments, if any,
made by such Noteholders to the Indenture Trustee (to the extent not
previously reimbursed) shall be distributed to the Noteholders, and, if the
aggregate amount remaining shall be insufficient to reimburse all such
payments in full, it shall be distributed ratably, without priority of any
Noteholder over any other, in the proportion that the aggregate amount of
such unreimbursed indemnity payments made by each such Noteholder bears to
the aggregate amount of such unreimbursed indemnity payments made by all
Noteholders;
third, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the date
of distribution on the Class A-1 Notes and the Class A-2 Notes shall be
distributed to the Class A-1 Noteholders and the Class A-2 Noteholders,
and, if the aggregate amount remaining shall be insufficient to pay all
such amounts in full, it shall be distributed ratably, without priority of
any one Class A-1 Note and one Class A-2 Note over any other Class A-1 Note
or over any other Class A-2 Note, in the proportion that the aggregate
amount of all accrued but unpaid interest to the date of distribution on
each Class A-1 Note or Class A-2 Note bears to the aggregate amount of all
accrued but unpaid interest to the date of distribution on all Class A-1
Notes and Class A-2 Notes;
fourth, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the date
of distribution on the Class B Notes shall be distributed to the Class B
Noteholders, and, if the aggregate amount remaining shall be insufficient
to pay all such amounts in full, it shall be distributed ratably, without
priority of any one Class B Note over any other Class B Note, in the
proportion that the aggregate amount of all accrued but unpaid interest to
the date of distribution on each Class B Note bears to the aggregate amount
of all accrued but unpaid interest to the date of distribution on all Class
B Notes;
fifth, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the date
of distribution on the Class C Notes shall be distributed to the Class C
Noteholders, and, if the aggregate amount remaining shall be insufficient
to pay all such amounts in full, it shall be distributed ratably, without
priority of any one Class C Note over any other Class C Note, in the
proportion that the aggregate amount of all accrued but unpaid interest to
the date of distribution on each Class C Note bears to the aggregate amount
of all accrued but unpaid interest to the date of distribution on all Class
C Notes;
sixth, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the date
of distribution on the Class D Notes shall be distributed to the Class D
Noteholders, and, if the aggregate amount remaining shall be insufficient
to pay all such amounts in full, it shall be distributed ratably, without
priority of any one Class D Note over any other Class D Note, in the
proportion that the aggregate amount of all accrued but unpaid interest to
the date of distribution on each Class D Note bears to the aggregate amount
of all accrued but unpaid interest to the date of distribution on all Class
D Notes;
seventh, the balance, if any, of such payment remaining thereafter
shall be distributed to the Class A-1 Noteholders and the Class A-2
Noteholders in order to pay in full the outstanding aggregate amount of
principal of the Class A-1 Notes and the Class A-2 Notes, and if the
aggregate amount remaining shall be insufficient to pay all such amounts in
full, it shall be distributed ratably, without priority of any one Class A-
1 Note and one Class A-2 Note over any other Class A-1 Note or over any
other Class A-2 Note, in the proportion that the aggregate unpaid principal
amount of each Class A-1 Note and Class A-2 Note bears to the aggregate
unpaid principal amount of all Class A-1 Notes and Class A-2 Notes;
eighth, the balance, if any, of such payment remaining thereafter
shall be distributed ratably to the Class B Noteholders to pay in full the
aggregate amount of principal of the Class B Notes, then due pursuant to or
in respect of the Class B Notes, and if the aggregate amount remaining
shall be insufficient to pay all such amounts in full, it shall be
distributed ratably, without priority of any one Class B Note over any
other Class B Note, in the proportion that the aggregate unpaid principal
amount of each Class B Note bears to the aggregate unpaid principal amount
of all Class B Notes;
ninth, the balance, if any, of such payment remaining thereafter shall
be distributed ratably to the Class C Noteholders to pay in full the
aggregate amount of principal of the Class C Notes, then due pursuant to or
in respect of the Class C Notes, and if the aggregate amount remaining
shall be insufficient to pay all such amounts in full, it shall be
distributed ratably, without priority of any one Class C Note over any
other Class C Note, in the proportion that the aggregate unpaid principal
amount of each Class C Note bears to the aggregate unpaid principal amount
of all Class C Notes; and
tenth, the balance, if any, of such payment remaining thereafter shall
be distributed ratably to the Class D Noteholders to pay in full the
aggregate amount of principal of the Class D Notes, then due pursuant to or
in respect of the Class D Notes, and if the aggregate amount remaining
shall be insufficient to pay all such amounts in full, it shall be
distributed ratably, without priority of any one Class D Note over any
other Class D Note, in the proportion that the aggregate unpaid principal
amount of each Class D Note bears to the aggregate unpaid principal amount
of all Class D Notes.
(b) The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date, the Issuer shall mail to each Noteholder and the Indenture Trustee
a notice that states the record date, the payment date and the amount to be
paid.
Section 5.07. Limitation of 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, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Indenture Trustee to institute
such Proceeding in respect of such Event of Default in its own name as
Indenture Trustee hereunder;
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(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of
a majority of the Outstanding Amount of the Notes, voting together as a
single class.
It is 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.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine that action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.08. Unconditional Rights of Noteholders to Receive Principal
and Interest. Notwithstanding any other provisions in the Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
Section 5.09. Restoration of Rights and Remedies. If the Indenture
Trustee or any Noteholders 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 or to such Noteholder, then and in every such case the Indenture Trustee
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 and the Noteholders
shall continue as through no such Proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee 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.
Section 5.11. Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default of Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
Section 5.12. Control by Noteholders. The Controlling Party of a majority
of the Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law or
with any other provision of this Indenture;
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(ii) subject to the terms of Section 5.04, any direction to the
Indenture Trustee to sell or liquidate the Collateral shall be by the
Holders of Notes representing not less than 100% of the Outstanding Amount
of the Notes;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Indenture Trustee elects to retain the Collateral pursuant to such
Section, then any direction to the Indenture Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to sell
or liquidate the Collateral shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially and adversely affect the
rights of any Noteholders not consenting to such action.
Section 5.13. Waiver of Past Defaults. In the case of any waiver of an
Event of Default, the Issuer, the Indenture Trustee and the Holders of the notes
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other Event of Default or
impair any right consequent thereto. Upon any such waiver, such Event of Default
shall cease to exist and be deemed to have been cured and not to have occurred,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereto.
Section 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's 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 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 shall not apply to (i) any suit instituted by the
Indenture Trustee, (ii) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (iii) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
Section 5.15. 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, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waivers
all benefit or advantages 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 5.16. 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 Collateral or upon any of
the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.06.
Section 5.17. Performance and Enforcement of Certain Obligations.
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(a) Promptly following a request from the Indenture Trustee to do so and
at the Administrator's expense, the Issuer shall take all such lawful action as
the Indenture Trustee may request to compel or secure the performance and
observance by the Trust Depositor and the Servicer as applicable, of each of
their obligations to the Issuer under or in connection with the Sale and
Servicing Agreement in accordance with the terms thereof, and to exercise any
and all rights, remedies, powers and privileges lawfully available to the Issuer
under or in connection with the Sale and Servicing Agreement to the extent and
in the manner directed by the Indenture Trustee, including the transmission of
notices of default on the part of the Trust Depositor or the Servicer thereunder
and the institution of legal of administrative actions or proceedings to compel
or secure performance by the Trust Depositor or the Servicer of each of their
obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing,
including facsimile) of the Required Holders shall exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Trust
Depositor or the Servicer under or in connection with the Sale and Servicing
Agreement, including the right or power to take any action to compel or secure
performance or observance by the Trust Depositor or the Servicer of each of
their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.
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ARTICLE SIX
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture and
in the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(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 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; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture and the other Transaction
Documents to which the Indenture Trustee is a party.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(i) this paragraph does not limit the effect of Section 6.01(b);
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.12.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur 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 to believe that repayments
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) The Indenture Trustee shall have no discretionary duties other than
performing those ministerial acts set forth above necessary to accomplish the
purpose of this Trust as set forth in this Indenture.
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(i) 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 and to the provisions of the TIA.
Section 6.02. Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Indenture
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate (with respect to factual matters) or an Opinion
of Counsel, as applicable. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the Officer's
Certificate or Opinion of Counsel.
(c) 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 or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute wilful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of Notes,
pursuant to the provisions of this Indenture, unless such Holders of Notes shall
have offered to the Indenture Trustee reasonable security or indemnity against
the costs, expenses and liabilities that may be incurred therein or thereby;
provided, however, that the Indenture Trustee shall, upon the occurrence of an
Event of Default (that has not been cured), exercise the rights and powers
vested in it by this Indenture in a manner consistent with Section 6.01.
(g) 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, consent, order, approval, bond or
other paper or document, unless so requested by the Holders of Notes evidencing
not less than 25% of the Outstanding Amount of the Notes; provided, however,
that if the payment within a reasonable time to the Indenture Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Indenture Trustee, not reasonably
assured to the Indenture Trustee by the security afforded to it by the terms of
this Indenture or the Sale and Servicing Agreement, the Indenture Trustee may
require reasonable indemnity against such cost, expense or liability as a
condition to so proceeding; the reasonable expense of every such examination
shall be paid by the Person making such request, or, if paid by the Indenture
Trustee, shall be reimbursed by the Person making such request upon demand.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee is required to comply with Section 6.11.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Collateral or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the
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Issuer in this Indenture or in any document issued in connection with the sale
of the Notes or in the Notes other than the Indenture Trustee's certificate of
authentication.
Section 6.05. Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to each Noteholder notice of the Default within 90
days after it occurs. Except in the case of a Default in payment of principal of
or interest on any Note (including payments pursuant to the redemption of such
Notes), the Indenture Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information, including without
limitation, IRS Form 1099, as may be required to enable such holder to prepare
its federal and state income tax returns.
Section 6.07. Compensation and Indemnity. The Issuer shall pay or shall
cause the Administrator to pay to the Indenture Trustee from time to time
reasonable compensation for its services. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall or shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall indemnify or shall cause the
Administrator to indemnify the Indenture Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. The Indenture Trustee shall notify the Issuer and the Administrator
promptly of any claim for which it may seek indemnity. Failure by the Indenture
Trustee to so notify the Issuer and the Administrator shall not relieve the
issuer or the Administrator of its obligations hereunder. The Issuer shall
defend or shall cause the Administrator to defend any such claim, and the
Indenture Trustee may have separate counsel and the Issuer shall pay or shall
cause the Administrator to pay the fees and expenses of such counsel. Neither
the Issuer nor the Administrator need reimburse any expense or indemnify against
any loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The issuer's payment obligations to the Indenture Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.01(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. The Indenture Trustee may
resign at any time by so notifying the Issuer and the Servicer. The Issuer may
remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Indenture Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar
law, shall have entered a decree or order granting relief or appointing a
receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator (or similar official) for the Indenture Trustee or for any
substantial part of the Indenture Trustee's property, or ordering the
winding-up or liquidation of the Indenture Trustee's affairs, provided any
such decree or order shall have continued unstayed and in effect for a
period of 30 consecutive days;
(iii) the Indenture Trustee commences a voluntary case under any
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator or other similar official for the Indenture
Trustee or for
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any substantial part of the Indenture Trustee's property, or makes any
assignment for the benefit of creditors or fails generally to pay its debts
as such debts become due or takes any corporate action in furtherance of
any of the foregoing; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The Issuer or the successor
Indenture Trustee shall mail a notice of its succession to Noteholders. The
retiring Indenture Trustee shall promptly transfer all property held by it as
Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the
Notes may petition any court of competent jurisdiction for the appointment of a
successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
Any resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to this Section and payment of all fees and expenses
owed to the outgoing Indenture Trustee. Notwithstanding the replacement of the
Indenture Trustee pursuant to this Section, the retiring Indenture Trustee shall
be entitled to payment or reimbursement of such amounts as such Person is
entitled pursuant to Section 6.07.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Insurer
and each Rating Agency prompt notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor Indenture Trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee.
(a) Notwithstanding any other provision of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Collateral may at the time be located, the Indenture Trustee and
the Administrator acting jointly shall have the power and may execute and
deliver all instruments to appoint one or more Persons to act as a co-Indenture
Trustee or co-Indenture Trustees, jointly with the Indenture Trustee, or
separate Indenture Trustee or separate Indenture Trustees, of all or any part of
the Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Collateral, or any part hereof,
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee and the Administrator
may consider necessary or desirable. If the Administrator shall not have joined
in such appointment within 15 days after the receipt by it of a request so to
do, the Indenture Trustee alone shall have the power to make such appointment.
No co-Indenture Trustee or separate Indenture Trustee hereunder shall be
required to meet the terms of
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eligibility of a successor Indenture Trustee under Section 6.11 and no notice to
Noteholders of the appointment of any co-Indenture Trustee or separate Indenture
Trustee shall be required under Section 6.08
(b) Every separate Indenture Trustee and co-Indenture Trustee shall, to
the extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture Trustee and such separate Indenture Trustee
or co-Indenture Trustee jointly (it being understood that such separate
Indenture Trustee or co-Indenture Trustee is not authorized to act
separately without the Indenture Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate Indenture Trustee or co-Indenture
Trustee, but solely at the direction of the Indenture Trustee;
(ii) no Indenture Trustee hereunder shall be personally liable by
reason of any act or omission of any other Indenture Trustee hereunder; and
(iii) the Indenture Trustee and the Administrator may at any
time accept the resignation of or remove any separate Indenture Trustee or
co-Indenture Trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate Indenture
Trustees and co-Indenture Trustees, as effectively as if given to each of them.
Every instrument appointing any separate Indenture Trustee or co-Indenture
Trustee shall refer to this Agreement and the conditions of this Article. Each
separate Indenture Trustee and co-Indenture Trustee, upon its acceptance of the
trusts conferred, shall be vested with the estates or property specified in its
instrument of co-appointment, either jointly with the Indenture Trustee or
separately, as may be provided therein, subject to all the provisions of this
Indenture, specifically including every provision of this Indenture relating to
the conduct of, affecting the liability of or affording protection to, the
Indenture Trustee. Every such instrument shall be filed with the Indenture
Trustee and a copy thereof given to the Administrator.
(d) Any separate Indenture Trustee or co-Indenture Trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact with full power
and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its name. If any separate
Indenture Trustee or co-Indenture Trustee shall die, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Indenture Trustee, to the extent
permitted by law, without the appointment of a new or successor Indenture
Trustee. Notwithstanding anything to the contrary in this Indenture, the
appointment of any separate Indenture Trustee or co-Indenture Trustee shall not
relieve the Indenture Trustee of its obligations and duties under this
Indenture.
Section 6.11. Eligibility. The Indenture Trustee shall at all times
satisfy the requirements of TIA (S)310(a). The Indenture Trustee hereunder shall
at all times be a financial institution organized and doing business under the
laws of the United States of America or any state, authorized under such laws to
exercise corporate trust powers, whose long term unsecured debt is rated at
least Baa3 by Moody's and shall have a combined capital and surplus of at least
$50,000,000 or shall be a member of a bank holding system the aggregate combined
capital and surplus of which is $50,000,000 and subject to supervision or
examination by federal or state authority, provided that the Trustee's separate
capital and surplus shall at all times be at least the amount required by
Section 310(a)(2) of the TIA. If such Person publishes reports of condition at
least annually, pursuant to law or to the requirements of a supervising or
examining authority, then for the purposes of this Section 6.ll, the combined
capital and surplus of such Person shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 6.ll, the Trustee shall resign immediately in the
manner and with the effect specified in Section 6.08. The Indenture Trustee
shall comply with TIA
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(S)310(b); provided, however, that there shall be excluded from the operation of
TIA (S)310(b)(1) any indenture or indentures under which other securities of the
Issuer are outstanding if the requirements for such exclusion set forth in TIA
(S)310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA (S)311(a), excluding any creditor
relationship listed in TIA (S)311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA (S)311(a) to the extent indicated.
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ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (i) not more than five days after the earlier of (a) each Record Date
and (b) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Noteholders as of such Record Date and (ii) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
ten days prior to the time such list is furnished; provided, however, that so
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished.
Section 7.02. Preservation of Information: Communication to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Noteholders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.01 and the names and addresses of Noteholders received by the Indenture
Trustee in its capacity as Note Registrar and shall otherwise comply with TIA
(S)312(a). The Indenture Trustee may destroy any list furnished to it as
provided in such Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA (S) 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer is
required (if at all) to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) that the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the Commission such
additional information, documents and reports with respect to compliance by the
Issuer with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations;
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA (S)313(c)) such summaries
of any information, documents and reports required to be filed by the issuer
pursuant to clauses (i) and (ii) of this Section 7.03(a) and by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA (S)313(a),
within 60 days after January 31 beginning with January 31, 1998, the Indenture
Trustee shall mail to each Noteholder as required by TIA (S)313(c) a brief
report dated as of such date that complies with TIA (S)313(a). The Indenture
Trustee also shall comply with TIA (S)313(b).
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A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
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ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. 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 this Indenture and the Sale and
Servicing Agreement. The Indenture Trustee shall apply all such money received
by it as provided in this Indenture. Except as otherwise expressly provided in
this Indenture, if any default occurs in the making of any payment or
performance under any agreement or instrument that is part of the Collateral,
the Indenture Trustee may 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 Indenture and any right to proceed
thereafter as provided in Article Five.
Section 8.02. Trust Accounts.
(a) On or prior to the Closing Date, the Issuer shall cause the Servicer
to establish and maintain, in the name of the Indenture Trustee, for the benefit
of the Noteholders and the Certificateholders, the Trust Accounts as provided in
Section 7.01 of the Sale and Servicing Agreement.
(b) On or before each Distribution Date, all amounts required to be
deposited in the Note Distribution Account with respect to the preceding Due
Period pursuant to Section 7.01 of the Sale and Servicing Agreement will be
transferred from the Collection Account and/or the Reserve Fund to the Note
Distribution Account.
(c) On each Distribution Date, the Indenture Trustee shall distribute all
amounts on deposit in the Note Distribution Account to Noteholders in respect of
the Notes to the extent of amounts due and unpaid on the Notes for principal and
interest as follows and in the following order of priority:
first, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect of
the Class A-1 Notes shall be distributed to the Class A-1 Noteholders
ratably, without priority of any one Class A-1 Note over any other Class
A-1 Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class A-1 Note bears to
the aggregate amount of all accrued but unpaid interest to the date of
distribution on all Class A-1 Notes;
second, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect of
the Class A-2 Notes shall be distributed to the Class A-2 Noteholders
ratably, without priority of any one Class A-2 Note over any other Class
A-2 Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class A-2 Note bears to
the aggregate amount of all accrued but unpaid interest to the date of
distribution on all Class A-2 Notes;
third, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect of
the Class B Notes shall be distributed to the Class B Noteholders ratably,
without priority of any one Class B Note over any other Class B Note, in
the proportion that the aggregate amount of all accrued but unpaid interest
to the date of distribution on each Class B Note bears to the aggregate
amount of all accrued but unpaid interest to the date of distribution on
all Class B Notes;
fourth, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect of
the Class C Notes shall be distributed to the Class C Noteholders ratably,
without priority of any one Class C Note over any other Class C Note, in
the proportion that the aggregate amount of all accrued but unpaid interest
to the date of distribution on each Class C Note bears to the aggregate
amount of all accrued but unpaid interest to the date of distribution on
all Class C Notes;
fifth, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect of
the Class D Notes shall be distributed to the Class D Noteholders ratably,
without priority of any one Class D Note over any other Class D Note, in
the proportion that the aggregate amount of all accrued but unpaid interest
to the date of distribution on each Class D Note bears to the aggregate
amount of all accrued but unpaid interest to the date of distribution on
all Class D Notes;
sixth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class A-1 Noteholders to pay
in full the aggregate amount of the Class A-1 Principal Payment then due
pursuant to or in respect of the Class A-1 Notes, without priority of any
one Class A-1 Note over any other Class A-1 Note, in the proportion that
the aggregate unpaid principal amount of each Class A-1 Note bears to the
aggregate unpaid principal amount of all Class A-1 Notes;
seventh, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class A-2 Noteholders to pay
in full the aggregate amount of the Class A-2 Principal Payment then due
pursuant to or in respect of the Class A-2 Notes, without priority of any
one Class A-2 Note over any other Class A-2 Note, in the proportion that
the aggregate unpaid principal amount of each Class A-2 Note bears to the
aggregate unpaid principal amount of all Class A-2 Notes;
eighth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class B Noteholders to pay
in full the aggregate amount of the Class B Principal Payment then due
pursuant to or in respect of the Class B Notes, without priority of any one
Class B Note over any other Class B Note, in the proportion that the
aggregate unpaid principal amount of each Class B Note bears to the
aggregate unpaid principal amount of all Class B Notes;
ninth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class C Noteholders to pay
in full the aggregate amount of the Class C Principal Payment then due
pursuant to or in respect of the Class C Notes, without priority of any one
Class C Note over any other Class C Note, in the proportion that the
aggregate unpaid principal amount of each Class C Note bears to the
aggregate unpaid principal amount of all Class C Notes; and
tenth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class D Noteholders to pay
in full the aggregate amount of the Class D Principal Payment then due
pursuant to or in respect of the Class D Notes, without priority of any one
Class D Note over any other Class D Note, in the proportion that the
aggregate unpaid principal amount of each Class D Note bears to the
aggregate unpaid principal amount of all Class D Notes.
Section 8.03. General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Trust Accounts shall be
invested in accordance with the provisions of Section 7.03 of the Sale and
Servicing Agreement. Except as otherwise provided in Section 7.03 of the Sale
and Servicing Agreement, all income or other gain from investments of moneys
deposited in such Trust Accounts shall be deposited by the Indenture Trustee in
the Collection Account, and any loss resulting from such investments shall be
charged to the related Trust Account. The Issuer will not direct the Indenture
Trustee to make any investment of any funds or to sell any investment held in
any of the Trust Accounts unless the security interest granted and perfected in
such account will continue to be perfected in such investment or the proceeds of
such sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the
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Indenture Trustee, in its commercial capacity as principal obligor and not as
Indenture Trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions for
any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00
a.m., New York City time (or such other time as may be agreed by the Issuer and
Indenture Trustee), on any Business Day or (ii) a Default or Event of Default
shall have occurred and be continuing with respect to the Notes but the Notes
shall not have been declared due and payable pursuant to Section 5.02 or (iii)
if such Notes shall have been declared due and payable following an Event of
Default, but amounts collected or receivable from the Collateral are being
applied in accordance with Section 5.05 as if there had not been such a
declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Qualified Eligible Investments.
Section 8.04. Release of Collateral.
(a) Subject to the payment of its fees and expenses pursuant to Section
6.07, the Indenture Trustee may, and when required by the provisions of this
Indenture or the Sale and Servicing Agreement 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 that 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 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
moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Collateral that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA as so stated in the Opinion of Counsel) Independent Certificates in
accordance with TIA (S)(S)314(c) and 314(d)(1) meeting the applicable
requirements of Section 11.01.
Section 8.05. Opinion of Counsel. The Indenture Trustee shall receive at
least seven days notice when requested by the Issuer to take any action pursuant
to Section 8.04(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require, as a condition to such action, an Opinion
of Counsel, in form and substance satisfactory to the Indenture Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions for this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Collateral. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
Without the consent of the Holders of any Notes and with prior notice to
each Rating Agency, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, and the other parties hereto at any time from time to time, may
enter into one or more indentures supplemental hereto (which shall conform to
the provisions of the TIA as in force at the date of the execution thereof), in
form satisfactory to the Indenture Trustee, for any of the following
purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien created by this Indenture, or to subject to the lien
created by this Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or the Transaction
Documents or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
provided that such action shall not adversely affect the interests of the
Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor Indenture Trustee with respect to the Notes and to
add to or change any of the provisions of this Indenture as shall be
necessary to facilitate the administration of the trusts hereunder by more
than one Indenture Trustee, pursuant to the requirements of Article Six;
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA; and
(viii) to elect into the FASIT provisions of the Code, provided an
Opinion of Counsel to the effect that such election will not adversely affect
the Noteholders, is delivered to the Issuer and Indenture Trustee.
The Indenture Trustee is hereby authorized to join in the exemption of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
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Section 9.02. Supplemental Indentures With Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to each Rating Agency, and with the consent of the Required
Holders, by Act of such Holders delivered to the Issuer and the Indenture
Trustee, 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, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however,
that, no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Redemption Date Amount with respect thereto, change the
provisions of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Collateral to payment of principal of
or interest on the Notes, 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 the provisions of
this Indenture requiring the application of funds available therefor, as
provided in Article Five, to the payment of any such amount due on the
Notes on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the 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 this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the second proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to sell or liquidate the
Collateral pursuant to Section 5.04 or amend the provisions of this Article
which specify the percentage of the Outstanding Amount of the Notes
required to amend this Indenture or the other Transaction Documents;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the other Transaction Documents cannot be
modified or waived without the consent of the Holder of each Outstanding
Note affected thereby; or
(vi) permit the creation of any lien ranking prior to or on a parity
with the lien created by this Indenture with respect to any part of the
Collateral or, except as otherwise permitted or contemplated herein,
terminate the lien created by this Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security provided
by the lien created by this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of the Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
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.
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Promptly after the execution by the parties hereto of any supplemental
indenture pursuant to this Section, the Indenture Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Indenture Trustee shall be entitled to receive, and subject
to Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
parties hereto and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
Section 9.05. Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act as then in
effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.06. 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 or the Indenture
Trustee 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. If
the Issuer or the Indenture Trustee 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.
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ARTICLE TEN
REDEMPTION OF NOTES
Section 10.01. Redemption.
(a) In the event that the Seller pursuant to Section 7.08 of the Sale and
Servicing Agreement purchases the corpus of the Trust, the Notes are subject to
redemption in whole, but not in part, on the Distribution Date on which such
repurchase occurs, for a purchase price equal to the outstanding principal, and
accrued interest on the Notes; provided, however, that the Issuer has available
funds sufficient to pay such amounts. Seller, the Servicer or the Issuer shall
furnish each Rating Agency notice of such redemption. If the Notes are to be
redeemed pursuant to this Section 10.01(a), the Servicer or the Issuer shall
furnish notice of such election to the Indenture Trustee not later than 20 days
prior to the Redemption Date and the Issuer shall deposit with the Indenture
Trustee in the Note Distribution Account the Redemption Price of the Notes to be
redeemed whereupon all such Notes shall be due and payable on the Redemption
Date upon the furnishing of a notice complying with Section 10.02 to each Holder
of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to Section
9.02 of the Trust Agreement or Section 5.02(b) of this Indenture, the proceeds
of such sale shall be distributed as provided in Section 5.06. If amounts are to
be paid to Noteholders pursuant to this Section 10.01(b), the Servicer or the
Issuer shall, to the extent practicable, furnish notice of such event to the
Indenture Trustee not later than 20 days prior to the Redemption Date whereupon
all such amounts shall be payable on the Redemption Date.
Section 10.02. Form of Redemption Notice. Notice of redemption under
section 10.01(a) shall be given by the Indenture Trustee by first-class mail,
postage prepaid, mailed not less than five days prior to the applicable
Redemption Date to each Holder of Notes, as of the close of business on the
Record Date preceding the applicable Redemption Date, at such Holder's address
appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Date Amount; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Date Amount (which shall be the office or agency of the
Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee
in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
Section 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption (if any) as
required by Section 10.02, on the Redemption Date become due and payable at the
Redemption Date Amount and (unless the Issuer shall default in the payment of
the Redemption Date Amount) no interest shall accrue on the Redemption Date
Amount for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Date Amount.
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ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Indenture Trustee
to take any action under any provision of this Indenture, the Issuer shall
furnish to the Indenture Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, and (iii) (if required by the TIA as so stated in the Opinion of
Counsel) an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this section and TIA (S)314(c), except
that, in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture,
no additional certificate or opinion need be furnished. No additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the definitions
herein relating thereto;
(ii) 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;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to enable
such signatory to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for
authentication and delivery of the Notes or the release of any property subject
to the lien created by this Indenture, the Issuer shall, in addition to any
obligation imposed in Section 11.01(a) or elsewhere in this Indenture, furnish
to the Indenture Trustee an Officer's Certificate certifying or stating the
opinion of the signer thereof such certificate as to the fair value (within 90
days of such deposit) to the Issuer of the Collateral or other property or
securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (i) above, the Issuer shall also
deliver to the Indenture Trustee an Independent Certificate as to the named
matters, if the fair value to the Issuer of the property to be so deposited and
of all other such property made the basis of any such withdrawal or release
since the commencement of the then-current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and this clause
(ii), is 10% or more of the Outstanding Amount of the Notes, but such a
certificate need not be furnished with respect to any property so deposited, if
the fair value thereof to the Issuer as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the Outstanding
Amount of the Notes.
(iii) Other than with respect to any release described in clause (A)
or (B) of Section 11.01(b)(v), whenever any property or securities are to be
released from the lien created by this Indenture, the Issuer shall also furnish
to the Indenture Trustee an Officer's Certificate certifying or stating the
opinion of each person signing such certificate as to the fair value (within 90
days of such release) of the property or securities proposed to be released and
stating that
41
<PAGE>
in the opinion of such person the proposed release will not impair the security
created by this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (iii) above, the Issuer shall also
furnish to the Indenture Trustee an Independent Certificate as to the same
matters if the fair value of the property or securities and of all other
property or securities (other than property described in clauses (A) or (B) of
Section 11.01(b)(v)) released from the lien created by this Indenture since the
commencement of the then current fiscal year, as set forth in the certificates
required by clause (iii) above and this clause (iv), equals 10% or more of the
Outstanding Amount of the Notes, but such certificate need not be furnished in
the case of any release of property or securities if the fair value thereof as
set forth in the related Officer's Certificate is less than $25,000 or less than
one percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the Issuer
may, without compliance with the other provisions of this Section, (A) collect,
liquidate, sell or otherwise dispose of the Contracts as and to the extent
permitted or required by the Transaction Documents, (B) make cash payments out
of the Trust Accounts as and to the extent permitted or required by the
Transaction Documents, so long as the Issuer shall deliver to the Indenture
Trustee every six months, commencing December 15, 1997, an Officer's Certificate
stating that all the dispositions of Collateral described in clauses (A) or (B)
that occurred during the preceding six calendar months were in the ordinary
course of the Issuer's business and that the proceeds thereof were applied in
accordance with the Transaction Documents.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Person as to other matters, and any such Person may certify or given an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Servicer, the
Seller or the Issuer, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller or the Issuer, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article Six.
Section 11.03. Acts of Noteholders.
(b) 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
42
<PAGE>
substantially similar tenor signed by such Noteholders in person or by agents
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 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section.
(c) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(d) The ownership of Notes shall be proved by the Note Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration 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 11.04. Notices. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows at the address
specified in the Sale and Servicing Agreement for such recipient.
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
Section 11.05. 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 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 where 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 that 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 a 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 of 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.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
43
<PAGE>
Section 11.06. Alternate Payment and Notice Provisions. Notwithstanding
any provisions of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
Section 11.07. 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 11.08. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-Indenture Trustees and agents.
Section 11.09. 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 11.10. Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 11.11. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment 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 date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.12. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF [DELAWARE] AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 11.13. Counterparts. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 11.14. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee and the Insurer) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
Section 11.15. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficiary interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder,
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<PAGE>
the Owner Trustee shall be subject to, and entitled to the benefits of, the
terms and provisions of Article Six, Seven and Eight of the Trust Agreement.
Section 11.16. No Petition. The parties hereto, by entering into this
Indenture, and each Noteholder, by accepting a Note or a beneficial interest in
a Note, hereby covenant and agree that they will not at any time institute
against the Seller, the Issuer or any General Partner, or join in any
institution against the Sellers, the Issuer or any General Partner thereof, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the other Transaction Documents.
Section 11.17. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested, the Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
Section 11.18. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA (S)(S)310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and delivered as of the day and year first above written.
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
By: [ ], not in its
individual capacity but solely on behalf
of the Issuer as Owner Trustee under the
Trust Agreement
By:
-------------------------------------
Printed Name:
---------------------
Title:
----------------------------
[_________], , not in its individual
capacity but solely as Indenture Trustee
By:
-----------------------------------------
Printed Name:
--------------
Title: Vice President
46
<PAGE>
STATE OF ________ )
) ss
COUNTY OF ____ )
On_______________before me,______________________________________________,
[insert date] [Here insert name and title of notary]
personally appeared __________________________________________________________,
[_] personally known to me, or
[_] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature__________________________ [Seal]
47
<PAGE>
STATE OF ________ )
) ss
COUNTY OF ____ )
On_______________before me,______________________________________________,
[insert date] [Here insert name and title of notary]
personally appeared __________________________________________________________,
[_] personally known to me, or
[_] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature______________________ [Seal]
48
<PAGE>
EXHIBIT A
FORM OF SALE AND SERVICING AGREEMENT
A-1
<PAGE>
EXHIBIT B
FORM OF CLASS A-1 NOTE
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY
THE UNITED STATES OR ANY AGENCY OF FUND OF THE UNITED STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
___% EQUIPMENT RECEIVABLE BACKED NOTES, CLASS A-1
REGISTERED $ ______________________________
No. R-
Heller Equipment Asset Receivables Trust 1997-1, a business trust organized
and existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to [________], or
registered assigns, the principal sum of ___________ ($_____) payable on the
earlier of _______, 199__ (the "Class A-1 Maturity Date") and the Redemption
Date, if any, pursuant to Sections 10.01 of the Indenture referred to on the
reverse hereof.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in Section 3.01 of the Indenture. Interest on this Note will accrue
for each Distribution Date from the most recent Distribution Date on which
interest has been paid to but excluding such Distribution Date or, if no
interest has yet been paid, from the Closing Date. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid the manner specified on the reverse hereof.
The principal of and interest on this Note are payable 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. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
B-1
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as of the date set forth
below.
Date: August ___, 1997 HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
By: [________________________], not in its
individual capacity but solely on behalf
of the Issuer as Owner Trustee, under the
Trust Agreement
By:
-------------------------------------
Printed Name:
------------------------
Title:
-------------------------------
B-2
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
[_______________________]
not in its individual capacity but solely as
Indenture Trustee
By:
------------------------------------------
Authorized Signatory
B-3
<PAGE>
[REVERSE OF CLASS A-1 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its ___% Equipment Receivable Backed Notes, Class A-1 (the "Class
A-1 Notes"), all issued under an Indenture, dated as of August [__], 1997 (the
"Indenture"), among the Issuer and [_____], as Indenture Trustee (the "Indenture
Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Class A-1 Notes are subject to all terms of the Indenture. All terms used
in this Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.
The Class A-1 Notes and the other Notes described in the Indenture
(collectively, the "Notes") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture subject to
the subordination of certain Classes of Notes under certain circumstances as
described in the Indenture and the Sale and Servicing Agreement.
Principal of the Class A-1 Notes will be payable on the earlier of the
Class A-1 Maturity Date and the Redemption Date, if any, selected pursuant to
the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Class A-1 Notes shall be due and payable on the date on which an
Event of Default shall have occurred and be continuing and the Indenture Trustee
or the Holders of the Notes representing not less than 66 - 2/3% of the
Outstanding Amount of the Notes, voting together as a single class, have
declared the Notes to be immediately due and payable in the manner provided in
the Indenture. All principal payments on the Class A-1 Notes shall be made pro
rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution Date
shall be made by wire transfer to the account to the Person whose name appears
as the Registered Holder of this Note (or one or more Predecessor Notes) on the
Note Register as of the close of business on each Record Date, payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) affected by any payments made on any Distribution
Date shall be binding upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed within five days of such Distribution Date
and the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Corporate Trust Office of the Indenture Trustee or
at the office of the Indenture Trustee's agent appointed for such purposes
located in the City of Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture Trustee may require, and thereupon one or more new program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new Notes of authorized denominations and in the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be charged for any
B-4
<PAGE>
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that by accepting the benefits of the Indenture and such
Note that such Noteholder will not at any time institute against the Seller or
the Issuer, or join in any institution against the Trust Depositor or the Issuer
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness which is solely
secured by the Collateral and that the Trust will be disregarded as a separate
entity for federal income tax purposes pursuant to Treasury Regulations Section
301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note (and each
Noteholder by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for the federal, state and local income, single business and franchise
tax purposes as indebtedness.
Prior to the due presentment for registration of transfer of this Note, the
Issuer and the Indenture Trustee and any agent of the Issuer and the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all 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 Noteholders under the Indenture at any time by the
Issuer and the Noteholders representing 66 2/3% of the Outstanding Amount of the
Notes. The Indenture also contains provisions permitting the Noteholders
representing specified percentages of the Outstanding Amount of the Notes, on
behalf of the Noteholders, 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 Noteholder (or any one
of more Predecessor Notes) shall be conclusive and binding upon such Holders and
upon all future Noteholders and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits
the Indenture Trustee to amend or waive certain terms and conditions set forth
in the Indenture without the consent of Noteholders issued thereunder.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of Illinois, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws.
A-5
<PAGE>
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 this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
A-6
<PAGE>
EXHIBIT C
FORM OF CLASS A-2 NOTE
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY
THE UNITED STATES OR ANY AGENCY OF FUND OF THE UNITED STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
___% RECEIVABLE BACKED NOTES, CLASS A-2
REGISTERED $____________
No. R-
Heller Equipment Asset Receivables Trust 1997-1, a business trust organized
and existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to [___________], or
registered assigns, the principal sum of ___________ ($__________) payable on
the earlier of _______, ____ (the "Class A-2 Maturity Date") and the Redemption
Date, if any, pursuant to Section 10.01 of the Indenture referred to on the
reverse hereof. No payments of principal of the Class A-2 Notes shall be made
until the principal on the Class A-1 Notes have been paid in full.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in the Indenture. Interest on this Note will accrue for each
Distribution Date from the most recent Distribution Date on which interest has
been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from the Closing Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable 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. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
C-1
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: August ___, 1997 HELLER EQUIPMENT ASSET RECEIVABLES
TRUST 1997-1
By: [________________________], not in
its individual capacity but solely on
behalf of the Issuer as Owner
Trustee, under the Trust Agreement
By: _________________________________
Printed Name: ___________________
Title: __________________________
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
[________________]
not in its individual capacity but
solely as Indenture Trustee
By: _________________________________
Authorized Signatory
C-2
<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its ___% Equipment Receivable Backed Notes, Class A-2 (the "Class
A-2 Notes"), all issued under an Indenture, dated as of August [__], 1997 (the
"Indenture"), among the Issuer and [________], as Indenture Trustee (the
"Indenture Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture. All terms used
in this Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.
The Class A-2 Notes and the other Classes of Notes described in the
Indenture (collectively, the "Notes") are and will be equally and ratably
secured by the Collateral pledged as security therefor as provided in the
Indenture subject to _________.
Principal of the Class A-2 Notes will be payable on the earlier of the
Class A-2 Maturity Date and the Redemption Date, if any, pursuant to Section
10.01 of the Indenture. Notwithstanding the foregoing, the entire unpaid
principal amount of the Class A-2 Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing unless the
Holders of the Notes representing not less than 66 2/3 of the Outstanding Amount
of the Notes, voting together as a single class, waive such Event of Default.
All principal payments on the Class A-2 Notes shall be made pro rata to the
Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution Date
shall be made by check mailed to the Person whose name appears as the Registered
Holder of this Note (or one or more Predecessor Notes) on the Note Register as
of the close of business on each Record Date, except that with respect to Notes
registered on the Record Date in the name of nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), payments will be made by wire
transfer in immediately available funds to the account designated by such
nominee. Such checks shall be mailed to the Person entitled thereto at the
address of such Person as it appears on the Note Register as of the applicable
Record Date without requiring that this Note be submitted for notation of
payment. Any reduction in the principal amount of this Note (or any one or more
Predecessor Notes) affected by any payments made on any Distribution Date shall
be binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
within five days of such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Indenture Trustee's principal Corporate Trust Office or at the office of the
Indenture Trustee's agent appointed for such purposes located in the City of
Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.01 of the Indenture, in whole, but not in part, at the option of the Sellers,
on any Distribution Date on or after the date on which the ADCB of all Contracts
then in the Contracts Pool is less than 10% of the initial ADCB of Contracts in
the Contracts Pool as of the Initial Cutoff Date.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture Trustee may require, and thereupon one or more new program, and
such other documents as the Indenture
C-3
<PAGE>
Trustee may require, and thereupon one or more new Class A-2 Notes of authorized
denomination and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in their individual capacities, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in their
individual capacities, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in their individual capacities, except as
any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that by accepting the benefits of the Indenture and such
Note that such Noteholder will not at any time institute against the Seller or
the Issuer, or join in any institution against the Trust Depositor or the Issuer
of any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness which is solely
secured by the Collateral and that the Trust will be disregarded as a separate
entity for federal income tax purposes pursuant to Treasury Regulations Section
301.7701-3 (b)(1)(ii). Each Noteholder, by acceptance of a Note or of a
beneficial interest in a Note, agrees to treat the Notes for the federal, state
and local income, single business and franchise tax purposes as indebtedness.
Prior to the due presentment for registration of transfer of this Note, the
Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all 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 with the consent of the of Holders of Notes representing 66
2/3% of the Outstanding Amount of all of the Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the 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 (or
any one of more Predecessor Notes) shall be conclusive and binding upon such
Holders and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
C-4
<PAGE>
This Note and the Indenture shall be construed in accordance with the laws
of the State of Illinois, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws.
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 this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-5
<PAGE>
EXHIBIT D
FORM OF CLASS B NOTE
D-1
<PAGE>
EXHIBIT E
FORM OF CLASS C NOTE
E-1
<PAGE>
EXHIBIT F
FORM OF CLASS D NOTE
F-1
<PAGE>
EXHIBIT G
FORM OF NOTE ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Note, and all rights thereunder, hereby irrevocably constituting and
appointing
- --------------------------------------------------------------------------------
to transfer said Note on the books kept for registration thereof, with full
power of substitution in the premises.
Dated:
---------------
Signature Guaranteed:
- ----------------------------------- ----------------------------------
Signature must be guaranteed by an Notice: The signature(s) on this
eligible guarantor institution which assignment must correspond with the
is a participant in the Securities name(s) as it appears on the face of
Transfer Agent's Medallion Program the within Note in every particular,
(STAMP) or similar signature without alteration or enlargement or
guarantee program. any change whatsoever.
- --------------------------------------
(Authorized Officer)
G-1
<PAGE>
EXHIBIT H
FORM OF NOTE DEPOSITORY AGREEMENT
H-1
<PAGE>
Exhibit 5.1
August __, 1997
Heller Funding Corporation
c/o Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinios 60661
Re: Class A-1, Class A-2, Class B and Class C Receivable-Backed Notes
Ladies and Gentlemen:
We have acted as special counsel to the Heller Equipment Assets
Receivables Trust 1997-1 (the "Trust") in connection with the filing by Heller
Funding Corporation (the "Company"), as trust depositor of the Trust, of the
registration statement on Form S-1 (File No. 333-30207) (such registration
statement, together with the exhibits and any amendments thereto, the
"Registration Statement"), registering $___ million aggregate principal amount
of receivable-backed notes (the "Notes"). The Registration Statement has been
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Securities Act"). As described in the Registration
Statement, the Notes will be issued under and pursuant to the terms of a Sale
and Servicing Agreement, Trust Agreement and Indenture (collectively, the
"Agreements" and each, individually, an "Agreement"). Capitalized terms used but
not defined herein have the meanings given to them in the Registration
Statement.
This opinion is being delivered to you pursuant to the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act.
We are familiar with the proceedings to date with respect to the
proposed issuance and delivery of the Notes and have examined copies of the
Certificate of Incorporation and By-Laws of the Company, the Registration
Statement and the Prospectus included therein, the form of each Agreement and
such other documents, records and questions of law, and satisfied ourselves as
to such matters of fact, as we have considered relevant and necessary as a basis
for this opinion.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents that will be executed in connection with the issuance
of the Notes, we have assumed that the parties to such documents will have at
the time of execution of such documents, the power, corporate or other, to enter
into and perform all obligations thereunder and have also assumed the
<PAGE>
August __, 1997
Page 2
due authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents and the validity and binding effect
of such documents. As to any facts material to the opinions expressed herein
which we did not independently establish or verify, we have relied upon oral and
written statements and representations of officers and other representatives of
the Company and others. In addition, we have also relied upon the accuracy and
completeness of all certificates and other statements, representations,
documents, records, financial statements and papers reviewed by us, and the
accuracy and completeness of all representations, warranties, schedules and
exhibits contained in such documents, with respect to the factual matters set
forth therein.
Based on the foregoing, we are of the opinion that when (i) the
Registration Statement, as finally amended, has become effective under the
Securities Act, (ii) the amount, price, interest rate and other principal terms
of the Notes have been duly approved by Board of Directors of the Company, (iii)
the applicable Agreements relating to such Notes have been duly executed and
delivered by the parties thereto in substantially the form filed as exhibits to
the Registration Statement, (iv) with respect to the Trust, the Certificate of
Trust has been duly executed and filed by the Owner Trustee with the Secretary
of State of the State of Delaware, (v) the Indenture has been qualified under
the Trust Indenture Act of 1939, as amended, and (vi) the Notes have been duly
executed and authenticated in accordance with the applicable Agreements, the
Notes will constitute legally valid and binding obligations of the Trust as
issuer thereof enforceable in accordance with their terms, and entitled to the
benefits of the applicable Agreements (subject to the effect of bankruptcy,
fraudulent conveyance or transfer, insolvency, reorganization, arrangement,
liquidation, conservatorship and moratorium laws and subject to the limitations
imposed by other laws and judicial decisions relating to or affecting the rights
of creditors generally, to general principles of equity, regardless of whether
enforcement is considered in proceedings in equity or at law, and to an implied
covenant of good faith and fair dealing).
We do not find it necessary for the purposes of this opinion to cover,
and accordingly we express no opinion as to, the application of the securities
or blue sky laws of the various states to the offer and exchange of the
Securities
This opinion is limited to the laws of the United States of America,
the State of Illinois and the State of Delaware, and we express no opinion with
respect to the laws of any state or other jurisdiction.
Our opinions set forth in this letter are based on the facts in
existence and the laws in effect on the date hereof and we expressly disclaim
any obligation to update our opinions herein, regardless of whether changes in
such facts or laws come to our attention after the delivery hereof.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to all references to our firm included in or made a
part of the Registration Statement.
<PAGE>
August __, 1997
Page 3
In giving such consent, we do not concede that we are experts within the meaning
of the Securities Act or the rules and regulations thereunder or that this
consent is required by Section 7 of the Securities Act.
Very truly yours,
Document Number: 0217826.01
<PAGE>
Exhibit 8.1
Form of Opinion of Winston & Strawn
with respect to Tax Matters
August ___, 1997
Re: Heller Funding Corporation
Registration Statement on Form S-1 (Reg. No. 333-30207)
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as special federal tax counsel to Heller Funding
Corporation, a Delaware corporation (the "Registrant"), in connection with the
proposed issuance and sale of its Class A-1 Receivable-Backed Notes, Series
1997-1, Class A-2 Receivable-Backed Notes, Series 1997-1, Class B
Receivable-Backed Notes, Series 1997-1, and Class C Receivable-Backed Notes,
Series 1997-1 (collectively the "Notes") to be issued from the Heller Equipment
Asset Receivables Trust, 1997-1, a limited purpose Delaware business trust (the
"Trust"). The property of the Trust will include certain conditional sale
agreements, finance leases, installment payment agreements with respect to
business equipment and computer software and other property. The Notes will be
issued pursuant to an indenture (the "Indenture") between the Trust and an
indenture trustee.
We have advised the Registrant with respect to the material federal
income tax consequences of the proposed issuance of the Notes to the holders
thereof. This advice is described under the headings "Summary of Terms--Federal
Income Tax Considerations" and "Federal Income Tax Consequences" in the
prospectus relating to the Notes (the "Prospectus"), which is a part of the
Registration Statement on Form S-1 (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") initially on June 27,
1997, under the Securities Act of 1933, as amended (the "Act"), for the
registration of the Notes under the Act. Such description does not purport to
discuss all possible federal income tax ramifications of the proposed issuance
of the Notes to the holders thereof in light of their own investment or tax
circumstances, but with respect to those tax consequences that are discussed, in
our opinion, the description fairly summarizes the federal income tax
considerations that are likely to be material to a holder of Notes. Furthermore,
we hereby confirm, as specified in the Prospectus, that for federal income tax
purposes (i) the Trust will not be treated as an association (or publicly traded
partnership) taxable as a corporation and (ii) the Notes will be treated as
indebtedness.
<PAGE>
Our opinion is based upon the current provisions of the Code, Treasury
Regulations promulgated thereunder, current administrative rulings, judicial
decisions, and other applicable authorities, all as in effect on the date of
such opinions. All of the foregoing authorities are subject to change or new
interpretation, both prospectively and retroactively, and such changes or
interpretation, as well as the changes in the facts as they have been
represented to us or assumed by us, could affect our opinions. Our opinion does
not foreclose the possibility of a contrary determination by the Internal
Revenue Service (the "IRS") or by a court of competent jurisdiction, or of a
contrary position by the IRS or Treasury Department in regulations or rulings
issued in the future. Furthermore, our opinion assumes that all the transactions
contemplated by the Prospectus will be consummated in accordance with the terms
of the Prospectus, including without limitation, that holders of Notes will
treat such Notes as indebtedness.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to a reference to this firm (as counsel to the
Registrant) under the headings "Summary of Terms --Federal Income Tax
Considerations," "Federal Income Tax Consequences," and "Legal Matters" in the
Prospectus forming a part of the Registration Statement, without implying or
admitting that we are "experts" within the meaning of the Act or the rules and
regulations of the Commission issued thereunder, with respect to any part of the
Registration Statement, including this exhibit.
Very truly yours,
/s/ Winston & Strawn
<PAGE>
EXHIBIT 10.1
================================================================================
SALE AND SERVICING AGREEMENT
among
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1,
as Issuer,
HELLER FUNDING CORPORATION,
as Trust Depositor,
HELLER FINANCIAL, INC.,
as Servicer
and
[__________________________]
as Indenture Trustee
Dated as of August [__], 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE ONE
<S> <C>
DEFINITIONS........................................................................................... 1
Section 1.01. Definitions............................................................................ 1
Section 1.02. Usage of Terms......................................................................... 22
Section 1.03. Section References..................................................................... 22
Section 1.04. Calculations........................................................................... 22
Section 1.05. Accounting Terms....................................................................... 22
ARTICLE TWO
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS......................................................... 23
Section 2.01. Creation and Funding of Trust; Transfer of Trust Assets................................ 23
Section 2.02. Conditions to the Closing.............................................................. 23
Section 2.03. Acceptance by Owner Trustee............................................................ 24
Section 2.04. Conveyance of Subsequent Contracts..................................................... 24
Section 2.05. Release of Released Amounts............................................................ 25
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES........................................................................ 26
Section 3.01. Representations and Warranties Regarding the Trust Depositor........................... 26
Section 3.02. Representations and Warranties Regarding the Servicer.................................. 28
ARTICLE FOUR
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS........................................... 29
Section 4.01. Custody of Contracts................................................................... 29
Section 4.02. Filing................................................................................. 30
Section 4.03. Name Change or Relocation.............................................................. 30
Section 4.04. Costs and Expenses..................................................................... 30
ARTICLE FIVE
SERVICING OF CONTRACTS................................................................................ 31
Section 5.01. Appointment and Acceptance; Responsibility for Contract Administration................. 31
Section 5.02. General Duties......................................................................... 31
Section 5.03. Consent to Assignment or Replacement................................................... 31
Section 5.04. Disposition Upon Termination of Contract............................................... 31
Section 5.05. Subservicers........................................................................... 32
Section 5.06. Further Assurance...................................................................... 32
Section 5.07. Notice to Obligors..................................................................... 32
Section 5.08. Collection Efforts; Modification of Contracts.......................................... 32
Section 5.09. Prepaid Contract....................................................................... 32
Section 5.10. Acceleration........................................................................... 32
Section 5.11. Taxes and Other Amounts................................................................ 33
Section 5.12. Lockboxes, Etc......................................................................... 33
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 5.13. Remittances.................................................................. 33
Section 5.14. Servicer Advances............................................................ 33
Section 5.15. Realization Upon Defaulted Contract.......................................... 33
Section 5.16. Maintenance of Insurance Policies............................................ 33
Section 5.17. Other Servicer Covenants..................................................... 34
Section 5.18. Servicing Compensation....................................................... 34
Section 5.19. Payment of Certain Expenses by Servicer...................................... 34
Section 5.20. Records...................................................................... 35
Section 5.21. Inspection................................................................... 35
Section 5.22. Trustees to Cooperate in Releases............................................ 35
ARTICLE SIX
COVENANTS OF THE TRUST DEPOSITOR............................................................ 36
Section 6.01. Corporate Existence.......................................................... 36
Section 6.02. Contracts Not to be Evidenced by Promissory Notes............................ 36
Section 6.03. Security Interests........................................................... 36
Section 6.04. Delivery of Collections...................................................... 36
Section 6.05. Regulatory Filings........................................................... 36
Section 6.06. Compliance With Law.......................................................... 36
Section 6.07. Activities................................................................... 36
Section 6.08. Indebtedness................................................................. 36
Section 6.09. Guarantees................................................................... 36
Section 6.10. Investments.................................................................. 37
Section 6.11. Merger; Sales................................................................ 37
Section 6.12. Distributions................................................................ 37
Section 6.13. Other Agreements............................................................. 37
Section 6.14. Separate Corporate Existence................................................. 37
Section 6.15. Location; Records............................................................ 38
Section 6.16. Liability of Trust Depositor; Indemnities.................................... 38
Section 6.17. Bankruptcy Limitations....................................................... 39
Section 6.18. Limitation on Liability of Trust Depositor and Others........................ 39
Section 6.19. Chief Executive Office....................................................... 39
ARTICLE SEVEN
ESTABLISHMENT OF ACCOUNTS; DISTRIBUTIONS; RESERVE FUND...................................... 40
Section 7.01. Trust Accounts; Collections.................................................. 40
Section 7.02. Reserve Fund Deposit......................................................... 40
Section 7.03. Trust Account Procedures..................................................... 40
Section 7.04. Securityholder Distributions................................................. 40
Section 7.05. Allocations and Distributions................................................ 41
Section 7.06. Repurchases of, or Substitution For, Contracts for Breach of Representations
and Warranties............................................................... 44
Section 7.07. Reassignment of Repurchased or Substituted Contracts......................... 45
Section 7.08. Sellers' and Trust Depositor's Repurchase Option............................. 45
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
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ARTICLE EIGHT
<S> <C> <C>
SERVICER DEFAULT; SERVICE TRANSFER............................................................ 46
Section 8.01. Servicer Default............................................................... 46
Section 8.02. Service Transfer............................................................... 46
Section 8.03. Appointment of Successor Servicer; Reconveyance; Successor Servicer to Act..... 47
Section 8.04. Notification to Securityholders................................................ 47
Section 8.05. Effect of Transfer............................................................. 47
Section 8.06. Database File.................................................................. 48
Section 8.07. Successor Servicer Indemnification............................................. 48
Section 8.08. Responsibilities of the Successor Servicer..................................... 48
ARTICLE NINE
REPORTS....................................................................................... 49
Section 9.01. Monthly Reports................................................................ 49
Section 9.02. Officer's Certificate.......................................................... 49
Section 9.03. Other Data..................................................................... 49
Section 9.04. Annual Report of Accountants................................................... 49
Section 9.05. Annual Statement of Compliance from Servicer................................... 49
Section 9.06. Annual Summary Statement....................................................... 50
ARTICLE TEN
TERMINATION................................................................................... 51
Section 10.01. Sale of Trust Assets.......................................................... 51
ARTICLE ELEVEN
MISCELLANEOUS................................................................................. 52
Section 11.01. Amendment..................................................................... 52
Section 11.02. Protection of Title to Trust.................................................. 52
Section 11.03. Governing Law................................................................. 53
Section 11.04. Notices....................................................................... 53
Section 11.05. Severability of Provisions.................................................... 54
Section 11.06. Third Party Beneficiaries..................................................... 55
Section 11.07. Counterparts.................................................................. 55
Section 11.08. Headings...................................................................... 55
Section 11.09. No Bankruptcy Petition........................................................ 55
</TABLE>
EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit A Form of Assignment............................................................ A-1
Exhibit B Form of Closing Certificate of Trust Depositor................................ B-1
Exhibit C Form of Closing Certificate of Seller/Servicer................................ C-1
Exhibit D Form of Opinion of Counsel for Trust Depositor regarding
general corporate matters (including perfection opinion)...................... D-1
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Exhibit E Form of Opinion of Counsel for Trust Depositor regarding
the "true sale" nature of the transaction................................... E-1
Exhibit F Form of Opinion of Counsel for Trust Depositor regarding
non-consolidation........................................................... F-1
Exhibit G Form of Certificate Regarding Repurchased Contracts......................... G-1
Exhibit H List of Contracts........................................................... H-1
Exhibit I Form of Monthly Report to Noteholders and Certificateholders................ I-1
Exhibit J Sellers' Representations and Warranties..................................... J-1
Exhibit K Lockbox Banks and Lockbox Accounts.......................................... K-1
Exhibit L Form of Contract Stamp...................................................... L-1
Exhibit M Form of Subsequent Transfer Agreement....................................... M-1
</TABLE>
iv
<PAGE>
This SALE AND SERVICING AGREEMENT, dated as of August [__], 1997, is among
Heller Equipment Asset Receivables Trust 1997-1 (together with its successors
and assigns, the "Issuer" or the "Trust"), Heller Funding Corporation (together
with its successor and assigns, the "Trust Depositor"), [____________] (solely
in its capacity as Indenture Trustee, together with its successors and assigns,
the "Indenture Trustee") and Heller Financial, Inc. (together with its
successors and assigns, "HFI" and, solely in its capacity as Servicer, together
with its successor and assigns, the "Servicer").
WHEREAS the Trust Depositor desires to fund the Trust by selling, conveying
and assigning a designated pool of Contracts (as defined herein) together with
certain related security therefor and other related rights and property as
further described herein, which Contracts were originated by HFI or Heller
Leasing (as defined herein), or acquired by purchase and assignment by HFI or
Heller Leasing from the owner thereof, and subsequently sold by HFI or Heller
Leasing (as applicable) to the Trust Depositor pursuant to the Transfer and Sale
Agreement (as defined herein);
WHEREAS the Trust is willing to purchase and accept assignment of the
Contracts, together with such related rights and property, from the Trust
Depositor pursuant to the terms hereof; and
WHEREAS the Servicer is willing to service the Contracts for the benefit
and account of the Trust pursuant to the terms hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"Accountant's Report" has the meaning assigned such term in Section 9.04.
"Accrual Period" means the period from and including the most recent
Distribution Date to but excluding the following Distribution Date, provided,
that the initial Accrual Period following the Closing Date shall be the period
from and including the Closing Date to but excluding the first Distribution Date
following the Closing Date.
"ADCB" means, with respect to any date of determination thereof, the sum of
the Discounted Contract Balances of each Contract included in the group of
Contracts for which an ADCB determination is being made, as of the date of such
determination. For purposes of calculating such sum on any date other than the
last day of a Collection Period, the Discounted Contract Balance of a Contract
shall be as of the last day of the preceding Collection Period or, with respect
to any Subsequent Contract transferred to the Trust after such last day, the
Discounted Contract Balance on the applicable Subsequent Cutoff Date for such
Contract.
"Additional Contract" means a Contract transferred to the Trust under
Section 2.04 with respect to which a related Addition Event has occurred with
respect to a Contract or Contracts then held in the Contract Pool and identified
in the related Addition Notice.
"Addition Event" means, with respect to any transfer of an Additional
Contract to the Trust under Section 2.04, a prepayment of one or more related
Contracts, identified in the corresponding Addition Notice, in full by the
related Obligor.
"Addition Notice" means, with respect to any transfer of Subsequent
Contracts to the Trust pursuant to Section 2.04 (and the Trust Depositor's
corresponding prior purchase of such Contracts from the applicable Seller), a
notice, which shall be given at least [5] days prior to the related Subsequent
Transfer Date, identifying the Subsequent Contracts to be transferred, the ADCB
of such Subsequent Contracts and the related Addition Event or Substitution
Event (with
<PAGE>
respect to an identified Contract or Contracts then in the Contract Pool) to
which such Subsequent Contract relates, with such notice to be signed both by
the Trust Depositor, and the Seller which owns such Subsequent Contract (which
is to be transferred by such Seller to the Trust Depositor and by the Trust
Depositor to the Trust on the related Subsequent Transfer Date).
"Affiliate" of any specified Person means 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" or "controlled" have meanings
correlative to the foregoing.
"Agreement" means this Sale and Servicing Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"Aggregate Principal Amount" means, with respect to any group of Notes or
Certificates, at any date of determination, the sum of the Principal Amounts of
such Notes or Certificates on such date of determination.
"Applicable Class Percentage" means
(a) prior to the occurrence of an Event of Default, or prior to the
occurrence and during the continuance of a Restricting Event, for any
outstanding Class of Notes for which a determination of Applicable Class
Percentage is required to be made hereunder,
(i) prior to the payment in full of the Class A-1 Notes, 0%; and
(ii) thereafter, the ratio (expressed as a percentage) that the
Initial Principal Amount of such Class of Notes bears to the sum of the Initial
Principal Amount of all Classes of Notes (other than the Class A-1 Notes); and
(b) following the occurrence of an Event of Default, or following the
occurrence and during the continuance of a Restricting Event,
(i) for the Class A-1 Notes and the Class A-2 Notes, (A) until
each such Class has been repaid in full, the ratio (expressed as a percentage)
that the aggregate Principal Amount of such Class of Notes on the date on which
such Event of Default or Restricting Event commences, bears to the sum of such
aggregate Principal Amounts for both such Classes of Notes, and (B) thereafter,
0%;
(ii) for the Class B Notes, 0% until all outstanding principal of
the Class A-1 Notes and Class A-2 Notes has been paid in full, then 100% until
all outstanding principal of the Class B Notes has been paid in full, and
thereafter 0%;
(iii) for the Class C Notes, 0% until all outstanding principal
of the Class A-1 Notes, Class A-2 Notes and Class B Notes has been paid in full,
then 100% until all outstanding principal of the Class C Notes has been paid in
full, and thereafter 0%; and
(iv) for the Class D Notes, 0% until all outstanding principal of
the Class A-1 Notes, Class A-2 Notes, Class B Notes and Class C Notes has been
paid in full, then 100% until all outstanding principal of the Class D Notes has
been paid in full, and thereafter 0%.
"Applicable Security" means, with respect to a Vendor Loan, any (i)
Secondary Contract securing such Vendor Loan and (ii) Equipment securing such
Vendor Loan or a related Secondary Contract.
"Assignment" means each Assignment, substantially in the form of Exhibit A
hereto (in the case of an Assignment executed by the Trust Depositor) and in the
form of Exhibit A to the Transfer and Sale Agreement (in the case of an
Assignment executed by a Seller), relating to an assignment, transfer and
conveyance of Contracts and related property to the applicable assignee.
"Available Amounts" means, as of any Distribution Date, the sum of (i) all
amounts on deposit in the Collection Account as of the immediately preceding
Determination Date on account of Scheduled Payments due on or before, and
Prepayments received on or before, the last day of the Collection Period
immediately preceding such Distribution Date (other than Excluded Amounts), (ii)
Recoveries on account of previously Defaulted Contracts, (iii) Investment
Earnings credited to the Collection Account, and (iv) Late Charges received on
or before the last day of such Collection Period.
"Average Cumulative Net Loss Ratio" means, for any date of determination
following the conclusion of the sixth full Collection Period occurring since the
Closing Date, the average of the sum of the Net Loss Ratios determined for each
of the six most recent full Collection Periods occurring prior to such date of
determination.
"Business Day" means any day which is neither a Saturday or a Sunday, nor
another day on which banking institutions in the city of Chicago, Illinois,
Wilmington, Delaware or New York, New York are authorized or obligated by law,
executive order, or governmental decree to be closed.
2
<PAGE>
"Business Trust Statute" means Chapter 38 of Title 12 of the Delaware Code,
12 Del Code 3801 et seq., as the same may be amended from time to time.
["Calculation Date" means [________].]
"Casualty Loss" means, with respect to any item of Equipment, the loss,
theft, damage beyond repair or governmental condemnation or seizure of such item
of Equipment.
"Certificate Distribution Account" has the meaning specified in the Trust
Agreement.
"Certificate Register" has the meaning specified in the Trust Agreement.
"Certificateholders" has the meaning specified in the Trust Agreement.
"Certificates" means the Class D Certificates, or any of them.
"Class" means any of the group of Notes or Certificates identified herein
as, as applicable, the Class A-1 Notes, the Class A-2 Notes, the Class B Notes,
the Class C Notes, or the Class D Certificates.
"Class A-1 Interest Rate" means [___]% per annum.
"Class A-1 Maturity Date" means the [_________] Distribution Date.
"Class A-1 Noteholder" means the Person in whose name a Class A-1 Note is
registered in the Note Register.
"Class A-1 Notes" means the $[______] aggregate initial principal amount
Heller Equipment Asset Receivables Trust Notes, Class A-1, issued pursuant to
the Indenture.
"Class A-1 Principal Payment Amount" means, with respect to any
Distribution Date and the Class A-1 Notes, (a) prior to the occurrence of an
Event of Default, or prior to the occurrence and during the continuance of a
Restricting Event, the sum of (1) the lesser of (A) the outstanding Principal
Amount of the Class A-1 Notes, and (B) the excess of (x) the ADCB for all
Contracts held by the Trust as of the last day of the second Collection Period
preceding such Distribution Date (or, in the case of Contracts that were first
added to the Contract pool during the Collection Period immediately preceding
such Distribution Date, as of the applicable Cutoff Date for such Contracts)
over (y) the ADCB for all Contracts held by the Trust as of the last day of the
Collection Period immediately preceding such Distribution Date (such amount
described in this clause (i) being, the "Expected Class A-1 Payment"), plus (ii)
the aggregate amount of Expected Class A-1 Payments which were not paid on each
preceding Distribution Date; and (b) following the occurrence of an Event of
Default, or following the occurrence and during the continuance of a Restricting
Event, the sum of (i) the difference between (A) the outstanding Principal
Amount of the Class A-1 Notes, and (B) the product of (x) the Applicable Class
Percentage for such Class A-1 Notes, and (y) the ADCB for all Contracts held by
the Trust as of the last day of the Collection Period immediately preceding such
Distribution Date (such amount described in this clause (i) being, the
"Anticipated Class A-1 Payment"), plus (ii) the aggregate amount of Anticipated
Class A-1 Payments which were not paid on each preceding Distribution Date.
"Class A-2 Interest Rate" means [___]% per annum.
"Class A-2 Maturity Date" means the [_________] Distribution Date.
"Class A-2 Noteholder" means the Person in whose name a Class A-2 Note is
registered in the Note Register.
"Class A-2 Notes" means the $[______] aggregate initial principal amount
Heller Equipment Asset Receivables Trust Notes, Class A-2, issued pursuant to
the Indenture.
"Class A-2 Principal Payment Amount" means, with respect to any
Distribution Date and the Class A-2 Notes, the sum of (i) the difference between
(A) the Principal Amount of the Class A-2 Notes immediately prior to such
Distribution Date, and (B) the product of (x) the Applicable Class Percentage
for such Notes and (y) the ADCB for all Contracts held by the Trust as of the
last day of the Collection Period immediately preceding such Distribution Date
(the amount described in clause (i) being, the "Expected Class A-2 Payment"),
plus
3
<PAGE>
described in clause (i) being, the "Expected Class A-2 Payment") and
(ii) the aggregate amount of Expected Class A-2 Payments which were not paid on
each preceding Distribution Date.
"Class B Interest Rate" means [___]% per annum.
"Class B Maturity Date" means the [_________] Distribution Date.
"Class B Noteholder" means the Person in whose name a Class B Note is
registered in the Note Register.
"Class B Notes" means the $[______] aggregate initial principal amount
Heller Equipment Asset Receivables Trust Notes, Class B, issued pursuant to the
Indenture.
(i) the difference between (A) the Principal Amount of the Class B
Notes immediately prior to such Distribution Date, and (B) the product of
(x) the Applicable Class Percentage for such Notes and (v) the ADCB for all
Contracts held by the Trust as of the last day of the Collection Period
immediately preceding such Distribution Date (the amount described in
clause (i) being, the "Expected Class B Payment"), plus
"Class C Interest Rate" means [___]% per annum.
"Class C Maturity Date" means the [_________] Distribution Date.
"Class C Noteholder" means the Person in whose name a Class C Note is
registered in the Note Register.
"Class C Notes" means the $[______] aggregate initial principal amount
Heller Equipment Asset Receivables Trust Notes, Class C, issued pursuant to the
Indenture.
(i) the difference between (A) the Principal Amount of the Class C
Notes immediately prior to such Distribution Date, and (B) the product of
(x) the Applicable Class Percentage for such Notes and (y) the ADCB for all
Contracts held by the Trust as of the last day of the Collection Period
immediately preceding such Distribution Date (the amount described in the
clause (i) being, the "Expected Class C Payment"), plus
(ii) the aggregate amount of Expected Class C Payments which were not
paid on each preceding Distribution Date.
"Class D Interest Rate" means [___]% per annum.
"Class D Maturity Date" means the [_________] Distribution Date.
"Class D Noteholder" means the Person in whose name a Class D Note is
registered in the Note Register.
"Class D Notes" means the $[ ] aggregate initial principal amount
Heller Equipment Asset Receivables Trust Notes, Class D, issued pursuant to the
Indenture.
"Class D Principal Payment Amount" means, with respect to any Distribution
Date and the Class D Notes, the sum of (i) the difference between (A) the
Principal Amount of the Class D Notes immediately prior to such Distribution
Date, and (B) the product of (x) the Applicable Class Percentage for such Notes
and (y) the ADCB for all Contracts held by the Trust as of the last day of the
Collection Period immediately preceding such Distribution Date (the amount
described in clause (i) being, the "Expected Class D Payment", plus
(ii) the aggregate amount of Expected Class D Payments which were not
paid on each preceding Distribution Date.
"Class E Certificateholder" means the Person in whose name a Class E
Certificate is registered in the Certificate Register.
"Class E Certificates" means the $[ ] aggregate initial principal
amount Heller Equipment Asset Receivables Trust Certificates, Class E,
representing beneficial equity interests in the Trust and issued pursuant to the
Trust Agreement.
"Class E Maturity Date" means the [ ] Distribution Date.
4
<PAGE>
of (1) the ADCB for all Contracts held by the Trust as of the last day of the
second Collection Period preceding such Distribution Date (or, in the case of
Contracts that were first added to the Contract pool during the Collection
Period immediately preceding such Distribution Date, as of the applicable Cutoff
Date for such Contracts) over (2) the ADCB for all Contracts held by the Trust
as of the last day of the Collection Period immediately preceding such
Distribution Date (the product described in clause (i) being, the "Expected
Class D Payment") and (ii) the aggregate amount of Expected Class D Payments
which were not paid on each preceding Distribution Date.
"Closing Date" means August [__], 1997.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning given such term in the "granting clause" of
the Indenture.
"Collection Account" means the Trust Account so designated pursuant to
Section 7.01.
"Collection Period" means a period beginning on the first day of a calendar
month and ending on, but not including, the first day of the next calendar
month, provided that the first Collection Period shall be the period beginning
on the Initial Cutoff Date and ending on, but not including, the first day of
the calendar month immediately following the calendar month in which the Closing
Date occurs.
"Collections" means all payments received on or with respect to the
Contracts in the Contract Pool or the related Equipment, including, without
limitation, Scheduled Payments, Prepayments, Recoveries and Expired Lease
Proceeds, all as related to amounts attributable to the Contracts in the
Contract Pool or the related Equipment, but excluding any Excluded Amounts.
"Commission" means the United States Securities and Exchange Commission.
"Computer Disk" means the computer disk generated by the Servicer which
provides information relating to the Contracts and which was used by the Sellers
in selecting the Contracts conveyed to the Trust Depositor pursuant to the
Transfer and Sale Agreement (and any Subsequent Purchase Agreement), and
includes the master file and the history file as well as servicing information
with respect to the Contracts.
"Contract" means each End-User Contract and each Vendor Loan but, unless
otherwise specified herein, shall not refer to any Secondary Contract.
"Contract Assets" has the meaning assigned in Section 2.01 (and 2.04, as
applicable in the case of Subsequent Contracts) of the Transfer and Sale
Agreement.
"Contract File" means, with respect to each Contract, the fully executed
original counterpart (for UCC purposes) of the contract, the original
certificate of title or other title document with respect to the related
Equipment (if applicable), and otherwise such documents, if any, that the
Servicer keeps on file in accordance with its customary procedures, evidencing
ownership of such Equipment (if applicable) and all other documents originally
delivered to the applicable Seller or held by the Servicer with respect to any
Contract.
"Contract Pool" as of any date means the Initial Contracts and the
Subsequent Contracts (if any), other than any such Contracts which (i) have been
reconveyed by the Trust to the Trust Depositor, and concurrently by the Trust
Depositor to the applicable Seller, pursuant to Section 7.07 hereof and Section
5.03 of the Transfer and Sale Agreement, or (ii) have been paid (or prepaid) in
full.
"Controlling Party" means the Holders of Class A-1 Notes and Class A-2
Notes aggregating more than 66-2/3% of the Aggregate Principal Amount of all
Class A-1 Notes and Class A-2 Notes outstanding (and if no Class A-1 Notes or
Class A-2 Notes remain outstanding, the Holders of Notes aggregating more than
50% of the Aggregate Principal Amount of all other Classes of Notes then
outstanding).
5
<PAGE>
"Corporate Trust Office" means, with respect to the Indenture Trustee or
Owner Trustee, as applicable, the office of the Indenture Trustee or Owner
Trustee at which at any particular time its corporate trust business shall be
principally administered, which offices at the date of the execution of this
Agreement are located at the addresses set forth in Section 11.04.
["Credit Guidelines" shall mean {HFI's _________ dated as of [_____],
19[__],} as amended or supplemented from time to time.]
"CSA" means each conditional sales agreement, including, as applicable,
schedules, subschedules, supplements and amendments to a master conditional
sales agreement, pursuant to which specified assets were conditionally sold to
an Obligor at specified monthly, quarterly, semi-annual or annual payments.
"Cumulative Net Loss Ratio" means, for any date of determination, the
fraction (expressed as a percentage) determined by dividing (i) the ADCB of all
Contracts in the Trust which have become Defaulted Contracts since the Initial
Cutoff Date, net of aggregatge Recoveries received by the Trust during such same
period, by (ii) the ADCB of all Contracts in the Contract Pool as of the Initial
Cutoff Date.
"Cutoff Date" means either or both (as the context may require) the Initial
Cutoff Date and any Subsequent Cutoff Date, as applicable to the Contract or
Contracts in question.
"Date of Processing" means, with respect to any transaction, the date on
which such transaction is first recorded on the related Seller's or Servicer's
computer master file of Contracts (without regard to the effective date of such
recordation).
"Defaulted Contract" means a Contract in the Contract Pool with respect to
which there has occurred one or more of the following: (i) all or some portion
of any Scheduled Payment under the Contract is more than 120 days delinquent
(or, with respect to a Contract for which there exists available payment
recourse to a Vendor to satisfy the amount in default, and which recourse was
not yet available (pursuant to the contractual terms thereof) or had not yet
been paid by the Vendor prior to the end of such 120 day period, then at such
time thereafter as the Vendor shall have failed to pay such defaulted amount in
accordance with the provisions of the Program Agreement, Vendor Assignment or
other agreement with the Vendor providing such recourse), or (ii) the Servicer
has determined in its sole discretion, in accordance with its usual and
customary practices (and taking into account any available Vendor recourse),
that such Contract is not collectible.
"Determination Date" means with respect to any Distribution Date, the third
Business Day prior to such Distribution Date.
"Discount Rate" means [___]% (which is equal to the sum of (1) the weighted
average of the Class A-1 Interest Rate, Class A-2 Interest Rate, Class B
Interest Rate, Class C Interest Rate, and Class D Interest Rate, and (2) the
Servicing Fee Percentage).
"Discounted Contract Balance" means with respect to any Contract, (i) as of
the related Cutoff Date, the present value of all of the remaining Scheduled
Payments becoming due under such Contract after the applicable Cutoff Date
discounted monthly at the applicable Discount Rate, and (ii) as of any other
date of determination, the sum of (x) the present value of all of the remaining
Scheduled Payments becoming due under such Contract after such date of
determination discounted monthly at the Discount Rate and (y) the aggregate
amount of all Scheduled Payments due and payable under such Contract after the
applicable Cutoff Date and prior to such date of determination (other than
Scheduled Payments related to Contracts that have become Defaulted Contracts or
Prepaid Contracts, and have not been replaced with a Subsequent Contract as
provided in Section 2.04) that have not then been received by the Servicer.
The "Discounted Contract Balance" for each Contract shall be calculated
assuming:
(i) all payments due in any Collection period are due on the last day
of the Collection Period;
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<PAGE>
(ii) payments are discounted on a monthly basis using a 30 day month
and a 360 day year; and
(iii) all security deposits and drawings under letters of credit, if
any, issued in support of a Contract are applied to reduce Scheduled
Payments in inverse order of the due date thereof.
"Distribution Date" shall mean the [twentieth] day of each calendar month
or, if such [twentieth] day is not a Business Day, the next succeeding Business
Day, with the first such Distribution Date hereunder being September [22], 1997.
"Dollar" and "$" means lawful currency of the United States of America.
"Eligible Contract" means at any date of determination, each Contract with
respect to which each of the following is true:
(a) the information with respect to the Contract, any Secondary
Contract securing the obligations under such Contract, and the Equipment,
if any, subject to the Contract delivered under the Transfer and Sale
Agreement is true and correct in all material respects;
(b) immediately prior to the transfer of such Contract and any
related Equipment (or security interest therein) or Applicable Security (or
security interest therein) to the Trust Depositor, and immediately prior to
the Trust Depositor's concurrent transfer thereof to the Trust, such
Contract was owned by the applicable Seller (and by the Trust Depositor
following the transfer by the Seller) free and clear of any adverse claim,
other than with respect to any Residual Investment;
(c) the Contract did not have a Scheduled Payment that was a
delinquent payment for more than 60 days, and the Contract is not a
Defaulted Contract;
(d) no provision of the Contract has been waived, altered or modified
in any respect, except by instruments or documents contained in the
Contract File (other than payment delinquencies permitted under clause (c)
above);
(e) the Contract is a valid and binding payment obligation of the
Obligor and is enforceable in accordance with its terms (except as may be
limited by applicable Insolvency Laws and the availability of equitable
remedies);
(f) the Contract is not and will not be subject to the rights of
rescission, setoff, counterclaim or defense and, to the Seller's knowledge,
no such rights have been asserted or threatened with respect to the
Contract;
(g) the Contract, at the time it was made, did not violate the laws
of the United States or any state, except for any such violations which
would not materially and adversely affect the collectibility of the
Contracts in the Contract Pool taken as a whole;
(h) (i) the Contract and any related Equipment or interest therein
have not been sold, transferred, assigned or pledged by the applicable Seller to
any other Person (other than the financed sale of the Equipment to the End-User
effected through the End-User Contract) and any Equipment related to such
Contract is free and clear of any liens and encumbrances of any third parties
other than the applicable Seller (except for Permitted Liens), and (ii) either
(A) such Contract is secured by a fully perfected lien of the first priority in
favor of the applicable Seller on the related Equipment, or, in the case of any
Vendor Loan, related Applicable Security or (B) in the case of such a Contract
secured by Title Registry Equipment, either (1) within 30 calendar days of the
origination or acquisition of such Contract by the applicable Seller an
application was filed (in the case of motor vehicles) in the appropriate state
office to note such Seller's interest in such Equipment on the certificate of
title for such vehicle, or (in the case of other Title Registry Equipment) all
applicable federal registration or recording procedures were initiated, and in
any case
7
<PAGE>
such Seller's interest will be so noted or recorded within 180 days of such
acquisition or origination, or (2) a certificate of title or similar
evidence of recordation on which the Seller's interest has been noted has
been obtained;
(i) if the Contract constitutes "chattel paper" for purposes of the
UCC, there is not more than one "secured party's original" counterpart of
the Contract;
(j) all filings necessary to evidence the conveyance or transfer of
the applicable Seller's ownership interest in the Contract, and such
Seller's corresponding interest in the related Equipment or Applicable
Security, as applicable, to the Trust Depositor (as well as the concurrent
conveyance of such property hereunder from the Trust Depositor to the
Trust), have been made in all appropriate jurisdictions; [provided, that
(i) UCC financing statement filings with respect to Equipment or Applicable
Security which name such Seller as secured party have not been amended to
indicate either the Trust Depositor or the Trust as an assignee; (although
separate UCC filings were made against the Seller's interest in Applicable
Security in each jurisdiction where a related Vendor is located) and (ii)
filings or registrations with respect to Title Registry Equipment which
name such Seller as either owner or a lienholder have not been amended to
indicate either the Trust Depositor or the Trust as an assignee;] [discuss
residual conveyance issue]
(k) the Obligor is not, to the Seller's knowledge, subject to
bankruptcy or other insolvency proceedings;
(l) the Obligor's billing address is in the United States and the
Contract is a U.S. dollar-denominated obligation;
(m) the Contract does not require the prior written consent of an
Obligor or contain any other restriction on the transfer or assignment of
the Contract (other than a consent or waiver of such restriction that has
been obtained prior to the Closing Date, with respect to an Initial
Contract, or the Subsequent Transfer Date, with respect to a Subsequent
Contract);
(n) either (x) the obligations of the related Obligor under such
Contract are irrevocable and unconditional and non-cancelable [(as
distinguished from prepayable)] or (y) with respect to certain Leases with
Lessees that are governmental entities or municipalities, if such Lease is
canceled in accordance with its terms, either (1) the Vendor that assigned
such Lease to the applicable Seller is unconditionally obligated to a
repurchase such lease from such Seller for a purchase price not less than
the Discounted Contract Balance of such Lease (as of the date of purchase)
plus interest thereon at the Discount Rate through the Distribution Date
following such date of repurchase, or (2) pursuant to the Transfer and Sale
Agreement, the Seller that sold such Lease to the Trust Depositor has
indemnified the Trust Depositor against such cancellation in an amount at
least equal to the Discounted Contract Balance of such Lease (as of the
date or purchase) plus interest thereon at the Discount Rate through the
Distribution Date following such cancellation, less any amounts paid by the
Vendor pursuant to clause (1);
(o) the Contract has an original maturity of not greater than the term
specified in this Agreement;
(p) no adverse selection procedure was used in selecting the Contract
for the Contract Pool;
(q) the Obligor under the Contract is required to maintain casualty
insurance or to self-insure with respect to the related Equipment in
accordance with the Servicer's normal requirements;
(r) the Contract constitutes chattel paper, an account, or a general
intangible (but not an instrument, except to the extent part of chattel
paper), in each case as defined under the UCC;
(s) the Contract is not a "consumer lease" as defined in Section 2A-
103(1)(e) of the UCC;
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(t) if such Contract is a Lease, the Lessee thereunder has represented
to the related Vendor or applicable Seller that such Lessee has accepted
the related Equipment and has had a reasonable opportunity to inspect and
test such Equipment and the Vendor or Seller has not been notified of any
defects therein;
(u) the Contract is not subject to any guarantee by the applicable
Seller [or any Affiliate of same], nor has the Seller established any
specific credit reserve with respect to the related Obligor;
(v) if such Contract is a Lease, such Lease is a "triple net lease"
under which the Obligor is responsible for the maintenance of the related
Equipment in accordance with general industry standards applicable to such
item of Equipment;
(w) if such Contract is a Vendor Loan, such Vendor Loan is secured by
an Eligible Secondary Contract having an aggregate Discounted Contract
Balance for such Eligible Secondary Contract equal to the outstanding
principal amount of such Vendor Loan (assuming the interest rate specified
in such Vendor Loan is the "Discount Rate" for purposes of calculating such
Discounted Contract Balance);
(x) no provision of such Contract provides for a Prepayment Amount
less than the amount calculated in accordance with the definition of
Prepayment Amount (unless otherwise indemnified by the Vendor or the
applicable Seller in an amount equal to the excess of the "Prepayment
Amount" as calculated in accordance with the definition thereof over the
amount otherwise payable upon a prepayment under such Contract); and
(y) such Contract is not an obligation of the United States of
America or an agency, department, or instrumentality of the United States
of America;]
provided, that Contracts with respect to which any of the statements in clauses
(c), (o) or (x) above are not true shall also be "Eligible Contracts" if the
Trust Depositor shall have received confirmation from each Rating Agency that
such fact will not result in a Ratings Effect.
"Eligible Deposit Account" means either (a) a segregated account with a
Qualified Institution, or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
Untied States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank), and acting as a trustee for
funds deposited in such account, so long as any of the securities of such
depository institution shall have a credit rating from each Rating Agency in one
of its short-term credit rating categories which signifies investment grade.
"Eligible Investments" with respect to any Distribution Date means
negotiable instruments or securities or other investments maturing on or before
such Distribution Date (a) which, except in the case of demand or time deposits,
investments in money market funds and Eligible Repurchase Obligations, are
represented by instruments in bearer or registered form or ownership of which is
represented by book entries by a Clearing Agency or by a Federal Reserve Bank in
favor of depository institutions eligible to have an account with such Federal
Reserve Bank who hold such investments on behalf of their customers, (b) which,
as of any date of determination, mature by their terms on or prior to the
Distribution Date immediately following such date of determination, and (c)
which evidence:
(i) direct obligations of, and obligations fully guaranteed as to
full and trimly payment by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full faith and
credit of the United States of America);
(ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies incorporated under the laws of
the United States of America or any state thereof and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however, that at the time of the Trust's
investment or contractual commitment to invest therein, the commercial
paper, if any, and short-term unsecured debt obligations (other than such
obligation whose rating is based on the credit of a Person other than such
institution or trust company) of such depository institution or trust
company shall have a credit rating from each Rating Agency in the Highest
Required Investment Category granted by such Rating Agency;
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(iii) commercial paper, or other short term obligations, having, at
the time of the Trust's investment or contractual commitment to invest
therein, a rating in Highest Required Investment Category granted by each
Rating Agency;
(iv) demand deposits, time deposits or certificates of deposit that
are fully insured by the FDIC;
(v) notes that are payable on demand or bankers' acceptances
issued by any depository institution or trust company referred to in (ii)
above;
(vi) investments in money market funds having, at the time of the
Trust's investment or contractual commitment to invest therein, a rating of
the Highest Required Investment Category from each Rating Agency or whose
portfolio is limited to the investments described in clause (i) of this
definition;
(vii) time deposits (having maturities of not more than 90 days) by
an entity the commercial paper of which has, at the time of the Trust's
investment or contractual commitment to invest therein, a rating of the
Highest Required Investment Category granted by each Rating Agency;
(viii) Eligible Repurchase Obligations; and
(ix) any negotiable instruments or securities or other investments
in which the investment by the Trust therein has been approved in writing
by the Rating Agency.
"Eligible Secondary Contract" shall mean each Secondary Contract
(i) that satisfies all the criteria set forth in the definition of
"Eligible Contract" except clauses (b), (h) (with respect to ownership by
the applicable Seller of the Contract) and (w) thereof, and except that the
term "Obligor" shall mean "End-User" in all such criteria;
(ii) with respect to which Secondary Contract and the proceeds thereof
the applicable Seller has a duly perfected first priority lien; and
(iii) the transfer of the Seller's security interest with respect to
which has created a valid first priority Lien in such Secondary Contract
and the proceeds thereof in favor of the Seller which has been duly
perfected.
"Eligible Repurchase Obligations" means repurchase obligations with respect
to any security that is a direct obligation of, or fully guaranteed by, the
United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (c)(ii) of the
definition of Eligible Investments.
"End-User" shall mean any party that uses the Financed Item pursuant to an
End-User Contract.
"End-User Contract" shall mean any CSA, Secured Note, Lease, IPA, or other
Financing Agreement covering Financed Items originated or purchased by either or
the Financing Originators.
"Equipment" means the tangible assets (including printing equipment,
information technology equipment, communications equipment, commercial
equipment, industrial equipment, transportation equipment, construction
equipment, forestry equipment or other equipment) financed or leased by an
Obligor pursuant to a Contract and/or, unless the context otherwise requires, a
security interest in such assets.
"Event of Default" shall have the meaning specified in Section 5.01 of the
Indenture.
"Excess Contract", as of any date of determination, means each Contract
selected by the Servicer in accordance with Section 7.06 at such time as there
shall have been discovered a breach of any of the representations and warranties
set forth in Section 3.05 of the Transfer and Sale Agreement, the removal of
which pursuant to Section 7.06 hereof and the applicable Seller's repurchase
thereof or substitution of a Substitute Contract therefor pursuant to Section
5.01 of the Transfer and Sale Agreement, shall remedy such breach.
["Exchange Act" means the Securities Exchange Act of 1934, as amended or
supplemented from time to time.]
"Excluded Amounts" means (i) any collections on deposit in the Collection
Account or otherwise received by the Servicer on or with respect to the Contract
Pool or related Equipment, which collections are attributable to any taxes, fees
or other charges imposed by any Governmental Authority, (ii) any collections
representing reimbursements of insurance premiums or payments for services that
were not financed by the applicable Seller, and (iii) any proceeds from
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the sale or other disposition of Equipment in excess of the difference between
(x) the Discounted Contract Balance of the related Contract as of the applicable
Cutoff Date, over (y) the present value as of the applicable Cutoff Date of all
amounts actually received by the Trust in respect of such Contract, discounted
monthly at the Discount Rate.
"Expired Lease" means any Lease that has terminated other than on its
scheduled expiration date.
"Expired Lease Proceeds" means any and all cash proceeds or rents realized
from the sale or re-lease of Equipment under an Expired Lease (net of
Liquidation Expenses).
"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.
"Final Trust Termination Date" means [December 31, 201].
"Financed Items" means Equipment, Software, Services and other property and
services that are permitted to be financed under Contracts in accordance with
the [Credit Guidelines].
"Financing Agreement" means each financing agreement covering Financed
Items other than a CSA, a Secured Note, a Lease or an IPA.
"Fitch" means Fitch Investors Service, L.P., or any successor thereto.
"Governmental Authority" means the United States of America, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, government.
"Guaranteed Residual Investment" means each Residual Investment that is
made in the form of a full recourse loan to the related Obligor on an End-User
Contract constituting a Lease [, the repayment obligation with respect to which
is not included as part of the Scheduled Payments on the related Contract].
"Heller Leasing" means Heller Financial Leasing, Inc., a Delaware
corporation.
"HFI" has the meaning assigned such term in the preamble hereto.
"Highest Required Investment Category" means (i) with respect to ratings
assigned by Fitch, [___] for short-term instruments and [___] for long-term
instruments, and (ii) with respect to ratings assigned by Moody's, A-2 or P-1
for one month instruments, A-1 or P-1 for three month instruments, AA3 or P-1
for six month instruments and AAA or P-1 for instruments with a term in excess
of six months.
"Holder" means (i) with respect to a Certificate, the Person in whose name
such Certificate is registered in the Certificate Register, and (ii) with
respect to a Note, the Person in whose name such Note is registered in the Note
Register.
"Indebtedness" means, with respect to any Person at any date, (a) all
indebtedness of such person for borrowed money or for the deferred purchase
price of property or services (other than current liabilities incurred in the
ordinary course of business and payable in accordance with customary trade
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under capital leases, (c) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, and (d) all liabilities secured by any Lien on any
property owned by such Person even though such person has not assumed or
otherwise become liable for the payment thereof.
"Indenture" means the Indenture, dated as of the date hereof, between the
Issuer and the Indenture Trustee.
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"Indenture Trustee" means the Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
"Independent", when used with respect to any specified Person, means such a
Person who (i) is in fact independent of the Issuer, the Trust Depositor or the
Servicer, (ii) is not a director, officer or employee of any Affiliate of the
Issuer, the Trust Depositor or the Servicer, (iii) is not a person related to
any officer or director of the Issuer, the Trust Depositor or the Servicer or
any of their respective Affiliates, (iv) is not a holder (directly or
indirectly) of more than 10% of any voting securities of the Issuer, the Trust
Depositor or the Servicer or any of their respective Affiliates, and (v) is not
connected with the Issuer, the Trust Depositor or the Servicer as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
"Ineligible Contract" has the meaning specified in Section 7.06.
"Initial Class A-1 Principal Amount" means $[_________].
"Initial Class A-2 Principal Amount" means $[_________].
"Initial Class B Principal Amount" means $[_________].
"Initial Class C Principal Amount" means $[_________].
"Initial Class D Principal Amount" means $[_________].
"Initial Class E Principal Amount" means $[_________].
"Initial Principal Amount" means the sum of the Initial Class A-1 Principal
Amount, the Initial Class A-2 Principal Amount, the Initial Class B Principal
Amount, the Initial Class C Principal Amount, the Initial Class D Principal
Amount, and the Initial Class E Principal Amount i.e., $[_________].
"Initial Contracts" means those Contracts conveyed to the Trust on the
Closing Date.
"Initial Cutoff Date" means [July 31], 1997.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Insolvency Law now or hereafter in effect,
or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or ordering the winding-up or liquidation of such Person's affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (b) the commencement by such person of a voluntary case
under any applicable Insolvency Law now or hereafter in effect, or the consent
by such person to the entry of an order for relief in an involuntary case under
such law, taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of this property, or the making by such Person of any general assignment
for the benefit of creditors, or the failure by such Person generally to pay its
debts as such debts become due, or the taking of action by such Person in
furtherance of any of the foregoing.
"Insolvency Laws" means the Bankruptcy Code of the United States of America
and all other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of payments,
or similar debtor relief laws from time to time in effect affecting the rights
of creditors generally.
"Insurance Policy" means, with respect to any Contract, an insurance policy
covering physical damage to or loss of the related Equipment.
"Insurance Proceeds" means. depending on the context, any amounts payable
or any payments made, to the Servicer under any Insurance Policy.
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"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Investment Earnings" means the investment earnings (net of losses and
investment expenses) on amounts on deposit in the Collection Account and the
Reserve Fund, to be credited to the Collection Account on such Distribution Date
pursuant to Section 7.03.
"IPA" means each installment payment agreement, including as applicable,
schedules, subschedules, supplements and amendments to a software license
agreement, pursuant to which the Originator financed the purchase or acquisition
of specified assets by an Obligor for specified monthly, quarterly or semiannual
payments.
"Issuer" means the Heller Equipment Asset Receivables Trust 1997-1, a
Delaware business trust.
"Late Charges" means any late payment fees paid by Obligors on Contracts
after all sums received have been allocated first to regular installments due or
overdue and all such installments are then paid in full.
"Lease" means each agreement, including both operating and financing
agreements, and, as applicable, schedules, subschedules, supplements and
amendments to a master lease, pursuant to which the Originator, as lessor,
leased specified assets to a Lessee at a specified monthly, quarterly,
semiannual or annual rental.
"Lessee" means, with respect to any Lease, the Obligor with respect to such
Lease.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), equity
interest, participation interest, preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement, and any financing lease having substantially the same economic effect
as any of the foregoing.
"Liquidation Expenses" means, with respect to any Contract, the aggregate
amount of all out-of-pocket expenses reasonably incurred by the Servicer
(including amounts paid to any subservicer) and any reasonably allocated costs
of internal counsel, in each case in accordance with the Servicer's customary
procedures in connection with the repossession, refurbishing and disposition of
any related Equipment upon or after the expiration or earlier termination of
such Contract and other out-of-pocket costs related to the liquidation of any
such Equipment, including the attempted collection of any amount owing pursuant
to such Contract if it is a Defaulted Contract.
"Liquidation Proceeds" means, with respect to a Defaulted Contract,
proceeds from the sale, lease or re-lease of the Equipment, proceeds of the
related Insurance Policy and any other recoveries with respect to such Defaulted
Contract and the related Equipment, net of Liquidation Expenses and amounts, if
any, so received that are required to be refunded to the Obligor on such
Contract.
"List of Contracts" means the list identifying each Contract constituting
part of the Trust Assets, which list shall consist of the initial List of
Contracts reflecting the Initial Contracts transferred to the Trust on the
Closing Date, together with any Subsequent List of Contracts reflecting the
Subsequent Contracts transferred to the Trust on the related Subsequent Transfer
Date, and which list (a) identifies each Contract and (b) sets forth as to each
Contract (i) the Discounted Principal Balance as of the applicable Cutoff Date,
(ii) the amount of monthly payments due from the Obligor, (iii) the Contract
Rate and (iv) the maturity date, and which list (as in effect on the Closing
Date) is attached to this Agreement as Exhibit H.
"Lockbox" means the post office boxes listed on Exhibit K to which the
Obligors are instructed to remit payments on the Contracts included in the
Contract Pool and/or such other post office boxes for such purpose as may be
established or have been established from time to time.
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"Lockbox Account" means the intervening account used by a Lockbox Processor
for deposit of funds received in a Lockbox prior to their transfer to the
Collection Account.
"Lockbox Processor" means the depositary institution or processing company
(which may be the Indenture Trustee) which processes payments on the Contracts
sent by the Obligors thereon forwarded to a Lockbox.
"Material Modification" means a termination or release (including pursuant
to prepayment), or an amendment, modification or waiver, or equivalent similar
undertaking or agreement, by the Servicer with respect to a Contract which would
not otherwise be permitted under the standards and criteria set forth in
Sections 5.08 and/or 5.09 hereof, as applicable.
"Maturity Date" means, as applicable, the Class A-1 Maturity Date, Class A-
2 Maturity Date, Class B Maturity Date, Class C Maturity Date, Class D Maturity
Date or Class E Maturity Date.
"Monthly Report" has the meaning specified in Section 9.01.
"Moody's" means Moody's Investors Service, Inc. or any successor thereto.
"Note" means any one of the notes of the Trust of any Class executed and
authenticated in accordance with the Indenture.
"Note Distribution Account" means the account established and maintained as
such pursuant to Section 7.01.
["Note Owner" means, with respect to a Book-Entry Note, the Person who is
the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly or as an indirect participant, in accordance with the rules of
such Clearing Agency), and in any event the Person who is the beneficial owner
of a Note.]
"Note Register" has the meaning given such term in Section [__] of the
Indenture.
"Obligor" means, with respect to any Contract, the Person or Persons
obligated to make payments with respect to such Contract, including any
guarantor thereof.
"Officer's Certificate" shall mean a certificate signed by any officer of
the Trust Depositor or the Servicer and delivered to the Owner Trustee or the
Indenture Trustee, as the case may be.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
(including internal counsel) for the Trust Depositor or the Servicer and who
shall be reasonably acceptable to the Owner Trustee or the Indenture Trustee, as
the case may be.
"Originator" means, with respect to each Contract, the party that is the
original lessor or financing party thereunder.
"Owner Trustee" means the Person acting, not in its individual capacity,
but solely as Owner Trustee, under the Trust Agreement, its successors in
interest and any successor owner trustee under the Trust Agreement.
"Paying Agent" means as described in Section 6.11 of the Indenture and
Section 3.10 of the Trust Agreement.
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"Permitted Liens" means (a) with respect to Contracts in the Contract Pool:
(i) Liens for state, municipal or other local taxes if such taxes
shall not at the time be due and payable or if the Trust Depositor 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, (ii) Liens in favor of the Trust Depositor created
pursuant to the Transfer and Sale Agreement and transferred to the Trust
pursuant hereto, (iii) Liens in favor of the Trust created pursuant to this
Agreement, and (iv) Liens in favor of the Indenture Trustee created
pursuant to the Indenture and/or this Agreement;
and (b) with respect to the related Equipment:
(i) materialmen's, warehousemen's, mechanics' and other liens arising
by operation of law in the ordinary course of business for sums not due,
(ii) Liens for state, municipal or other local taxes if such taxes shall
not at the time be due and payable or if the Trust Depositor 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, (iii) Liens in favor of the Trust Depositor created
pursuant to the Transfer and Sale Agreement and transferred to the Owner
Trustee pursuant hereto, (iv) Liens in favor of the Trust created pursuant
to this Agreement; (v) Liens in favor of the Indenture Trustee created
pursuant to the Indenture and/or this Agreement, (vi) subordinated liens
which are subordinated to the prior payment of the Notes and Certificates
on terms described herein, and (vii) Liens granted by the End-Users which
are subordinated to the interest of the Trust in such Equipment.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Placement Agency Agreement" means [________].
"Prepaid Contract" means any Contract that has terminated or been prepaid
in full prior to its scheduled expiration date (including because of a Casualty
Loss), other than a Defaulted Contract.
"Prepayment Amount" has the meaning specified in Section 5.09.
"Prepayments" means any and all partial and full prepayments on a Contract
(including, with respect to any Contract and any Collection Period, any
Scheduled Payment (or portion thereof) which is due in a subsequent Collection
Period which the Servicer has received, and (if such Contract is not otherwise
prepayable by its terms) expressly permitted the related Obligor to make, in
advance of its scheduled due date and which will be applied to such Scheduled
Payment on such due date, and any and all cash proceeds or rents realized from
the sale, lease, re-lease or re-financing of Equipment under a Prepaid Contract,
net of Liquidation Expenses), Liquidation Proceeds, amounts received in respect
of Transfer Deposit Amounts and payments upon an optional termination of the
Trust pursuant to Section 7.08.
"Principal Amount" means, with respect to a Class of Notes or Certificates,
as applicable, the aggregate Initial Principal Amount thereof reduced by (i) the
aggregate amount of any distributions applied in reduction of such principal
amount and (ii) the aggregate amount of any distributions then on deposit in the
Note Distribution Account, if any, for such Class of Notes established in
accordance with the Indenture or, as applicable, the Certificate Distribution
Account, if any, for such Class of Certificates established in accordance with
the Trust Agreement, and to be applied in reduction of such principal amount in
accordance with such Indenture or Trust Agreement.
"Program Agreement" means each vendor finance program agreement pursuant to
which End-User Contracts originated by a Vendor are assigned to a Seller.
["Prospectus" means [________].]
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"Qualified Eligible Investments" means Eligible Investments acquired by the
Indenture Trustee in its name and in its capacity as Indenture Trustee, which
are held by the Indenture Trustee in the Collection Account or the Reserve Fund
and with respect to which (a) the Indenture Trustee has noted its interest
therein on its books and records, and (b) the Indenture Trustee has purchased
such investments for value without notice of any adverse claim thereto (and, if
such investments are securities or other financial assets or interests therein,
within the meaning of Section 8-102 of the UCC as enacted in Illinois, without
acting in collusion with a securities intermediary in violating such securities
intermediary's obligations to entitlement holders in such assets, under Section
8-504 of such UCC, to maintain a sufficient quantity of such assets in favor of
such entitlement holders), and (c) either (i) such investments are in the
possession of the Indenture Trustee, or (ii) such investments, (A) if
certificated securities and in bearer form, have been delivered to the Indenture
Trustee, or in registered form, have been delivered to the Indenture Trustee and
either registered by the issuer in the name of the Indenture Trustee or endorsed
by effective endorsement to the Indenture Trustee or in blank; (B) if
uncertificated securities, the ownership of which has been registered to the
Indenture Trustee on the books of the issuer thereof (or another person, other
than a securities intermediary, either becomes the registered owner of the
uncertified security on behalf of the Indenture Trustee or, having previously
become the registered owner, acknowledges that it holds for the Indenture
Trustee); or (C) if securities entitlements (within the meaning of Section 8-102
of the UCC as enacted in Illinois) representing interests in securities or other
financial assets (or interests therein) held by a securities intermediary
(within the meaning of said Section 8-102), a securities intermediary indicates
by book entry that a security or other financial asset has been credited to the
Indenture Trustee's securities account with such securities intermediary. Any
such Qualified Eligible Investment may be purchased by or through the Indenture
Trustee or any of its Affiliates.
"Qualified Institution" means (a) the corporate trust department of the
Indenture Trustee, or (b) a depository institution organized under the laws of
the United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), (i) (A) which has either
(1) a long-term unsecured debt rating acceptable to the Rating Agencies, or (2)
a short-term unsecured debt rating or certificate of deposit rating acceptable
to the Rating Agencies, (B) the parent corporation of which has either (1) a
long-term unsecured debt rating acceptable to the Rating Agencies, or (2) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies, or (C) is otherwise acceptable to the Rating Agencies, and
(ii) whose deposits are insured by the FDIC.
"Rating Agency" means each of Moody's and Fitch, so long as such Persons
maintain a rating on the Notes and Certificates; and if either Moody's or Fitch
no longer maintains a rating on the Notes and Certificates, such other
nationally recognized statistical rating organization selected by the Trust
Depositor.
"Rating Agency Condition" means, with respect to any action or series of
related actions or proposed transaction or series of related proposed
transactions, that each Rating Agency shall have notified the Trust Depositor
and the Owner Trustee in writing that such action or series of related actions
or the consummation of such proposed transaction or series of related
transactions will not result in a reduction or withdrawal of the rating of any
outstanding Class with respect to which it is a Rating Agency.
"Ratings Effect" means, with respect to any action or series of related
actions or proposed transaction or series of related proposed transactions, a
reduction or withdrawal of the rating of any outstanding Class with respect to
which a Rating Agency has previously issued a rating as a result of such action
or series of related actions or the consummation of such proposed transaction or
series of related transactions.
"Record Date" means, with respect to any Distribution Date, the last
Business Day of the preceding calendar month.
"Recoveries" means any and all recoveries on account of a Defaulted
Contract, including, without limitation, any and all cash proceeds or rents
realized from the sale, lease, re-lease or re-financing of repossessed Equipment
or other property, Insurance Proceeds, amounts representing late fees and
penalties and amounts received pursuant to a Program Agreement (including,
without limitation, amounts received from any "ultimate net loss pool" that may
have been created under such Program Agreement), but in each case net of
Liquidation Expenses.
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"Released Amounts" means, with respect to any payment or collection
received with respect to any Contract on any Business Day (whether such payment
or collection is received by the Servicer, the Owner Trustee or the Trust
Depositor), an amount equal to that portion of such payment or collection
constituting Excluded Amounts.
"Required Holders" means (i) prior to the payment in full of the Class A-1
Notes and Class A-2 Notes outstanding, Class A-1 Noteholders and/or Class A-2
Noteholders holding Class A-1 Notes and/or Class A-2 Notes evidencing more than
66 2/3% of the Aggregate Principal Amount of all Class A-1 Notes and Class A-2
Notes outstanding, (ii) from and after the payment in full of the Class A-1
Notes and Class A-2 Notes outstanding, Holders of Class B Notes holding Class B
Notes evidencing more than 66 2/3% of the Aggregate Principal Amount of all
Class B Notes outstanding, (iii) from and after the payment in full of the Class
B Notes outstanding, Holders of Class C Notes holding Class C Notes evidencing
more than 66 2/3% of the Aggregate Principal Amount of all Class C Notes
outstanding, and (iv) from and after the payment in full of the Class C Notes
outstanding, Holders of Class D Notes holding Class D Notes evidencing more than
66 2/3% of the Aggregate Principal Amount of all Class D Notes outstanding.
"Required Percentage of Holders" means (i) prior to the payment in full of
the principal amount of and accrued interest on the Class A-1 Notes and Class A-
2 Notes, Class A-1 Noteholders and/or Class A-2 Noteholders holding Class A-1
Notes and/or Class A-2 Notes evidencing more than 50% of the Aggregate Principal
Amount of all Class A-1 Notes and Class A-2 Notes then outstanding (or the
Indenture Trustee on behalf of such percentage of Noteholders), (ii) from and
after the payment in full of the principal amount of and accrued interest on the
Class A-1 Notes and Class A-2 Notes, Class B Noteholders holding Class B Notes
evidencing more than 50% of the Aggregate Principal Amount of all Class B Notes
outstanding (or the Indenture Trustee on behalf of such percentage of Class B
Noteholders), (iii) from and after the payment in full of the principal amount
of and accrued interest on the Class B Notes, Class C Noteholders holding Class
C Notes evidencing more than 50% of the Aggregate Principal Amount of all Class
C Notes outstanding (or the Indenture Trustee on behalf of such percentage of
Class C Noteholders), and (iv) from and after the payment in full of the
principal amount of and accrued interest on all Notes outstanding, Class D
Noteholders holding Class D Notes evidencing more than 50% of the Aggregate
Principal Amount of all Class D Notes outstanding.
"Requirements of Law" for any Person means the certificate of incorporation
or articles of association and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or order or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
"Reserve Fund" means the Reserve Fund established and maintained pursuant
to Section 7.06 hereof.
"Reserve Fund Amount" means, initially as of the Closing Date, $[_____]
(representing the Reserve Fund Initial Deposit) and thereafter, at any date of
determination, means an amount equal to the lesser of (a) the Reserve Fund
Initial Deposit, and (b) the Aggregate Principal Amount of the Notes as of such
date of determination.
"Reserve Fund Initial Deposit" means $[_____], which is equal to 1.00% of
the ADCB of the Contracts Pool at the Initial Cutoff Date.
"Reserve Fund Deposits" means all moneys deposited in the Reserve Fund from
time to time including, but not limited to, the Reserve Fund Initial Deposit as
well as all investments and reinvestments thereof, earnings thereon, and
proceeds of the foregoing, whether now or hereafter existing.
"Residual Investment" means, with respect to certain Leases, any funds that
a Seller shall have advanced against all or any portion of the anticipated
residual value of the leased Equipment upon the expiration of such Lease in
accordance with its terms, and in excess of the discounted present value of the
rental payments due under such Lease.
"Responsible Officer" means, with respect to the Owner Trustee, any officer
in its Corporate Trust Administration Department (or any similar group of a
successor Owner Trustee) and with respect to the Indenture Trustee, the chairman
and any vice chairman of the board of directors, the president, the chairman and
vice chairman of any executive committee of the board of directors, every vice
president, assistant vice president, the secretary, every assistant secretary,
cashier or any assistant cashier, controller or assistant controller, the
treasurer, every assistant treasurer, every trust officer, assistant trust
officer and every other officer or assistant officer of the Indenture Trustee
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customarily performing functions similar to those performed by persons who at
the time shall be such officers, respectively, or to whom a corporate trust
matter is referred because of knowledge of, familiarity with, and authority to
act with respect to a particular matter.
"Restricting Event" means any of the following events:
(a) As of any Calculation Date occurring after the elapsing of six
full Collection Periods since the Closing Date, the Average
Cumulative Net Loss Ratio exceeds 1.00%; or
(b) A Servicer Default or an Event of Default has occurred and is
continuing.
"Scheduled Payment" means, with respect to any Contract, the monthly or
quarterly or semi-annual or annual rent or financing (whether principal or
principal and interest) payment scheduled to be made by the related Obligor
under the terms of such Contract after the related Cutoff Date; it being
understood that Scheduled Payments do not include any Excluded Amounts or
payments owing by such Obligor pursuant to the related End-User Contract in
respect of a Guaranteed Residual Investment.
"Secondary Contract" shall mean, with respect to a Vendor Loan, each
End-User Contract securing such Vendor Loan.
"Secured Note" means each promissory note with a related security interest
evidenced by written agreement, pursuant to which the purchase of specified
assets by a Obligor is financed for specified monthly, quarterly or semiannual
payments.
"Securities" means the Notes and the Certificates, or any of them.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securityholders" means the Holders of the Notes or the Certificates.
"Seller" means either of HFI or Heller Leasing, each in the capacity as a
Seller of a Contract under the Transfer and Sale Agreement (including in respect
of a Subsequent Contract pursuant to a Subsequent Purchase Agreement).
"Servicer" means initially HFI, or its successor, until any Service
Transfer hereunder and thereafter means the Successor Servicer appointed
pursuant to Article VIII below with respect to the duties and obligations
required of the Servicer under this Agreement.
"Servicer Advance" means, with respect to any Distribution Date, the
amounts, if any, deposited by the Servicer in the Collection Account for such
Distribution Date in respect of Scheduled Payments pursuant to Section 5.14.
"Servicer Default" shall have the meaning specified in Section 8.01.
"Services" means, in connection with the financing of Software by an
Originator, the support and consulting services related to such Software, the
procurement of which was also financed by such Originator pursuant to a
Contract.
"Servicing Fee" has the meaning specified in Section 5.18.
"Servicing Fee Percentage" means [0.50]%.
"Service Transfer" has the meaning assigned in Section 8.02(a).
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"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Indenture Trustee by the Servicer, as the same may be amended
from time to time.
"Software" means the computer software programs financed or leased by an
Obligor pursuant to a Contract.
"Solvent" means, as to any Person at any time, that (a) the fair value of
the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (b) the present fair saleable value of the
Property of such Person in an orderly liquidation of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person is able
to realize upon its Property and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature; and (e) such Person is not engaged in
business or a transaction, and is not about to engage in a business or a
transaction, for which such Person's property would constitute unreasonably
small capital.
"Subsequent Contract" means any Contracts conveyed, assigned and
transferred by the Trust Depositor to the Trust pursuant to Section 2.04 (and
which has been acquired by the Trust Depositor from a Seller pursuant to Section
2.04 of the Transfer and Sale Agreement), whether an Additional Contract or a
Substitute Contract.
"Subsequent Contract Qualification Conditions" means, with respect to any
Subsequent Contract being transferred to the Trust pursuant to Section 2.04, the
accuracy of each of the following statements as of the related Cutoff Date for
such Contract:
(a) the Discounted Contract Balance of such Subsequent Contract is not
less than that of the related Contract or Contracts identified on the related
Addition Notice (whether a Contract or Contracts with respect to which there has
occurred an Addition Event, or a Substitution Event); and
(b) for each separate Collection Period which corresponds to a
Collection Period in which a payment would have been owing on the related
Contract or Contracts identified on the related Addition Notice, the amount in
respect of Scheduled Payments receivable (assuming Scheduled Payments are paid
and received when due) on the Subsequent Contract in such Collection Period is
not less than that of such related Contract or Contracts;
(c) if, instead of such Subsequent Contract being added to the
Contracts Pool on the related Subsequent Transfer Date, such Subsequent Contract
had instead been included in the Contracts Pool as of the Initial Cutoff Date,
and the related Contract or Contracts identified on the related Addition Notice
were no so included (and assuming such hypothetical inclusion satisfied the
criteria set forth in clause (a) and (b) above that would have been applicable
at such time), the representations of the Sellers set forth in Section 3.05
concerning concentrations would not, as a result of such inclusion, have become
inaccurate or incorrect in any material respect; and
(d) no adverse selection procedure shall have been employed in the
selection of such Subsequent Contract from the Sellers' portfolio.
"Subsequent Cutoff Date" means the date specified as such for Subsequent
Contracts in the related Subsequent Transfer Agreement.
"Subsequent List of Contracts" means a list, in the form of the initial
List of Contracts delivered on the Closing Date, but listing each Subsequent
Contract transferred to the Trust pursuant to the related Subsequent Transfer
Agreement.
"Subsequent Purchase Agreement" means, with respect to any Subsequent
Contracts, the agreement between the applicable Seller and the Trust Depositor
pursuant to which such Seller will transfer the Subsequent Contracts to the
Trust Depositor, the form of which is attached to the Transfer and Sale
Agreement as Exhibit C.
"Subsequent Transfer Agreement" means the agreement described in Section
2.04 hereof.
"Subsequent Transfer Date" means any date on which Subsequent Contracts are
transferred to the Trust.
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"Substitute Contract" means a Contract transferred to the Trust under
Section 2.04 with respect to which a related Substitution Event has occurred
with respect to a Contract or Contracts then held in the Contract Pool and
identified in the related Addition Notice.
"Substitute Contract Transfer Condition" means, with respect to any
Substitute Contract being transferred to the Trust pursuant to Section 2.04 in
respect of a related Contract or Contracts identified on the related Addition
Notice which is of a type described in clause (a) or (b) of the definition of
Substitution Event (a "Type"), the condition that after giving effect to such
transfer, the ADCB of all Substitute Contracts transferred to the Trust since
the Closing Date in respect of related Contracts of the same Type shall not
exceed 15% of the ADCB of the Initial Contracts as of the Initial Cutoff Date.
"Substitution Event" means, with respect to any transfer of a related
Substitute Contract to the Trust under Section 2.04, the occurrence of any of
the following: (a) one or more Contracts then held in the Trust and identified
in the related Addition Notice has become a Defaulted Contract, (b) one or more
Contracts then held in the Trust and identified in the related Addition Notice
has been subjected to a Material Modification, or (c) one or more Contracts then
held in the Trust and identified in the related Addition Notice is the subject
of a breach of a representation or warranty under the Transfer and Sale
Agreement which breach, in the absence of a substitution of a Substitute
Contract for such Contract or Contracts, would require the payment of a Transfer
Deposit Amount to the Trust in respect of such Contract.
"Successor Servicer" has the meaning given such term in Section 8.02(b).
"Tax Opinion" means, with respect to any action, an opinion of Counsel to
the effect that, for federal income tax purposes, (i) following such action the
Trust will not be deemed to be an association (or publicly traded partnership)
taxable as a corporation, and (ii) such action will not affect the tax
characterization as debt of Notes of any outstanding Class issued by the Trust
for which an Opinion of Counsel has been provided that such Notes are debt.
"Title Registry Equipment" means Equipment in the form of motor vehicles,
aircraft, barges or similar maritime assets , or railroad rolling stock, where
the transfer of interests in such Equipment is subject to state vehicle
registration laws (in the case of motor vehicles) or certain federal title
registration statutes, regulations and procedures (in the case of other Title
Registry Equipment).
"Transaction Documents" means this Agreement, the Transfer and Sale
Agreement, the Indenture, the Trust Agreement, the Administration Agreement, the
Note Depository Agreement, the Certificate Depository Agreement, any Subsequent
Transfer Agreement and any Subsequent Purchase Agreement.
"Transfer and Sale Agreement" means the Transfer and Sale Agreement dated
as of August [__], 1997 by and among each Seller and the Trust Depositor, as
amended, supplemented or otherwise modified from time to time.
"Transfer Date" means the Business Day immediately preceding each
Distribution Date.
"Transfer Deposit Amount" means, with respect to each Ineligible Contract
or Excess Contract, on any date of determination, the sum of the Discounted
Contract Balances of such Contracts, together with accrued interest thereon
through such date of determination at the Discount Rate, and any outstanding
Servicer Advances thereon.
"Transferred Assets" means all right, title and interest of the
transferring party in, to and under the following:
(i) the Initial Contracts and Subsequent Contracts, and all monies due
or to become due in payment of such Contracts on and after the related Cutoff
Dates, any Prepayment Amounts, any payments in respect of a casualty or early
termination, and any Recoveries received with respect thereto, but excluding any
Scheduled Payments due prior to the related Cutoff Date and any Excluded
Amounts;
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(ii) the Equipment related to such Contracts and, in the case of
any Vendor Loan, related Applicable Security, including all proceeds from
any sale or other disposition of such Equipment (but subject to the
exclusion and release herein of Excluded Amounts);
(iii) the Contract Files;
(iv) all payments made or to be made in the future with respect to
such Contracts or the Obligor thereunder under any Program Agreements or
Vendor Agreements with the related Seller and under any guarantee or
similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract;
(vi) rights of the Trust Depositor under the Transfer and Sale
Agreement, including, without limitation, in respect of the obligation of
each Seller party thereto to repurchase or substitute for Contracts under
certain circumstances as specified therein;
(vii) each Assignment; and
(viii) all income from and proceeds of the foregoing;
provided, that Transferred Assets shall not include any Residual
Investment.
"Trust" means the trust created by the Trust Agreement and funded pursuant
to this Agreement, consisting of the Trust Assets.
"Trust Accounts" means, collectively, the Collection Account, the Reserve
Fund and the Note Distribution Account, or any of them.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, physical property, book-entry securities, uncertificated
securities or otherwise), including without limitation the Reserve Fund Initial
Deposit, and all proceeds of the foregoing.
"Trust Agreement" means the Trust Agreement, dated as of the date hereof,
between the Trust Depositor and the Owner Trustee.
"Trust Assets" has the meaning given to such term in Section 2.01(b) hereof
(and in Section 2.04(a) hereof in respect of Subsequent Contracts and related
assets transferred to the Trust pursuant to Subsequent Transfer Agreements).
"Trust Depositor" has the meaning assigned such term in the preamble
hereunder, or any successor entity thereto.
"Trust Estate" shall have the meaning specified in the Trust Agreement.
"Trustees" means the Owner Trustee and the Indenture Trustee.
"UCC" means the Uniform Commercial Code as enacted in Illinois; provided,
however, in the event that, by reason of mandatory provisions of law, any and
all of the attachment, perfection or priority of the Lien of the Trust in and to
the Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Illinois, the term UCC shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
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the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.
"UCC Filing Locations" means the States of Illinois, Delaware, each
other State in which the Seller/Servicer maintains the Contract Files related to
Contracts in the Contract Pool and each State in which a Vendor [which is an
Obligor on a Vendor Loan] is located (as defined in the UCC in such State).
"Uncollectible Advance" means with respect to any Determination Date and
any Contract, the amount, if any, advanced by the Servicer pursuant to Section
7.03 which the Servicer has as of such Determination Date determined in good
faith will not be ultimately recoverable by the Servicer.
"Underwriter" means First Union Capital Markets Corp.
"United States" means the United States of America.
"Unreimbursed Servicer Advances" means, at any time, the amount of all
previous Servicer Advances (or portions thereof) as to which the Servicer has
not been reimbursed as of such time pursuant to Sections 7.01 or 7.05 and which
the Servicer has determined in its sole discretion are Uncollectible Advances,
and with respect to which the Servicer has given a written certification to such
effect to each Trustee.
"Vendor" means, with respect to a Contract, the equipment manufacturer,
dealer or distributor, or software licensor or distributor, or other Person that
provided financing under such Contract in connection with the acquisition or use
by an End-User of such party's Equipment, Software, Services or other products.
"Vendor Agreements" means the collective reference to Vendor Assignments
and Program Agreements.
"Vendor Assignment" means each assignment agreement pursuant to which an
individual End-User Contract originated by a Vendor is assigned to a Seller.
"Vendor Loan" means a limited recourse loan agreement (not in the form of
an "instrument" as defined in the UCC) payable by a Vendor and secured by the
Vendor's interest in Secondary Contracts and by the Equipment, if any, related
thereto.
"Vice President" of any Person means any vice president of such Person,
whether or not designated by a number or words before or after the title "Vice
President," who is a duly elected officer of such Person.
Section 1.02. Usage of Terms. With respect to all terms in this Agreement,
the singular includes the plural and the plural the singular; words importing
any gender include the other genders; references to "writing" include printing,
typing, lithography and other means of reproducing words in a visible form;
references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation."
Section 1.03. Section References. All section references, unless otherwise
indicated, shall be to Sections in this Agreement.
Section 1.04. Calculations. Except as otherwise provided herein, all
interest rate and basis point calculations hereunder will be made on the basis
of a 360-day year and twelve 30-day months and will be carried out to at least
three decimal places.
Section 1.05. Accounting Terms. All accounting terms used but not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
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ARTICLE TWO
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
Section 2.01. Creation and Funding of Trust; Transfer of Trust Assets. (a)
The Trust shall be created pursuant to the terms and conditions of the Trust
Agreement, upon the execution and delivery of the Trust Agreement and the filing
by the Owner Trustee of an appropriately completed Certificate of Trust under
the Business Trust Statute. The Trust Depositor, as settlor of the Trust, shall
fund and convey assets to the Trust pursuant to the terms and provisions hereof.
The Trust shall be administered pursuant to the provisions of this Agreement and
the Trust Agreement for the benefit of the Noteholders and Certificateholders.
The Owner Trustee is hereby specifically recognized by the parties hereto as
empowered to conduct business dealings on behalf of the Trust in accordance with
the terms hereof and of the Trust Agreement.
(b) On the Closing Date, the Trust Depositor shall sell, transfer, assign,
set over and otherwise convey to the Trust by execution of an Assignment
substantially in the form of Exhibit A hereto, without recourse other than as
expressly provided herein, (i) all the right, title and interest of the Trust
Depositor in and to the Transferred Assets, (ii) the remittances, deposits and
payments made into the Trust Accounts from time to time and amounts in the Trust
Accounts from time to time (and any investments of such amounts), and (iii) all
proceeds and products of the foregoing (the property in clauses (i)-(iii) above,
the corpus of the Trust, being the "Trust Assets"). Although the Trust Depositor
and the Owner Trustee agree that such transfer is intended to be a sale,
conveyance and transfer of ownership of the Trust Assets, rather than the
granting of a security interest to secure a borrowing, and that the Trust Assets
shall not be property of the Trust Depositor, in the event such transfer is
deemed to be of a mere security interest to secure a borrowing, the Trust
Depositor shall be deemed to have granted the Owner Trustee for the benefit of
the Trust a perfected first priority security interest in such Trust Assets and
this Agreement shall constitute a security agreement under applicable law,
securing the obligations and/or interests represented by the Securities, in the
order and priorities, and subject to the other terms and conditions of, this
Agreement, the Indenture and the Trust Agreement, together with such other
obligations or interests as may arise hereunder and thereunder in favor of the
parties thereto.
Section 2.02. Conditions to the Closing. On or before the Closing Date,
the Trust Depositor shall deliver or cause to be delivered the following
documents to the Owner Trustee and Indenture Trustee:
(a) The initial List of Contracts, certified by the Chairman of the
Board, President or any Vice President of the Trust Depositor, together
with an Assignment substantially in the form of Exhibit A hereto.
(b) A certificate of an officer of the Seller substantially in the
form of Exhibit B to the Transfer and Sale Agreement and of an officer of
the Trust Depositor substantially in the form of Exhibit B hereto.
(c) Opinions of counsel for the Seller and the Trust Depositor
substantially in the form of Exhibits D, E and F hereto (and including as
an addressee thereof each Rating Agency).
(d) A letter from Arthur Andersen LLP, or another nationally
recognized accounting firm, addressed to the Sellers and stating that such
firm has reviewed a sample of the Initial Contracts and performed specific
procedures for such sample with respect to certain contract terms and which
identifies those Initial Contracts which do not conform.
(e) Copies of resolutions of the Board of Directors of each of the
Sellers, the Servicer and the Trust Depositor or of the Executive Committee
of the Board of Directors of each of the Sellers, the Servicer and the
Trust Depositor approving the execution, delivery and performance of this
Agreement and the other Transaction Documents to which any of them is a
party, as applicable, and the transactions contemplated hereunder and
thereunder, certified in each case by the Secretary or an Assistant
Secretary of the Sellers, the Servicer and the Trust Depositor.
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(f) Officially certified, recent evidence of due incorporation and
good standing of each of the Sellers and the Trust Depositor under the laws
of Delaware.
(g) Evidence of proper filing with appropriate officers in the UCC
Filing Locations of UCC financing statements executed by each Seller, as
debtor, naming the Trust Depositor as secured party (and the Owner Trustee
as assignee) and identifying the Contract Assets as collateral; and
evidence of proper filing with appropriate officer in the UCC Filing
Locations of UCC financing statements executed by the Trust Depositor, as
debtor, naming the Owner Trustee as secured party (and the Indenture
Trustee as assignee) and identifying the Trust Assets as collateral; and
evidence of proper filing with appropriate officers in the UCC Filing
Locations of UCC financing statements executed by the Trust and naming the
Indenture Trustee as secured party and identifying the Collateral, as
collateral.
(h) An Officer's Certificate listing the Servicer's Servicing
Officers.
(i) Evidence of deposit in the Collection Account of all funds
received with respect to the Initial Contracts on or after the Initial
Cutoff Date to the Closing Date, together with an Officer's Certificate
from the Servicer to the effect that such amount is correct.
(j) The Officer's Certificate of each Seller specified in Section
2.02(h) of the Transfer and Sale Agreement.
(k) Evidence of deposit in the Reserve Fund of the Reserve Fund
Initial Deposit by the Trust Depositor.
(l) A fully executed Transfer and Sale Agreement.
(m) A fully executed Trust Agreement.
(n) A fully executed Administration Agreement.
(o) A fully executed Indenture.
Section 2.03. Acceptance by Owner Trustee. On the Closing Date, if the
conditions set forth in Section 2.02 have been satisfied, the Owner Trustee
shall issue on behalf of the Trust to, or upon the order of, the Trust Depositor
the Certificates representing ownership of a beneficial interest in 100% of the
Trust and the Owner Trustee shall issue, and the Indenture Trustee shall
authenticate, to, or upon the order of, the Trust Depositor the Notes secured by
the Collateral. The Owner Trustee hereby acknowledges its acceptance, on behalf
of the Trust, of the Trust Assets, and declares that it shall maintain such
right, title and interest in accordance with the terms of this Agreement and the
Trust Agreement upon the trust herein and therein set forth.
Section 2.04. Conveyance of Subsequent Contracts. (a) Subject to the
conditions set forth in paragraph (b) below, the Trust Depositor shall sell,
transfer, assign, set over and otherwise convey to the Trust, without recourse
other than as expressly provided herein and therein, (i) all the right, title
and interest of the Trust Depositor in and to the Subsequent Contracts listed on
the Subsequent List of Contracts (including, without limitation, all rights to
receive payments which are collected pursuant thereto on or after the related
Subsequent Cutoff Date, including any liquidation proceeds therefrom, but
excluding any rights to receive payments which were collected pursuant thereto
prior to such Subsequent Cutoff Date), and (ii) all other rights and property
interests consisting of Transferred Assets related to such Subsequent Contracts
(the property in clauses (i)-(ii) above, upon such transfer, becoming part of
the "Trust Assets"). Although the Trust Depositor and the Owner Trustee agree
that such transfer is intended to be a sale of ownership, rather than the
granting of a security interest to secure a borrowing, and that the Trust Assets
following such transfer shall not be property of the Trust Depositor, in the
event such transfer is deemed to be of a mere security interest to secure a
borrowing, the Trust Depositor shall be deemed to have granted the Owner Trustee
for the benefit of the Trust a perfected
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first priority security interest in such Trust Assets and this Agreement shall
constitute a security agreement under applicable law, securing the obligations
and/or interests represented by the Securities, in the order and priorities, and
subject to the other terms and conditions of, this Agreement, the Indenture and
the Trust Agreement, together with such other obligations or interests as may
arise hereunder and thereunder in favor of the parties hereto and thereto.
(b) The Trust Depositor shall transfer to the Trust the Subsequent
Contracts and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date (and the delivery
of a related Addition Notice by the Trust Depositor shall be deemed a
representation and warranty by the Trust Depositor, and of the Sellers jointly
and severally, that such conditions have been or will be, as of the related
Subsequent Transfer Date, satisfied):
(i) The Trust Depositor shall have provided the Owner Trustee and
the Indenture Trustee with a timely Addition Notice complying with the
definition thereof contained herein;
(ii) there shall have occurred, with respect to each such Subsequent
Contract, a corresponding Addition Event or Substitution Event with respect
one or more Contracts then in the Contract Pool;
(iii) the Subsequent Contract(s) being conveyed to the Trust, satisfy
the Subsequent Contract Qualification Conditions;
(iv) if such Subsequent Contracts include Substitute Contracts,
after giving effect to the conveyance, the Substitute Contract Transfer
Conditions shall remain satisfied;
(v) the Trust Depositor shall have delivered to the Owner Trustee a
duly executed written assignment (including an acceptance by the Owner
Trustee) in substantially the form of Exhibit M hereto (the "Subsequent
Transfer Agreement"), which shall include a Subsequent List of Contracts
listing the Subsequent Contracts;
(vi) the Trust Depositor shall have deposited or caused to be
deposited in the Collection Account all Collections received with respect
to the Subsequent Contracts on or after the related Subsequent Cutoff Date;
(vii) as of each Subsequent Transfer Date, neither the Sellers nor
the Trust Depositor were insolvent nor will any of them have been made
insolvent by such transfer nor are any of them aware of any pending
insolvency;
(viii) no selection procedures believed by the Sellers or the Trust
Depositor to be adverse to the interests of the Noteholders or
Certificateholders shall have been utilized in selecting the Subsequent
Contracts;
(ix) each of the representations and warranties made by the Seller
pursuant to Article III of the Transfer and Sale Agreement applicable to
the Subsequent Contracts shall be true and correct as of the related
Subsequent Transfer Date, and the Sellers shall have performed all
obligations to be performed by them hereunder or thereunder on or prior to
such Subsequent Transfer Date; and
(x) the Seller shall, at its own expense, on or prior to the
Subsequent Transfer Date indicate in its Computer Disk that the Subsequent
Contracts identified on the Subsequent List of Contracts in the Subsequent
Transfer Agreement have been sold to the Issuer through the Trust Depositor
pursuant to this Agreement and the Transfer and Sale Agreement.
Section 2.05. Release of Released Amounts. The Indenture Trustee hereby
agrees to release to the Trust from the Transferred Assets, and the Trust hereby
agrees to release to the Trust Depositor, an amount equal to the Released
Amounts immediately upon identification thereof, which release shall be
automatic and shall require no further act by the Indenture Trustee or the
Trust, provided that the Indenture Trustee or Owner Trustee shall execute and
deliver
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such instruments of release and assignment, or otherwise confirm the foregoing
release, as may reasonably be requested by the Trust Depositor. Upon such
release, such Released Amounts shall not constitute and shall not be included in
the Transferred Assets.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Each Seller under the Transfer and Sale Agreement has jointly and severally
made, and upon execution of each Subsequent Purchase Agreement is jointly and
severally deemed to remake, each of the representations and warranties set forth
in Exhibit J hereto and has consented to the assignment by the Trust Depositor
to the Issuer of the Trust Depositor's rights with respect thereto. Such
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date in the case of the Initial Contracts, and as of the
applicable Subsequent Transfer Date in the case of the Subsequent Contracts, but
shall survive the sale, transfer and assignment of the Contracts to the Trust.
Pursuant to Section 2.01 of this Agreement, the Trust Depositor has sold,
assigned, transferred and conveyed to the Issuer as part of the Trust Assets its
rights under the Transfer and Sale Agreement, including without limitation, the
representations and warranties of the Sellers therein as set forth in Exhibit J
attached hereto, together with all rights of the Trust Depositor with respect to
any breach thereof including any right to require the Sellers to repurchase or
substitute for any Contract in accordance with the Transfer and Sale Agreement.
It is understood and agreed that the representations and warranties set forth or
referred to in this Section shall survive delivery of the Contract Files to the
Owner Trustee or any custodian.
The Trust Depositor hereby represents and warrants to the Owner Trustee
that it has entered into the Transfer and Sale Agreement with the Sellers, that
the Sellers have made the representations and warranties in the Transfer and
Sale Agreement as set forth in Exhibit J hereto, that such representations and
warranties run to and are for the benefit of the Trust Depositor, and that
pursuant to Section 2.01 of this Agreement the Trust Depositor has transferred
and assigned to the Issuer all rights of the Trust Depositor to cause the
Sellers under the Transfer and Sale Agreement to repurchase or substitute for
Contracts in the event of a breach of such representations and warranties.
Section 3.01. Representations and Warranties Regarding the Trust
Depositor. By its execution of this Agreement and each Subsequent Transfer
Agreement, the Trust Depositor represents and warrants to the Issuer, the
Indenture Trustee, the Noteholders and the Certificateholders that:
(a) Sellers' Representations and Warranties. The representations
and warranties set forth in Exhibit J are true and correct.
(b) Organization and Good Standing. The Trust Depositor is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and has the corporate power to own its assets and to
transact the business in which it is currently engaged. The Trust Depositor
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets, or condition (financial
or other) of the Trust Depositor or the Trust.
(c) Authorization; Valid Sale; Binding Obligations. The Trust
Depositor has the power and authority to make, execute, deliver and perform
this Agreement and the other Transaction Documents to which it is a party
and all of the transactions contemplated under this Agreement and the other
Transaction Documents to which it is a party, and to create the Trust and
cause it to make, execute, deliver and perform its obligations under this
Agreement and the other Transaction Documents to which it is a party and
has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the other Transaction
Documents to which it is a party and to cause the Trust to be created. This
Agreement and the
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related Subsequent Transfer Agreement, if any, shall effect a valid sale,
transfer and assignment of the Trust Assets, enforceable against the Trust
Depositor and creditors of and purchasers from the Trust Depositor. This
Agreement and the other Transaction Documents to which the Trust Depositor
is a party constitute the legal, valid and binding obligation of the Trust
Depositor enforceable in accordance with their terms, except as enforcement
of such terms may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies.
(d) No Consent Required. The Trust Depositor is not required to
obtain the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any Governmental
Authority in connection with the execution, delivery, performance, validity
or enforceability of this Agreement or the other Transaction Documents to
which it is a party.
(e) No Violations. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party
by the Trust Depositor, and the consummation of the transactions
contemplated hereby and thereby, will not violate any Requirement of Law
applicable to the Trust Depositor, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Trust
Depositor is a party or by which the Trust Depositor or any of the Trust
Depositor's properties may be bound, or result in the creation or
imposition of any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind upon any of its properties pursuant to
the terms of any such mortgage, indenture, contract or other agreement,
other than as contemplated by the Transaction Documents.
(f) Litigation. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Trust Depositor threatened, against the Trust
Depositor or any of its properties or with respect to this Agreement, the
other Transaction Documents to which it is a party or the Securities (1)
which, if adversely determined, would in the reasonable judgment of the
Trust Depositor have a material adverse effect on the business, properties,
assets or condition (financial or otherwise) of the Trust Depositor or the
Trust or the transactions contemplated by this Agreement or the other
Transaction Documents to which the Trust Depositor is a party or (2)
seeking to adversely affect the federal income tax or other federal, state
or local tax attributes of the Certificates or Notes.
(g) Bulk Sales. The execution, delivery and performance of this
Agreement do not require compliance with any "bulk sales" laws by the Trust
Depositor.
(h) Solvency. The transactions under this Agreement do not and
will not render the Trust Depositor insolvent.
(i) Taxes. The Trust Depositor has filed or caused to be filed
all tax returns which, to its knowledge, are required to be filed and has
put all taxes shown to be due and payable on such returns or on any
assessments made against it or any of its property and all other taxes,
fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any amount of tax due, the validity of
which is currently being contested in good faith by appropriate proceedings
and with respect to which reserves in accordance with generally accepted
accounting principles have been provided on the books of the Trust
Depositor); no tax lien has been filed and, to the Trust Depositor's
knowledge, no claim is being asserted, with respect to any such tax, fee or
other charge.
(j) Place of Business; No Changes. The Trust Depositor's sole
place of business (within the meaning of Article 9 of the UCC) is as set
forth in Section 11.04 below. The Trust Depositor has not changed its name,
whether by amendment of its Certificate of Incorporation, by reorganization
or otherwise, and has not changed the location of its place of business,
within the four months preceding the Closing Date.
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Such representations speak as of the execution and delivery of this Agreement
and as of the Closing Date in the case of the Initial Contracts, and as of the
applicable Subsequent Transfer Date in the case of the Subsequent Contracts, but
shall survive the sale, transfer and assignment of the Contracts to the Trust.
Section 3.02. Representations and Warranties Regarding the Servicer. The
Servicer represents and warrants to the Owner Trustee, the Indenture Trustee,
the Noteholders and the Certificateholders that:
(a) Organization and Good Standing. The Servicer is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the corporate power to
own its assets and to transact the business in which it is currently
engaged. The Servicer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or leased by
it requires such qualification and in which the failure so to qualify would
have a material adverse effect on the business, properties, assets, or
condition (financial or otherwise) of the Servicer or the Trust. The
Servicer is properly licensed in each jurisdiction to the extent required
by the laws of such jurisdiction to service the Contracts in accordance
with the terms hereof.
(b) Authorization; Binding Obligations. The Servicer has the
power and authority to make, execute, deliver and perform this Agreement
and the other Transaction Documents to which the Servicer is a party and
all of the transactions contemplated under this Agreement and the other
Transaction Documents to which the Servicer is a party, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement and the other Transaction Documents to which
the Servicer is a party. This Agreement and the other Transaction Documents
to which the Servicer is a party constitute the legal, valid and binding
obligation of the Servicer enforceable in accordance with their terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies.
(c) No Consent Required. The Servicer is not required to obtain
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any Governmental
Authority in connection with the execution, delivery, performance, validity
or enforceability of this Agreement and the other Transaction Documents to
which the Servicer is a party.
(d) No Violations. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Servicer is
a party by the Servicer will not violate any Requirements of Law applicable
to the Servicer, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Servicer is a party or
by which the Servicer or any of the Servicer's properties may be bound, or
result in the creation of or imposition of any security interest, lien,
pledge, preference, equity or encumbrance of any kind upon any of its
properties pursuant to the terms of any such mortgage, indenture, contract
or other agreement, other than as contemplated by the Transaction
Documents.
(e) Litigation. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Servicer threatened, against the Servicer or any of
its properties or with respect to this Agreement, or any other Transaction
Document to which the Servicer is a party which, if adversely determined,
would in the reasonable judgment of the Servicer have a material adverse
effect on the business, properties, assets or condition (financial or
otherwise) of the Servicer or the Trust or the transactions contemplated by
this Agreement or any other Transaction Document to which the Servicer is a
party.
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ARTICLE FOUR
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
Section 4.01. Custody of Contracts. (a) Subject to the terms and
conditions of this Section 4.01, the contents of each Contract File shall be
held in the custody of the Servicer for the benefit of, and as agent for, the
Noteholders, the Certificateholders, the Indenture Trustee, and the Owner
Trustee as the owner thereof.
(b) The Servicer agrees to maintain the related Contract Files at its
offices where they are currently maintained, or at such other offices of the
Servicer in the UCC Filing Locations as shall from time to time be identified to
the Trustees by written notice. The Servicer may temporarily move individual
Contract Files or any portion thereof without notice as necessary to conduct
collection and other servicing activities in accordance with its customary
practices and procedures; provided, however, that the Servicer will take all
action necessary to maintain the perfection of the Trust's interest in the
Contracts and the proceeds thereof. It is intended that by the Servicer's
agreement pursuant to Section 4.01(a) above and this Section 4.01(b) the
Trustees shall be deemed to have possession of the Contract Files for purposes
of Section 9-305 of the Uniform Commercial Code of the State in which the
Contract Files are located.
(c) As custodian, the Servicer shall have and perform the following powers
and duties:
(i) hold the Contract Files on behalf of the Noteholders and the
Certificateholders and the Owner Trustee and the Indenture Trustee,
maintain accurate records pertaining to each Contract to enable it to
comply with the terms and conditions of this Agreement, maintain a current
inventory thereof, conduct annual physical inspections of Contract Files
held by it under this Agreement and certify to the Owner Trustee and the
Indenture Trustee annually that it continues to maintain possession of such
Contract Files;
(ii) implement policies and procedures in writing and signed by a
Servicing Officer with respect to persons authorized to have access to the
Contract Files on the Servicer's premises and the receipting for Contract
Files taken from their storage area by an employee of the Servicer for
purposes of servicing or any other purposes;
(iii) attend to all details in connection with maintaining custody of
the Contract Files on behalf of the Noteholders and the Certificateholders,
the Owner Trustee and the Indenture Trustee;
(iv) at all times maintain the original of each fully executed
Contract and store such original Contract in a fireproof vault;
(v) stamp each Contract on both the first and the signature page
(if different) as of the Closing Date (or Subsequent Transfer Date, as the
case may be) with a legend in the form attached hereto as Exhibit L; and
(vi) within 30 days of the Closing Date (or Subsequent Transfer
Date, as the case may be) deliver an Officer's Certificate to the Owner
Trustee and the Indenture Trustee certifying that as of a date no earlier
than the Closing Date (or Subsequent Transfer Date, as the case may be) it
has conducted an inventory of the Contract Files (which in the case of
Subsequent Contracts, need be only of the Contract Files related to such
Subsequent Contracts) and that there exists a Contract File for each
Contract and stating all exceptions to such statement, if any.
(d) In performing its duties under this Section 4.01, the Servicer agrees
to act with reasonable care, using that degree of skill and care that it
exercises with respect to similar contracts for the financing of Financed Items
owned and/or serviced by it, and in any event with no less degree of skill and
care than would be exercised by a prudent servicer
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of such Financed Items. The Servicer shall promptly report to the Owner Trustee
and the Indenture Trustee any failure by it to hold the Contract Files as herein
provided and shall promptly take appropriate action to remedy any such failure.
In acting as custodian of the Contract Files, the Servicer further agrees not to
assert any legal or beneficial ownership interest in the Contracts or the
Contract Files, except as provided in Section 5.06. The Servicer agrees to
indemnify the Noteholders, the Certificateholders, the Owner Trustee and the
Indenture Trustee for any and all liabilities, obligations, losses, damages,
payments, costs, or expenses of any kind whatsoever which may be imposed on,
incurred by or asserted against the Noteholders, the Certificateholders, the
Owner Trustee and the Indenture Trustee as the result of any act or omission by
the Servicer relating to the maintenance and custody of the Contract Files;
provided, however, that the Servicer will not be liable for any portion of any
such amount resulting from the gross negligence or willful misconduct of any
Noteholder, Certificateholder, the Owner Trustee or the Indenture Trustee. The
Trustees shall have no duty to monitor or otherwise oversee the Servicer's
performance as custodian hereunder.
Section 4.02. Filing. On or prior to the Closing Date, the Servicer shall
cause the UCC financing statement(s) referred to in Section 2.02(g) hereof to be
filed and from time to time the Servicer shall take and cause to be taken such
actions and execute such documents as are necessary or desirable or as the Owner
Trustee or Indenture Trustee may reasonably request to perfect and protect the
Trust's first priority perfected interest in the Trust Corpus 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.
Section 4.03. Name Change or Relocation. (a) During the term of this
Agreement, neither the Servicer nor the Trust Depositor shall change, nor shall
the Trust Depositor permit any Seller to change, its name, identity or structure
or relocate its chief executive office without first giving at least 30 days'
prior written notice to the Owner Trustee and the Indenture Trustee.
(b) If any change in either the Servicer's, a Seller's or the Trust
Depositor's name, identity or structure or other action would make any financing
or continuation statement or notice of lien seriously misleading within the
meaning of applicable provisions of the UCC or any title statute, the Servicer,
no later than five days after the effective date of such change, shall file such
amendments as may be required to preserve and protect the Trust's interests in
the Trust Assets and the proceeds thereof. In addition, neither any Seller, the
Servicer nor the Trust Depositor shall change its place of business (within the
meaning of Article 9 of the UCC), or the locations in which Contract Files are
maintained, from the locations specified in Section 11.04 below or the UCC
Filing Locations unless it has first taken such action as is advisable or
necessary to preserve and protect the Trust's interest in the Trust Assets.
Promptly after taking any of the foregoing actions, the Servicer shall deliver
to the Owner Trustee and the Indenture Trustee an opinion of counsel reasonably
acceptable to the Owner Trustee stating that, in the opinion of such counsel,
all financing statements or amendments necessary to preserve and protect the
interests of the Owner Trustee in the Trust Corpus have been filed, and reciting
the details of such filing.
Section 4.04. 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 Trust's right,
title and interest in and to the Contracts (including, without limitation, the
security interest in the Equipment related thereto).
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ARTICLE FIVE
SERVICING OF CONTRACTS
Section 5.01. Appointment and Acceptance; Responsibility for Contract
Administration. HFI is hereby appointed as Servicer and custodian (as
contemplated in Article IV hereof) pursuant to this Agreement. HFI accepts the
appointment and agrees to act as the Servicer and custodian pursuant to this
Agreement.
The Servicer will have the sole obligation to manage, administer, service and
make collections on the Contracts and perform or cause to be performed all
contractual and customary undertakings of the holder of the Contracts to the
Obligor. The Owner Trustee, at the written request of a Servicing Officer,
shall furnish the Servicer with any powers of attorney or other documents
necessary or appropriate in the opinion of the Owner Trustee to enable the
Servicer to carry out its servicing and administrative duties hereunder. The
Servicer is hereby appointed the servicer hereunder until such time as any
Service Transfer may be effected under Article VIII.
Section 5.02. General Duties. The Servicer will service, administer and
enforce the Contracts in the Contract Pool on behalf of the Trust and will have
full power and authority to do any and all things in connection with such
servicing and administration which it deems necessary or desirable and as shall
not contravene the provisions of this Agreement. The Servicer will manage,
service, administer, and make collections on the Contracts in the Contract Pool
with reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable contracts that it services for itself
or others. The Servicer's duties will include collection and posting of all
payments, responding to inquiries of Obligors regarding the Contracts in the
Contract Pool, investigating delinquencies, accounting for collections,
furnishing monthly and annual statements with respect to collections and
payments in accordance with Article Nine hereof, making Servicer Advances in its
discretion, and using its best efforts to maintain the perfected first priority
security interest of the Indenture Trustee in the Trust Assets. The Servicer
will follow its customary standards, policies, and procedures and will have full
power and authority, acting alone, to do any and all things in connection with
such managing, servicing, administration, and collection that it deems necessary
or desirable. If the Servicer commences a legal proceeding to enforce a
Defaulted Contract pursuant to Section 5.15 or commences or participates in a
legal proceeding (including a bankruptcy proceeding) relating to or involving a
Contract in the Contract Pool, the Trust will be deemed to have automatically
assigned such Contract to the Servicer for purposes of commencing or
participating in any such proceeding as a party or claimant, and the Servicer is
authorized and empowered by the Trust, pursuant to this Section 5.02, to execute
and deliver, on behalf of itself and the Trust, any and all instruments of
satisfaction or cancellation, or partial or full release or discharge, and all
other notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceedings. If in any
enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Contract on the ground that it is not a real party in interest or a
holder entitled to enforce the Contract, then the Owner Trustee will, at the
Servicer's expense and direction, take steps on behalf of the Trust to enforce
the Contract, including bringing suit in the Trust's name.
Section 5.03. Consent to Assignment or Replacement. At the request of an
Obligor, the Servicer may in its sole discretion consent to the assignment of
the related Contract or the sublease of a unit of the Equipment relating to a
Contract, so long as such Obligor remains liable for all of its obligations
under such Contract. Upon the request of any Obligor, the Servicer may, in its
sole discretion, provide for the substitution or replacement of any unit of
Equipment for a substantially similar unit of Equipment, so long as such Obligor
remains liable for all of its obligations under such Contract.
Section 5.04. Disposition Upon Termination of Contract. Upon the
termination of a Contract included in the Contract Pool as a result of a default
by the obligor thereunder, and upon any such Contract becoming a Defaulted
Contract, the Servicer will use commercially reasonable efforts to dispose of
any related Equipment. Without limiting the generality of the foregoing, the
Servicer may dispose of any such Equipment by purchasing such Equipment or by
selling
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such Equipment to any of its Affiliates for a purchase price equal to the fair
market value thereof. The Servicer will deposit any Prepayments and any Expired
Lease Proceeds of any such disposition in accordance with Section 7.01.
Section 5.05. Subservicers. The Servicer may enter into servicing
agreements with one or more subservicers (including any Affiliate of the
Servicer) to perform all or a portion of the servicing functions on behalf of
the Servicer; provided that the Servicer shall remain obligated and be liable to
the Trust for servicing and administering the Contracts in the Contract Pool in
accordance with the provisions of this Agreement without diminution of such
obligation and liability by virtue of the appointment of such subservicer, to
the same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering such Contracts. The fees and expenses of the
subservicer (if any) will be as agreed between the Servicer and its subservicer
and neither the Owner Trustee, the Trust, the Indenture Trustee nor the Holders
will have any responsibility therefor. All actions of a subservicer taken
pursuant to such a subservicer agreement will be taken as an agent of the
Servicer with the same force and effect as though performed by the Servicer.
Section 5.06. Further Assurance. The Owner Trustee and the Indenture
Trustee will furnish the Servicer, and the Servicer will furnish any
subservicer, with any powers of attorney and other documents necessary or
appropriate to enable the Servicer or a subservicer, as applicable, to carry out
its servicing and administrative duties under this Agreement.
Section 5.07. Notice to Obligors. The Servicer will not be required to
notify any Obligor that such Obligor's Contract or related Equipment, or any
security interest in such Contract or such Equipment, has been sold,
transferred, assigned, or conveyed pursuant to the Transfer and Sale Agreement
or pursuant to this Agreement; provided that, in the event that the Servicer
resigns or is replaced, then if the place for payment pursuant to any Contract
is changed, the Successor Servicer must give each related Obligor prompt written
notice of the appointment of the Successor Servicer and the place to which such
Obligor should make payments pursuant to each such Contract.
Section 5.08. Collection Efforts; Modification of Contracts. The Servicer
will make reasonable efforts to collect all payments called for under the terms
and provisions of the Contracts in the Contract Pool as and when the same become
due, and will follow those collection procedures which it follows with respect
to all comparable contracts that it services for itself or others. The Servicer
may, subject to Sections 5.09 and 5.10, at the request of an Obligor and at the
Servicer's option, waive, modify or otherwise vary any other provision of a
Contract in accordance with its customary and usual practices, provided, that no
such waiver, modification or variance shall, without the consent of each Rating
Agency, have the effect of accelerating (except as provided in Sections 5.09 and
5.10), delaying, reducing or extending the date for payment of Scheduled
Payments with respect to such Contract. The Servicer may in its discretion waive
any late payment charge or any other fees that may be collected in the ordinary
course of servicing any Contract in the Contract Pool.
Section 5.09. Prepaid Contract. The Servicer may, at its option and in
accordance with its customary and usual practices, agree to permit a Contract in
the Contract Pool that is not otherwise contractually prepayable by its terms to
become a Prepaid Contract (which shall not include a Contract that becomes an
Prepaid Contract due to a Casualty Loss); provided, that the Servicer will not
permit the early termination or full prepayment of such a Contract unless (i)
such early termination or full prepayment would not result in the Trust
receiving an amount (the "Prepayment Amount") less than the sum of (A) the
Discounted Contract Balance on the date of such prepayment plus any accrued and
unpaid interest payments thereon (at the Discount Rate) and (B) any outstanding
Servicer Advances thereon, or (ii) if such early termination or full prepayment
would result in the Trust receiving a Prepayment Amount less than the amount set
forth in clause (i), either the Vendor or the Sellers shall have agreed to pay
the Trust the difference between the Prepayment Amount actually paid and the
amount set forth in clause (i) (such payment by the Vendor or Seller also to be
considered a "Prepayment Amount").
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Section 5.10. Acceleration. The Servicer, in its sole discretion, may
accelerate (or elect not to accelerate) the maturity of all or any Scheduled
Payments under any Contract in the Contract Pool under which a default under the
terms thereof has occurred and is continuing (after the lapse of any applicable
grace period); provided that the Servicer is required to accelerate the
Scheduled Payments due under any Contract in the Contract Pool (and take other
action in accordance with the applicable Seller's past practice, including
repossessing or otherwise converting the related Equipment, to realize upon the
value of such Contract and the related Equipment) to the fullest extent
permitted by the terms of such Contract, promptly after such Contract becomes a
Defaulted Contract.
Section 5.11. Taxes and Other Amounts. To the extent provided for in any
Contract in the Contract Pool, the Servicer will make reasonable efforts to
collect all payments with respect to amounts due for taxes, assessments and
insurance premiums relating to such Contracts or the Equipment and remit such
amounts to the appropriate Governmental Authority or insurer on or prior to the
date such payments are due.
Section 5.12. Lockboxes, Etc. On or before the Closing Date with respect
to the Initial Contracts and on or before the relevant Subsequent Transfer Date,
with respect to Subsequent Contracts, the Servicer shall have instructed all
Obligors to make all payments in respect of the Contracts in the Contract Pool
to a Lockbox or directly to a Lockbox Account. All Collections received in a
Lockbox shall, within one Business Day of receipt thereof, be deposited in the
Lockbox Account. In the event that any payments in respect of the Contracts are
made directly to the Servicer, the Servicer shall, within two Business Days of
receipt thereof, deposit such amounts in a Lockbox Account or in the Collection
Account. The Servicer shall cause all Collections deposited in the Lockbox
Account to be deposited in the Collection Account within two Business Days of
the date such Collections are possessed by or on behalf of the Servicer.
Section 5.13. Remittances. The Servicer will service all Collections in
accordance with Section 7.01 hereof. As soon as practicable but in any event not
later than the Business Day following the date of establishment by the Servicer
that any of the collected funds received in any of the Lockboxes do not
constitute Collections on account of the Contracts in the Contract Pool, such
monies which do not constitute such Collections shall be remitted to the
applicable Seller.
Section 5.14. Servicer Advances. For each Collection Period, if the
Servicer determines that any Scheduled Payment (or portion thereof) which was
due and payable pursuant to a Contract in the Contract Pool during such
Collection Period was not received prior to the end of such Collection Period,
the Servicer may make a Servicer Advance in an amount up to the amount of such
delinquent Scheduled Payment (or portion thereof) , to the extent that in its
sole discretion it determines that it can recoup such amount from subsequent
Collections under the related Contract. The Servicer will deposit any Servicer
Advances into the Collection Account on or prior to 11:00 a.m. (Chicago time) on
the related Transfer Date, in immediately available funds. The Servicer will be
entitled to be reimbursed for Servicer Advances pursuant to Sections 7.05(a) and
7.05(b).
Section 5.15. Realization Upon Defaulted Contract. The Servicer will use
its best efforts consistent with its customary and usual practices and
procedures in its servicing of contracts to repossess or otherwise comparably
convert the ownership of any Equipment relating to a Defaulted Contract and will
act as sales and processing agent for Equipment or Applicable Security which it
repossesses. The Servicer will follow such other practices and procedures as it
deems necessary or advisable and as are customary and usual in its servicing of
contracts and other actions by the Servicer in order to realize upon such
Equipment or Applicable Security, which practices and procedures may include
reasonable efforts to enforce all obligations of Obligors and repossessing and
selling such Equipment or Applicable Security at public or private sale in
circumstances other than those described in the preceding sentence. Without
limiting the generality of the foregoing, the Servicer may sell any such
Equipment or Applicable Security to the Servicer or its Affiliates for a
purchase price equal to the then fair market value thereof. In any case in which
any such Equipment or Applicable Security has suffered damage, the Servicer will
not expend funds in connection with any repair or toward the repossession of
such Equipment or Applicable Security unless it determines in its discretion
that such repair and/or repossession will increase the Liquidation Proceeds by
an amount greater than the amount of such expenses. The Servicer will remit to
the Collection Account the Liquidation Proceeds received in connection with the
sale or disposition
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of Equipment or Applicable Security relating to a Defaulted Contract in
accordance with Section 7.01 net of any amounts payable to a Vendor.
Section 5.16. Maintenance of Insurance Policies. The Servicer will use its
best efforts to ensure that each Obligor maintains an Insurance Policy with
respect to the related Equipment in an amount at least equal to the sum of the
Discounted Contract Balance of the related Contract in the Contract Pool;
provided that the Servicer, in accordance with its customary servicing
procedures, may allow Obligors to self-insure. Additionally, the Servicer will
require that each Obligor maintain property damage liability insurance during
the term of each Contract in the Contract Pool in amounts and against risks
customarily insured against by the Obligor on equipment owned by it. If an
Obligor fails to maintain property damage insurance, the Servicer may purchase
and maintain such insurance on behalf of, and at the expense of, the Obligor. In
connection with its activities as Servicer of the Contracts, the Servicer agrees
to present, on behalf of itself, the Trust, the Indenture Trustee and the
Holders, claims to the insurer under each Insurance Policy and any such
liability policy, and to settle, adjust and compromise such claims, in each
case, consistent with the terms of each Contract. The Servicer's Insurance
Policies with respect to the related Equipment will insure against liability for
personal injury and property damage relating to such Equipment, will name the
Indenture Trustee as an insured thereunder and will contain a breach of warranty
clause.
Section 5.17. Other Servicer Covenants. The Servicer hereby covenants
that:
(a) Contract Files. The Servicer will, at its own cost and
expense, maintain all Contract Files in accordance with its customary
procedures. Without limiting the generality of the preceding sentence, the
Servicer will not dispose of any documents constituting the Contract Files
in any manner which is inconsistent with the performance of its obligations
as the Servicer pursuant to this Agreement and will not dispose of any
Contract except as contemplated by this Agreement.
(b) Compliance with Law. The Servicer will comply, in all
material respects, with all laws and regulations of any Governmental
Authority applicable to the Servicer or the Contracts in the Contract Pool
and related Equipment and Contract Files or any part thereof; provided that
the Servicer may contest any such law or regulation in any reasonable
manner which will not materially and adversely affect the value of (or the
rights of the Trust on behalf of the Holders or the Indenture Trustee on
behalf of the Noteholders, with respect to) the Trust Assets.
(c) Obligations with Respect to Contracts; Modifications. The
Servicer will duly fulfill and comply with, in all material respects, all
obligations on the part of the Trust Depositor to be fulfilled or complied
with under or in connection with each Contract in the Contract Pool and
will do nothing to impair the rights of the Indenture Trustee and the
Holders in, to and under the Trust Assets. The Servicer will perform such
obligations under the Contracts in the Contract Pool and will not change or
modify the Contracts, except as otherwise provided herein and except
insofar as any such failure to perform, change or modify would not
materially and adversely affect the value of (or the rights of the Trust,
on behalf of the Holders, or the Indenture Trustee, on behalf of the
Noteholders, with respect to) the Contracts or the related Equipment.
(d) No Bankruptcy Petition. Prior to the date that is one year
and one day after the payment in full of all amounts owing in respect of
all outstanding Securities, the Servicer will not institute against the
Trust Depositor, or the Trust, or join any other Person in instituting
against the Trust Depositor or the Trust, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar
proceedings under the laws of the United States or any state of the United
States. This Section 5.17(d) will survive the termination of this
Agreement.
(f) Location of Contract Files. The Contract Files shall remain
at all times in the possession of the Servicer.
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Section 5.18. Servicing Compensation. As compensation for its servicing
activities hereunder and reimbursement for its expenses as set forth in Section
5.19, the Servicer shall be entitled to receive a monthly servicing fee in
respect of any Collection Period (or portion thereof) prior to the termination
of the Trust (with respect to each Collection Period, the "Servicing Fee") equal
to one-twelfth of the product of (A) the Servicing Fee Percentage and (B) the
ADCB of the Contract Pool as of the first day of such Collection Period.
Section 5.19. Payment of Certain Expenses by Servicer. The Servicer will
be required to pay all expenses incurred by it in connection with its activities
under this Agreement, including fees and disbursements of independent
accountants, the Owner Trustee, the Indenture Trustee, taxes imposed on the
Servicer, expenses incurred in connection with payments and reports pursuant to
this Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Trust or the Trust Depositor, but excluding
Liquidation Expenses incurred as a result of activities contemplated by Section
5.15. The Servicer will be required to pay all reasonable fees and expenses
owing to the Owner Trustee or the Indenture Trustee in connection with the
maintenance of the Trust Accounts. The Servicer shall be required to pay such
expenses for its own account and shall not be entitled to any payment or
reimbursement therefor other than the Servicing Fee.
Section 5.20. Records. The Servicer shall, during the period it is
Servicer hereunder, maintain such books of account and other records as will
enable the Owner Trustee and the Indenture Trustee to determine the status of
each Contract.
Section 5.21. Inspection. (a) At all times during the term hereof, the
Servicer shall afford the Owner Trustee and the Indenture Trustee and their
respective authorized agents reasonable access during normal business hours to
the Servicer's records relating to the Contracts and will cause its personnel to
assist in any examination of such records by the Owner Trustee or the Indenture
Trustee, or such authorized agents, and allow copies of the same to be made. The
examination referred to in this Section will be conducted in a manner which does
not unreasonably interfere with the Servicer's normal operations or customer or
employee relations. Without otherwise limiting the scope of the examination the
Owner Trustee or the Indenture Trustee may, using generally accepted audit
procedures, verify the status of each Contract and review the Computer Disk and
records relating thereto for conformity to Monthly Reports prepared pursuant to
Article IX and compliance with the standards represented to exist as to each
Contract in this Agreement.
(b) At all times during the term hereof, the Servicer shall keep available
a copy of the List of Contracts at its principal executive office for inspection
by Securityholders.
Section 5.22. Trustees to Cooperate in Releases. At the same time as (i)
any Lease in the Contract Pool becomes an Expired Lease and the Equipment
related to such Lease is sold, (ii) any Contract becomes a Prepaid Contract and
in connection therewith the Equipment related to such Prepaid Contract is sold,
or (iii) the Servicer substitutes or replaces any unit of Equipment as
contemplated in Section 5.03, the Owner Trustee, on behalf of the Trust, and the
Indenture Trustee, on behalf of the Noteholders, will to the extent requested by
the Servicer release the Trust's interest in the Equipment relating to such
Expired Lease or Prepaid Contract or such substituted or replaced Equipment, as
the case may be; provided that such release will not constitute a release of the
Trust's interest in the proceeds of such sale (other than with respect to
Equipment that is replaced pursuant to Section 5.03). In connection with any
sale of such Equipment, the Owner Trustee, on behalf of the Trust, and the
Indenture Trustee will execute and deliver to the Servicer any assignments,
bills of sale, termination statements and any other releases and instruments as
the Servicer may request in order to effect such release and transfer; provided
that neither the Owner Trustee nor the Indenture Trustee will make any
representation or warranty, express or implied, with respect to any such
Equipment in connection with such sale or transfer and assignment. Nothing in
this Section 5.22 shall diminish the Servicer's obligations pursuant to Section
7.01 with respect to the proceeds of any such sale.
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ARTICLE SIX
COVENANTS OF THE TRUST DEPOSITOR
Section 6.01. Corporate Existence. During the term of this Agreement, the
Trust Depositor will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the other Transaction
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby. In addition, all transactions and dealings between the Trust Depositor
and its Affiliates will be conducted on an arm's-length basis.
Section 6.02. Contracts Not to be Evidenced by Promissory Notes. The
Trust Depositor will take no action to cause any Contract to be evidenced by an
instrument (as defined in the UCC), except in connection with the enforcement or
collection of such Contract.
Section 6.03. Security Interests. Except for the transfers hereunder and
any Residual Investment that is not a Guaranteed Residual Investment, the Trust
Depositor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Contract in the
Contract Pool or related Equipment, whether now existing or hereafter
transferred to the Trust, or any interest therein. The Trust Depositor will
immediately notify the Owner Trustee and the Indenture Trustee of the existence
of any Lien on any Contract in the Contract Pool or related Equipment; and the
Trust Depositor shall defend the right, title and interest of the Trust in, to
and under the Contracts in the Contract Pool and the related Equipment, against
all claims of third parties; provided, however, that nothing in this Section
6.03 shall prevent or be deemed to prohibit the Trust Depositor from suffering
to exist Permitted Liens upon any of the Contracts in the Contract Pool or any
related Equipment.
Section 6.04. Delivery of Collections. The Trust Depositor agrees to pay
to the Servicer promptly (but in no event later than two Business Days after
receipt) all Collections received by the Trust Depositor in respect of the
Contracts in the Contract Pool, for application in accordance with Section 7.01.
Section 6.05. Regulatory Filings. The Trust Depositor shall make any
filings, reports, notices, applications and registrations with, and seek any
consents or authorizations from, the Commission and any state securities
authority on behalf of the Trust as may be necessary or that Trust Depositor
deems advisable to comply with any federal or state securities or reporting
requirements laws.
Section 6.06. Compliance With Law. Trust Depositor hereby agrees to
comply in all material respects with all Requirements of Law applicable to Trust
Depositor.
Section 6.07. Activities. The Trust Depositor shall not engage in any
business or activity of any kind, or enter into any transaction or indenture,
mortgage, instrument, agreement, contract, lease or other undertaking, which is
not directly related to the transactions contemplated and authorized by this
Agreement or the other Transaction Documents.
Section 6.08. Indebtedness. The Trust Depositor shall not create, incur,
assume or suffer to exist any Indebtedness or other liability whatsoever, except
(i) obligations incurred under this Agreement, or (ii) liabilities incident to
the maintenance of its corporate existence in good standing.
Section 6.09. Guarantees. The Trust Depositor shall not become or remain
liable, directly or contingently, in connection with any Indebtedness or other
liability of any other Person, whether by guarantee, endorsement (other than
endorsements of negotiable instruments for deposit or collection in the ordinary
course of business), agreement to purchase or repurchase, agreement to supply or
advance funds, or otherwise.
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Section 6.10. Investments. The Trust Depositor shall not make or suffer
to exist any loans or advances to, or extend any credit to, or make any
investments (by way of transfer of property, contributions to capital, purchase
of stock or securities or evidences of indebtedness, acquisition of the business
or assets, or otherwise) in, any Person except (i) for purchases of Contracts
pursuant to the Transfer and Sale Agreement, or (ii) for investments in Eligible
Investments in accordance with the terms of this Agreement.
Section 6.11. Merger; Sales. The Trust Depositor shall not enter into any
transaction of merger or consolidation, or liquidate or dissolve itself (or
suffer any liquidation or dissolution) or acquire or be acquired by any Person,
or convey, sell, lease or otherwise dispose of all or substantially all of its
property or business, except as provided for in this Agreement.
Section 6.12. Distributions. The Trust Depositor shall not declare or
pay, directly or indirectly, any dividend or make any other distribution
(whether in cash or other property) with respect to the profits, assets or
capital of the Trust Depositor or any Person's interest therein, or purchase,
redeem or otherwise acquire for value any of its capital stock now or hereafter
outstanding, except that so long as no Event of Default has occurred and is
continuing and no Event of Default would occur as a result thereof or after
giving effect thereto and the Trust Depositor would continue to be Solvent as a
result thereof and after giving effect thereto, the Trust Depositor may declare
and pay dividends on its capital stock.
Section 6.13. Other Agreements. The Trust Depositor shall not become a
party to, or permit any of its properties to be bound by, any indenture,
mortgage, instrument, contract, agreement, lease or other undertaking, except
this Agreement and the other Transaction Documents to which it is a party; nor
shall it amend or modify the provisions of its Certificate of Incorporation or
issue any power of attorney except to the Owner Trustee, the Indenture Trustee
or the Servicer.
Section 6.14. Separate Corporate Existence. The Trust Depositor shall:
(i) maintain its own deposit account or accounts, separate from
those of any Affiliate, with commercial banking institutions. The
funds of the Trust Depositor will not be diverted to any other Person
or for other than corporate uses of the Trust Depositor.
(ii) Ensure that, to the extent that it shares the same officers
or other employees as any of its stockholders or Affiliates, the
salaries of and the expenses related to providing benefits to such
officers and other employees shall be fairly allocated among such
entities, and each such entity shall bear its fair share of the salary
and benefit costs associated with all such common officers and
employees.
(iii) Ensure that, to the extent that it jointly contracts with
any of its stockholders or Affiliates to do business with vendors or
service providers or to share overhead expenses, the costs incurred in
so doing shall be allocated fairly among such entities, and each such
entity shall bear its fair share of such costs. To the extent that the
Trust Depositor contracts or does business with vendors or service
providers when the goods and services provided are partially for the
benefit of any other Person, the costs incurred in so doing shall be
fairly allocated to or among such entities for whose benefit the goods
and services are provided, and each such entity shall bear its fair
share of such costs. All material transactions between Trust Depositor
and any of its Affiliates shall be only on an arm's length basis.
(iv) Maintain a principal executive and administrative office
through which its business is conducted separate from those of its
Affiliates. To the extent that the Trust Depositor and any of its
stockholders or Affiliates have offices in the same location, there
shall be a fair and appropriate allocation of overhead costs among
them, and each such entity shall bear its fair share of such expenses.
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(v) Conduct its affairs strictly in accordance with its
Certificate of Incorporation and observe all necessary, appropriate
and customary corporate formalities, including, but not limited to,
holding all regular and special stockholders' and directors' meetings
appropriate to authorize all corporate action, keeping separate and
accurate minutes of its meetings, passing all resolutions or consents
necessary to authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts, including, but not
limited to, payroll and intercompany transaction accounts.
(vi) Take or refrain from taking, as applicable, each of the
activities specified in the "nonsubstantive consolidation" opinion of
Winston & Strawn, delivered on the Closing Date, upon which the
conclusions expressed therein are based.
Section 6.15. Location; Records. The Trust Depositor (x) shall not move
outside the State of Illinois, the location of its chief executive office,
without 45 days' prior written notice to the Owner Trustee and the Indenture
Trustee and (y) shall not move or permit the Servicer to move the location of
the Contract Files from the location(s) thereof on the Closing Date, without 45
days' prior written notice to the Owner Trustee and the Indenture Trustee and
(z) will promptly take all actions required (including, but not limited to, all
filings and other acts necessary or advisable under the UCC of each relevant
jurisdiction in order to continue the first priority perfected security interest
of the Indenture Trustee in all Contracts in the Contract Pool. The Trust
Depositor will give the Owner Trustee and the Indenture Trustee prompt notice of
a change within the State of Illinois of the location of its chief executive
office.
Section 6.16. Liability of Trust Depositor; Indemnities. The Trust
Depositor shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Trust Depositor under this Agreement.
The Trust Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee and the Servicer from and against any
taxes that may at any time be asserted against any such Person with respect to
the transactions contemplated herein and in the other Transaction Documents,
including any sales, gross receipts, general corporation, tangible personal
property, Illinois personal property replacement privilege or license taxes
(but, in the case of the Issuer, not including any taxes asserted with respect
to, and as of the date of, the sale of the Contracts to the Issuer or the
issuance and original sale of the Securities, or asserted with respect to
ownership of the Contracts, or federal or other income taxes arising out of
distributions on the Certificates or the Notes) and costs and expenses in
defending against the same.
The Trust Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee and the Securityholders from and
against any loss, liability or expense incurred by reason of the Trust
Depositor's willful misfeasance, bad faith or negligence (other than errors in
judgment) in the performance of its duties under this Agreement, or by reason of
reckless disregard of its obligations and duties under this Agreement.
The Trust Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, and the Indenture Trustee 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 trusts and duties herein
and, in the case of the Owner Trustee, in the Trust Agreement and, in the case
of the Indenture Trustee, in the Indenture, except to the extent that such cost,
expense, loss, claim, damage or liability in the case of (i) the Owner Trustee,
shall be due to the willful misfeasance, bad faith or negligence of the Owner
Trustee, or shall arise from the breach by the Owner Trustee of any of its
representations or warranties set forth in Section 7.03 of the Trust Agreement,
or (ii) the Indenture Trustee, shall be due to the willful misfeasance, bad
faith or negligence of the Indenture Trustee.
The Trust Depositor shall be liable directly to and will indemnify any
injured party or any other creditor of the Trust for all losses, claims,
damages, liabilities and expenses of the Trust to the extent that the Trust
Depositor would be liable if the Trust were a partnership under the Delaware
Revised Uniform Limited Partnership Act in which the Trust Depositor were a
general partner; provided, however, that the Trust Depositor shall not be liable
for any losses incurred by a Certificateholder in the capacity of an investor in
the Trust Certificates or a Noteholder in the capacity of an investor in the
Notes. In addition, any third party creditors of the Trust (other than in
connection with the obligations described
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in the immediately preceding sentence for which the Trust Depositor shall not be
liable) shall be deemed third party beneficiaries of this paragraph. The
obligations of the Trust Depositor under this paragraph shall be evidenced by
the Trust Certificates described in the Trust Agreement, which for purposes of
the Business Trust Statute shall be deemed to be a separate class of Trust
Certificates from all other Trust Certificates issued by the Trust; provided
that the rights and obligations evidenced by all Trust Certificates, regardless
of class, shall, except as provided in this Section, be identical.
Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the Trust
Depositor shall have made any indemnity payments pursuant to this Section and
the Person to or on behalf of whom such payments are made thereafter shall
collect any of such amounts from others, such Person shall promptly repay such
amounts to the Trust Depositor, without interest.
Section 6.17. Bankruptcy Limitations. The Trust Depositor shall not,
without the affirmative vote of a majority of the members of the Board of
Directors of the Trust Depositor (which must include the affirmative vote of at
least two duly appointed Independent directors) (A) dissolve or liquidate, in
whole or in part, or institute proceedings to be adjudicated bankrupt or
insolvent, (B) consent to the institution of bankruptcy or insolvency
proceedings against it, (C) file a petition seeking or consent to reorganization
or relief under any applicable federal or state law relating to bankruptcy, (D)
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the corporation or a substantial
part of its property, (E) make a general assignment for the benefit of
creditors, (F) admit in writing its inability to pay its debts generally as they
become due, or (G) take any corporate action in furtherance of the actions set
forth in clauses (A) through (F) above; provided, however, that no director may
be required by any shareholder of the Trust Depositor to consent to the
institution of bankruptcy or insolvency proceedings against the Trust Depositor
so long as it is Solvent.
Section 6.18 Limitation on Liability of Trust Depositor and Others. The
Trust Depositor and any director or officer or employee or agent of the Trust
Depositor may rely in good faith on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Trust Depositor and any director or officer or employee or agent
of the Trust Depositor shall be reimbursed by the Owner Trustee or the Indenture
Trustee, as the case may be, for any contractual damages, liability or expense
incurred by reason of the Owner Trustee's or the Indenture Trustee's willful
misfeasance, bad faith or negligence (except errors in judgment) in the
performance of their respective duties hereunder, or by reason of reckless
disregard of their respective obligations and duties hereunder. The Trust
Depositor shall not be under any obligation to appear in, prosecute or defend
any legal action that shall not be incidental to its obligations under this
Agreement, and that in its opinion may involve it in any expense or liability.
Section 6.19. Chief Executive Office. During the term of this Agreement,
the Trust Depositor will maintain its chief executive office in one of the
States of the United States, except Louisiana, Tennessee, Colorado, Kansas, New
Mexico, Oklahoma, Utah or Wyoming.
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ARTICLE SEVEN
ESTABLISHMENT OF ACCOUNTS; DISTRIBUTIONS; RESERVE FUND
Section 7.01. Trust Accounts; Collections. (a) On or before the Closing
Date, the Trust Depositor shall establish the Collection Account, Note
Distribution Account, Certificate Distribution Account and Reserve Fund, each in
the name of the Indenture Trustee for the benefit of the Noteholders and the
Certificateholders, respectively. The Servicer and Indenture Trustee are hereby
required to ensure that each of the Trust Accounts is established and maintained
as an Eligible Account with a Qualified Institution. If any institution with
which any of the accounts established pursuant to this Section 7.01(a) are
established ceases to be a Qualified Institution, the Servicer or the Indenture
Trustee (as the case may be) shall within 10 Business Days establish a
replacement account at a Qualified Institution after notice of such event.
(b) The Servicer shall deposit or cause to be deposited, without deposit
into any intervening account, into the Collection Account as promptly as
practical after the Date of Processing (but in any case not later than the
second Business Day following the Date of Processing thereof), all Collections
on deposit in the form of available funds in a Lockbox Account, and all
Collections otherwise received by the Servicer.
(c) Notwithstanding Section 7.01(b), the Servicer shall deposit or cause to
be deposited, on the Closing Date and on each Subsequent Transfer Date
thereafter, in immediately available funds into the Collection Account, all
collections received after the applicable Cutoff Date and through and including
the Closing Date or Subsequent Transfer Date, as the case may be, in respect of
Contracts being transferred to the Trust on such date.
(d) Notwithstanding Sections 7.01(a) and (b), the Servicer shall not be
required to deposit or cause to be deposited Collections on any Contracts in the
Contract Pool on which (and to the extent that) the Servicer has previously mad
a Servicer Advance which has not been reimbursed, which amounts the Servicer may
retain (as reimbursement of such Servicer Advance).
Section 7.02. Reserve Fund Deposit. On the Closing Date, the Owner
Trustee, on behalf of the Trust Depositor, shall deposit the Reserve Fund
Initial Deposit into the Reserve Fund from the net proceeds of the Securities.
Section 7.03. Trust Account Procedures. If the Servicer so directs, in
writing, the Indenture Trustee shall invest the amounts in the Trust Accounts in
Qualified Eligible Investments that mature not later than one Business Day prior
to the next succeeding Distribution Date. Once such funds are invested, the
Indenture Trustee shall not change the investment of such funds. Any loss on
such investments shall be deposited in the applicable Trust Account by the
Servicer out of its own funds immediately as realized. Funds in the Trust
Accounts not so invested must be insured to the extent permitted by law by the
Bank Insurance Fund or the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation. Subject to the restrictions herein, the Indenture
Trustee may purchase a Qualified Eligible Investment from itself or an
Affiliate. Subject to the other provisions hereof, the Indenture Trustee shall
have sole control over each such investment and the income thereon, and any
certificate or other instrument evidencing any such investment, if any, shall be
delivered directly to the Indenture Trustee or its agent, together with each
document of transfer, if any, necessary to transfer title to such investment to
the Indenture Trustee in a manner which complies with this Section 7.03. All
Investment Earnings on investments of funds in the Trust Accounts shall be
deposited in the Collection Account pursuant to Section 7.01 and distributed on
the next Distribution Date pursuant to Section 7.05. The Trust Depositor and the
Trust agree and acknowledge that the Indenture Trustee is to have "control"
(within the meaning of Section 8-102 of the UCC as enacted in Illinois) of
collateral comprised of "Investment Property" (within the meaning of Section 9-
115 of the UCC as enacted in Illinois) for all purposes of this Agreement.
Section 7.04. Securityholder Distributions. (a) Each Noteholder and
Certificateholder as of the related Record Date shall be paid on the next
succeeding Distribution Date by check mailed to such Noteholder or
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Certificateholder at the address for such Noteholder or Certificateholder
appearing on the Note Register or Certificate Register or by wire transfer if
such Noteholder or Certificateholder provides written instructions to the
Indenture Trustee or Owner Trustee, respectively, at least ten days prior to
such Distribution Date.
(b) The Indenture Trustee shall serve as the Paying Agent hereunder and
shall make the payments to the Noteholders and Certificateholders required
hereunder. The Indenture Trustee hereby agrees that all amounts held by it for
payment hereunder will be held in trust for the benefit of the Noteholders and
Certificateholders.
Section 7.05. Allocations and Distributions.
(a) Allocations and Distributions Prior to an Event of Default or a
Restricting Event. On each Determination Date prior to an Event of Default or a
Restricting Event, the Servicer, pursuant to monthly payment instructions and
notification, shall instruct the Indenture Trustee to withdraw, and on the
succeeding Distribution Date the Indenture Trustee acting in accordance with
such instructions shall withdraw, the amounts required to be withdrawn from the
Collection Account pursuant to this Section in order to make the following
payments or allocations from the Available Amounts for the related Distribution
Date (in each case, such payment or transfer to be made only to the extent funds
remain available therefor after all prior payments and transfers for such
Distribution Date have been made), in the following order of priority:
(i) pay to the Servicer, the amount of any Unreimbursed Servicer
Advance;
(ii) pay to the Servicer the monthly Servicing Fee for the preceding
monthly period together with any amounts in respect of the Servicing Fee
that were due in respect of prior monthly periods that remain unpaid;
(iii) pay to the Indenture Trustee on behalf of the Class A-1
Noteholders an amount equal to interest accrued in respect of the related
Class A-1 Notes for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that accrued in respect
of prior Accrual Periods for which no allocation was previously made;
provided that if the Available Amounts remaining to be allocated pursuant
to this clause are less than the full amount required to be so allocated,
such remaining Available Amounts shall be allocated to the Holder of each
Class A-1 Note pro rata based upon the outstanding Principal Amount
thereof;
(iv) pay to the Indenture Trustee on behalf of the Class A-2
Noteholders an amount equal to interest accrued in respect of the related
Class A-2 Notes for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that accrued in respect
of prior Accrual Periods for which no allocation was previously made;
provided that if the Available Amounts remaining to be allocated pursuant
to this clause are less than the full amount required to be so allocated,
such remaining Available Amounts shall be allocated to the Holder of each
Class A-2 Note pro rata based upon the outstanding Principal Amount
thereof;
(v) pay to the Indenture Trustee on behalf of the Class B Noteholders
an amount equal to the interest accrued thereon for the Accrual Period
immediately preceding such Distribution Date, together with any amounts
that accrued in respect of prior Accrual Periods for which no allocation
was previously made; provided, that if the Available Amounts remaining to
be allocated pursuant to this clause are less than the full amount required
to be so paid, such remaining Available Amount shall be paid to the Holder
of each Class B Note pro rata based on the outstanding Principal Amount
thereof;
(vi) pay to the Indenture Trustee on behalf of the Class C
Noteholders, an amount equal to the interest accrued thereon for the
Accrual Period immediately preceding such Distribution Date, together with
any such amounts that accrued in respect of prior Accrual Periods for which
no allocation was previously made; provided, that if the Available Amounts
remaining to be allocated pursuant to this clause are less than the full
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amount required to be so paid, such remaining Available Amounts shall be
paid to the Holder of each Class C Note pro rata based on the outstanding
Principal Amount thereof;
(vii) pay to the Indenture Trustee on behalf of the Class D
Noteholders an amount equal to interest accrued thereon for the Accrual
Period immediately preceding such Distribution Date, together with any such
amounts that accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available Amounts
remaining to be allocated pursuant to this clause are less than the full
amount required to be so paid, such remaining Available Amounts shall be
paid to the Holder of each Class D Note pro rata based on the outstanding
principal amount thereof;
(viii) pay to the Indenture Trustee, on behalf of the Class A-1
Noteholders, the lesser of (i) the Class A-1 Principal Payment Amount for
such Distribution Date, and (ii) the remaining outstanding Principal Amount
of the Class A-1 Notes; provided that if the Available Amounts remaining to
be allocated pursuant to this clause are less than the full amount required
to be so paid, such remaining Available Amounts shall be allocated to each
Class A-1 Note pro rata based on the outstanding principal amount thereof;
(ix) pay to the Indenture Trustee, on behalf of the Class A-2
Noteholders, the lesser of (i) the Class A-2 Principal Payment Amount for
such Distribution Date, and (ii) the remaining outstanding Principal Amount
of the Class A-2 Notes; provided (i) that if the Available Amounts
remaining to be allocated pursuant to this clause are less than the full
amount required to be so paid, such remaining Available Amounts shall be
allocated to each Class A-2 Note pro rata based on the outstanding
principal amount thereof, and (ii) if the amount to be allocated pursuant
to this clause exceeds the amount needed to repay outstanding Class A-2
Note principal in full, then such excess shall be applied in repayment of
principal on the Class B Notes;
(x) pay to the Indenture Trustee, on behalf of the Class B
Noteholders, the lesser of (i) the Class B Principal Payment Amount for
such Distribution Date, and (ii) the remaining outstanding Principal Amount
of the Class B Notes; provided (i) that if the Available Amounts remaining
to be allocated pursuant to this clause are less than the full amount
required to be so paid, such remaining Available Amounts shall be allocated
to each Class B Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this clause
exceeds the amount needed to repay outstanding Class B Note principal in
full, then such excess shall be applied in repayment of principal on the
Class C Notes;
(xi) pay to the Indenture Trustee, on behalf of the Class C
Noteholders, the lesser of (i) the Class C Principal Payment Amount for
such Distribution Date, and (ii) the remaining outstanding Principal Amount
of the Class C Notes; provided (i) that if the Available Amounts remaining
to be allocated pursuant to this clause are less than the full amount
required to be so paid, such remaining Available Amounts shall be allocated
to each Class C Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this clause
exceeds the amount needed to repay outstanding Class C Note principal in
full, then such excess shall be applied in repayment of principal on the
Class D Notes; and
(xii) pay to the Indenture Trustee, on behalf of the Class D
Noteholders, the lesser of (i) the Class D Principal Payment Amount for
such Distribution Date, and (ii) the remaining outstanding Principal Amount
of the Class D Notes; provided (i) that if the Available Amounts remaining
to be allocated pursuant to this clause are less than the full amount
required to be so paid, such remaining Available Amounts shall be
allocated to each Class D Note pro rata based on the outstanding principal
amount thereof, and (ii) if the amount to be allocated pursuant to this
clause exceeds the amount needed to repay outstanding Class D Note
principal in full, then such excess shall be applied in accordance with the
priorities in clauses (xiii) and (xiv) below;
(xiii) pay to the Indenture Trustee, for deposit into the Reserve
Fund, such remaining Available Amounts up to such amount as may be required
to cause the amounts on deposit in the Reserve Fund to equal the Reserve
Fund Amount; and
(xiv) pay any remaining Available Amounts to the Holder of the
Class E Certificates.
Prior to the occurrence of an Event of Default or Restricting Event, if the
Available Amounts are less than the amount required to make in full the payments
and allocations set forth in Sections 7.05(a)(i)-(xii) above, amounts held in
the Reserve Fund shall be withdrawn in order for any of such payments or
allocations to be made and such amounts will be considered as Available Amounts
for such purpose only.
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(b) Allocations and Payments after an Event of Default or a Restricting
Event. On each Determination Date after the occurrence of an Event of Default or
on each Determination Date after the occurrence, but only during the
continuance, of a Restricting Event, the Servicer, pursuant to monthly payment
instructions and notification, shall instruct the Indenture Trustee to withdraw,
and on the succeeding Distribution Date the Indenture Trustee acting in
accordance with such instructions shall withdraw, the amounts required to be
withdrawn from the Collection Account pursuant to this Section in order to make
the following payments or allocations from the Available Amounts for the related
Distribution Date (in each case, such payment or transfer to be made only to the
extent funds remain available therefor after all prior payments and transfers
for such Distribution Date have been made), in the following order of priority:
(i) pay to the Indenture Trustee the amount of any unpaid fees and
expenses to which the Indenture Trustee is entitled under Section
5.06(a)(i) of the Indenture;
(ii) pay to the Servicer, the amount of any Unreimbursed Servicer
Advances;
(iii) pay to the Servicer the monthly Servicing Fee for the preceding
monthly period together with any amounts in respect of the Servicing Fee
that were due in respect of prior monthly periods that remain unpaid;
(iv) pay to the Indenture Trustee on behalf of the Class A-1
Noteholders an amount equal to interest accrued in respect of the related
Class A-1 Notes for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that accrued in respect
of prior Accrual Periods for which no allocation was previously made;
provided that if the Available Amounts remaining to be allocated pursuant
to this clause are less than the full amount required to be so allocated,
such remaining Available Amounts shall be allocated to the Holder of each
Class A-1 Note pro rata based upon the outstanding Principal Amount
thereof;
(v) pay to the Indenture Trustee on behalf of the Class A-2
Noteholders an amount equal to interest accrued in respect of the related
Class A-2 Notes for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that accrued in respect
of prior Accrual Periods for which no allocation was previously made;
provided that if the Available Amounts remaining to be allocated pursuant
to this clause are less than the full amount required to be so allocated,
such remaining Available Amounts shall be allocated to the Holder of each
Class A-2 Note pro rata based upon the outstanding Principal Amount
thereof;
(vi) pay to the Indenture Trustee on behalf of the Class B
Noteholders an amount equal to the interest accrued thereon for the Accrual
Period immediately preceding such Distribution Date, together with any
amounts that accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available Amounts
remaining to be allocated pursuant to this clause are less than the full
amount required to be so paid, such remaining Available Amount shall be
paid to the Holder of each Class B Note pro rata based on the outstanding
Principal Amount thereof;
(vii) pay to the Indenture Trustee on behalf of the Class C
Noteholders, an amount equal to the interest accrued thereon for the
Accrual Period immediately preceding such Distribution Date, together with
any such amounts that accrued in respect of prior Accrual Periods for which
no allocation was previously made; provided, that if the Available Amounts
remaining to be allocated pursuant to this clause are less than the full
amount required to be so paid, such remaining Available Amounts shall be
paid to the Holder of each Class C Note pro rata based on the outstanding
Principal Amount thereof;
(viii) pay to the Indenture Trustee on behalf of the Class D
Noteholders an amount equal to the interest accrued thereon for the Accrual
Period immediately preceding such Distribution Date, together with any such
amounts that accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available Amounts
remaining to be allocated pursuant to this clause are less than the full
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amount required to be so paid, such remaining Available Amounts shall be
paid to the Holder of each Class D Note pro ata based on the outstanding
principal amount thereof;
(ix) pay to the Indenture Trustee, on behalf of the Class A-1
Noteholders, the lesser of (i) the Class A-1 Principal Payment Amount for
such Distribution Date, and (ii) the remaining outstanding Principal Amount
of the Class A-1 Notes; provided that if the Available Amounts remaining to
be allocated pursuant to this clause are less than the full amount required
to be so paid, such remaining Available Amounts shall be allocated to each
Class A-1 Note pro rata based on the outstanding principal amount
thereof;
(x) pay to the Indenture Trustee, on behalf of the Class A-2
Noteholders, the lesser of (i) the Class A-2 Principal Payment Amount for
such Distribution Date, and (ii) the remaining outstanding Principal Amount
of the Class A-2 Notes; provided (i) that if the Available Amounts
remaining to be allocated pursuant to this clause are less than the full
amount required to be so paid, such remaining Available Amounts shall be
allocated to each Class A-2 Note pro rata based on the outstanding
principal amount thereof, and (ii) if the amount to be allocated pursuant
to this clause exceeds the amount needed to repay outstanding Class A-2
Note principal in full, then such excess shall be applied in repayment of
principal on the Class B Notes;
(xi) pay to the Indenture Trustee, on behalf of the Class B
Noteholders, the lesser of (i) the Class B Principal Payment Amount for
such Distribution Date, and (ii) the remaining outstanding Principal Amount
of the Class B Notes; provided (i) that if the Available Amounts remaining
to be allocated pursuant to this clause are less than the full amount
required to be so paid, such remaining Available Amounts shall be allocated
to each Class B Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this clause
exceeds the amount needed to repay outstanding Class B Note principal in
full, then such excess shall be applied in repayment of principal on the
Class C Notes;
(xii) pay to the Indenture Trustee, on behalf of the Class C
Noteholders, the lesser of (i) the Class C Principal Payment Amount for
such Distribution Date, and (ii) the remaining outstanding Principal Amount
of the Class C Notes; provided (i) that if the Available Amounts remaining
to be allocated pursuant to this clause are less than the full amount
required to be so paid, such remaining Available Amounts shall be allocated
to each Class C Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this clause
exceeds the amount needed to repay outstanding Class C Note principal in
full, then such excess shall be applied in repayment of principal on the
Class D Notes; and
(xiii) pay all other remaining Available Amounts to the Holder of the
Class E Certificates.
Following the occurrence and during the continuance of an Event of Default
or Restricting Event, if the Available Amounts are less than the amount required
to make in full the payments and allocations set forth in Sections 7.05(b)(i)-
(xiii) above, amounts held in the Reserve Fund (in the same order of priority)
shall be withdrawn in order for any of such payments or allocations to be made
(in the same order of priority) and such amounts will be considered as Available
Amounts for such purpose only.
Section 7.06. Repurchases of, or Substitution For, Contracts for Breach of
Representations and Warranties. Upon a discovery by the Servicer, the Trust
Depositor or the Trustees of a breach of a representation or warranty of the
Sellers as set forth in Exhibit J hereto or as made or deemed made in any
Addition Notice in any Subsequent Purchase Agreement relating to Subsequent
Contracts that materially adversely affects the Trust's interest in such
Contract (without regard to the benefits of the Reserve Fund) (an "Ineligible
Contract"), or of an inaccuracy with respect to the representations as to
concentrations of the Initial Contracts made under Section 3.05 of the Transfer
and Sale Agreement, the party discovering the breach shall give prompt written
notice to the other parties (and the Servicer shall, with respect to an
inaccuracy concerning concentrations, select one or more Contracts, without
employing adverse selection, as the related Excess Contract for
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purposes of this Section), provided, that the Trustees shall have no duty or
obligation to inquire or to investigate the breach by the Sellers of any of such
representations or warranties. The Sellers, as provided in the Transfer and Sale
Agreement and in accordance with this Section 7.06, shall repurchase each such
Ineligible Contract or Excess Contract, at a repurchase price equal to the
Transfer Deposit Amount, not later than ninety (90) days following the date the
Seller becomes aware of, or receives written notice from any Trustee, the
Servicer or the Trust Depositor of, any such breach or inaccuracy and which
breach or inaccuracy has not otherwise been cured; provided, however, that if
the Seller is able to effect a substitution for any such Ineligible Contract or
Excess Contract in compliance with Section 2.04, the Seller may, in lieu of
repurchasing such Contract, effect a substitution for such affected Contract
with a Substitute Contract not later than the date a repurchase of such affected
Contract would be required hereunder, and provided further that with respect to
a breach of representation or warranty relating to the Contracts in the
aggregate and not to any particular Contract the Seller may select Contracts
(without adverse selection) to repurchase (or substitute for) such that had such
Contracts not been included as part of the Trust Assets (and, in the case of a
substitution, had such Substitute Contract been included as part of the Trust
Assets instead of the selected Contract) there would have been no breach of such
representation or warranty. Notwithstanding any other provision of this
Agreement, the obligation of the Sellers under the Transfer and Sale Agreement
and described in this Section 7.06 shall not terminate or be deemed released by
any party hereto upon a Service Transfer pursuant to Article VIII. The
repurchase obligation described in this Section 7.06 is in no way to be
satisfied with monies in the Reserve Fund.
Section 7.07. Reassignment of Repurchased or Substituted Contracts. Upon
receipt by the Indenture Trustee for deposit in the Collection Account of the
Repurchase Price as described in Section 7.06 or Section 7.08 (or upon the
Subsequent Transfer Date related to a Substitute Contract described in Section
7.06), and upon receipt of a certificate of a Servicing Officer in the form
attached hereto as Exhibit G, the Indenture Trustee shall assign to the original
applicable Seller all of the Trust's right, title and interest in the
repurchased or substituted Contract and related Trust Assets without recourse,
representation or warranty and such reassigned Contract shall no longer
thereafter be included in any calculations of Discounted Contract Balances
required to be made hereunder or otherwise deemed a part of the Trust.
Section 7.08. Seller's and Trust Depositor's Repurchase Option. As
provided in the Transfer and Sale Agreement, on written notice to the Indenture
Trustee at least 20 days prior to a Distribution Date, and provided that the
ADCB of all Contracts in the Contract Pool is then less than 10% of the ADCB of
such Contracts as of the Initial Cutoff Date, the Sellers, through the Trust
Depositor, may (but are not required to) repurchase from the Trust on that
Distribution Date all outstanding Contracts at a price equal to the aggregate
outstanding Principal Amount of the Securities (other than the Class E
Certificates) as of the current Distribution Date thereon, the amount of
unreimbursed Servicer Advances (if any) as well as accrued and unpaid monthly
Servicing Fees to the date of such repurchase. Such price is to be deposited in
the Collection Account one Business Day before such Distribution Date, against
the Owner Trustee's and Indenture Trustee's and Trust Depositor's release of the
Contracts and the Contract Files to the Sellers.
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ARTICLE EIGHT
SERVICER DEFAULT; SERVICE TRANSFER
Section 8.01. Servicer Default. "Servicer Default" means the occurrence
of any of the following:
(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Owner Trustee or the
Indenture Trustee pursuant to this Agreement on or before the date
occurring three Business Days after the date such payment, transfer,
deposit, or such instruction or notice or report is required to be made or
given, as the case may be, under the terms of this Agreement; or
(b) 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 which has a material adverse effect on the
Noteholders or Certificateholders, which continues unremedied for a period
of 30 days after the first to occur of (i) the date on which written notice
of such failure requiring the same to be remedied shall have been given to
the Servicer by the Indenture Trustee or to the Servicer and the Indenture
Trustee by the Noteholders or Certificateholders or the Indenture Trustee
on behalf of such Noteholders of Notes aggregating not less than 25% of the
Principal Amount of any Class adversely affected thereby and (ii) the date
on which the Servicer becomes aware thereof and such failure continues to
materially adversely affect such Noteholders or Certificateholders for such
period; or
(c) any representation, warranty or certification made by the
Servicer in this Agreement or in any certificate delivered pursuant to the
this Agreement shall prove to have been incorrect when made, which has a
material adverse effect on the Noteholders or Certificateholders and which
continues to be incorrect in any material respect for a period of 30 days
after the first to occur of (i) the date on which written notice of such
incorrectness requiring the same to be remedied shall have been given to
the Servicer and the Owner Trustee by the Indenture Trustee, or to the
Servicer, the Owner Trustee and the Indenture Trustee by Noteholders or
Certificateholders or by the Indenture Trustee on behalf of Noteholders of
Notes aggregating not less than 25% of the Principal Amount of any Class
adversely affected thereby and (ii) the date on which the Servicer becomes
aware thereof, and such incorrectness continues to materially adversely
affect such Holders for such period; or
(d) an Insolvency Event shall occur with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of five Business Days or
referred to under clause (b) or (c) for a period of 60 days (in addition to any
period provided in (a), (b) or (c)) shall not constitute a Servicer Default
until the expiration of such additional five Business Days or 60 days,
respectively, if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an
act of God or other similar occurrences. Upon the occurrence of any such event
the Servicer shall not be relieved 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 Owner Trustee, the Indenture Trustee and the
Trust Depositor prompt notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations. The Servicer shall
immediately notify the Indenture Trustee in writing of any Servicer Default.
Section 8.02. Service Transfer. (a) If a Servicer Default has occurred
and is continuing, (x) the Required Holders, or (y) the Indenture Trustee may,
by written notice (a "Termination Notice") delivered to the parties hereto,
terminate all (but not less than all) of the Servicer's management,
administrative, servicing, custodial and collection functions.
(b) Upon delivery of the notice required by Section 8.02(a) (or, if later,
on a date designated therein), and on the date that a successor Servicer shall
have been appointed pursuant to Section 8.03 (such appointment being herein
called a "Servicer Transfer") all rights, benefits, fees, indemnities, authority
and power of the Servicer under this Agreement, whether with respect to the
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Contracts, the Contract Files or otherwise, shall pass to and be vested in
such successor (the "Successor Servicer") pursuant to and under this Section
8.02; and, without limitation, the Successor Servicer is 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 any and all
acts or things necessary or appropriate to effect the purposes of such notice of
termination. The Servicer agrees to cooperate with 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 which shall at the time be held by
the Servicer for deposit, or have been deposited by the Servicer, in the
Collection Account, or for its own account in connection with its services
hereafter or thereafter received with respect to the Contracts. The Servicer
shall transfer to the Successor Servicer all records held by the Servicer
relating to the Contracts in such electronic form as the Successor Servicer may
reasonably request and (ii) any Contract Files in the Servicer's possession. In
addition, the Servicer shall permit access to its premises (including all
computer records and programs) to the Successor Servicer or its designee, and
shall pay the reasonable transition expenses of the Successor Servicer. Upon a
Service Transfer, the Successor Servicer shall also be entitled to receive the
Servicing Fee for performing the obligations of the Servicer.
Section 8.03. Appointment of Successor Servicer; Reconveyance; Successor
Servicer to Act. Upon delivery of the notice required by Section 8.02(a) (or, if
later, on a date designated therein), the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or, if no such date is specified, until a date mutually
agreed by the Servicer and the Indenture Trustee. The Indenture Trustee shall as
promptly as possible after the giving of or receipt of a Termination Notice,
appoint a Successor Servicer, and such Successor Servicer shall accept its
appointment by a written assumption in a form acceptable to the Indenture
Trustee and Owner Trustee. If within 60 days of delivery of a Termination Notice
the Indenture Trustee is unable to obtain any bids from eligible servicers and
the Servicer shall have yet to cure the Servicer Default, then the Indenture
Trustee shall offer the Trust Depositor, and the Trust Depositor shall offer the
Sellers, the right to accept retransfer of all the Trust Assets, and such
parties may accept retransfer of such Trust Assets in consideration of the Trust
Depositor's delivery to the Collection Account on or prior to the next upcoming
Distribution Date of a sum equal to the Aggregate Principal Amount of all
Securities (other than the Certificates) then outstanding, together with
accrued and unpaid interest thereon through such date of deposit (provided, that
the Indenture Trustee, if so directed by the Required Holders, need not accept
and effect such reconveyanced in the absence of evidence (which may include
valuations of an investment bank or similar entity) reasonably acceptable to
such Trustee or Required Holders that such retransfer would not constitute a
fraudulent conveyance of the Trust Depositor or the Sellers).
In the event that a Successor Servicer has not been appointed and has not
accepted its appointment at the time when the then Servicer has ceased to act as
Servicer, the Indenture Trustee without further action shall automatically be
appointed the Successor Servicer. Notwithstanding the foregoing, if the
Indenture Trustee is legally unable or prohibited from so acting, it shall
petition a court of competent jurisdiction to appoint any established financial
institution having a net worth of at least $50,000,000 and whose regular
business includes the servicing of contracts similar to the Contracts as the
Successor Servicer hereunder. On or after a Service Transfer, 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, and
the terminated Servicer shall be relieved of such responsibilities, duties and
liabilities arising after such Service Transfer; provided, however, that (i) the
Successor Servicer will not assume any obligations of the Servicer described in
Section 8.03 and (ii) the Successor Servicer shall not be liable for any acts or
omissions of the Servicer occurring prior to such Service Transfer or for any
breach by the Servicer of any of its representations and warranties contained
herein or in any related document or agreement. As compensation therefor, the
Successor Servicer shall be entitled to receive reasonable compensation equal to
the monthly Servicing Fee. The Owner Trustee, Securityholders and the Indenture
Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. To the
extent the terminated Servicer has made Servicer Advances, it shall be entitled
to reimbursement of the same notwithstanding its termination hereunder, to the
same extent as if it had continued to service the Contracts hereunder.
Section 8.04. Notification to Securityholders. (a) Promptly following
the occurrence of any Servicer Default, the Servicer shall give written notice
thereof to the Trustees, the Trust Depositor and each Rating Agency at the
addresses described in Section 11.04 hereof and to the Noteholders and
Certificateholders at their respective addresses appearing on the Note Register
and the Certificate Register, respectively.
(b) Within 10 days following any termination or appointment of a Successor
Servicer pursuant to this Article VIII, the Indenture Trustee shall give written
notice thereof to each Rating Agency and the Trust Depositor at the addresses
described in Section 11.04 hereof, and to the Noteholders and Certificateholders
at their respective addresses appearing on the Note Register and the Certificate
Register, respectively.
Section 8.05. Effect of Transfer. (a) After a Service Transfer, the
terminated Servicer shall have no further obligations with respect to the
management, administration, servicing, custody or collection of the Contracts
and the Successor Servicer appointed pursuant to Section 8.03 shall have all of
such obligations, except that the terminated Servicer will transmit or cause to
be transmitted directly to the Successor Servicer for its own account, promptly
on receipt and in the same form in which received, any amounts (properly
endorsed where required for the Successor Servicer to collect them) received as
payments upon or otherwise in connection with the Contracts.
(b) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer)
other than those relating to the management, administration, servicing, custody
or collection of the Contracts.
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Section 8.06. Database File. The Servicer will provide the Successor
Servicer with a magnetic tape containing the database file for each Contract (i)
as of the Cutoff Date, (ii) the Subsequent Cutoff Date, (iii) thereafter, as of
the last day of the preceding Collection Period on each Determination Date prior
to a Servicer Default and (iv) on and as of the Business Day before the actual
commencement of servicing functions by the Successor Servicer following the
occurrence of a Servicer Default.
Section 8.07. Successor Servicer Indemnification. The original Servicer
shall defend, indemnify and hold the Successor Servicer and any officers,
directors, employees or agents of the Successor Servicer harmless against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments and any other costs, fees, and expenses that the Successor
Servicer may sustain in connection with the claims asserted at any time by third
parties against the Successor Servicer which result from (i) any willful or
grossly negligent act taken or omission by the Servicer or (ii) a breach of any
representations of the Servicer in Section 3.02 hereof. The indemnification
provided by this Section 8.07 shall survive the termination of this Agreement.
Section 8.08. Responsibilities of the Successor Servicer. The Successor
Servicer will not be responsible for delays attributable to the Servicer's
failure to deliver information, defects in the information supplied by the
Servicer or other circumstances beyond the control of the Successor Servicer.
The Successor Servicer will make arrangements with the Servicer for the
prompt and safe transfer of, and the Servicer shall provide to the Successor
Servicer, all necessary servicing files and records, including (as deemed
necessary by the Successor Servicer at such time): (i) microfiche loan
documentation, (ii) servicing system tapes, (iii) Contract payment history, (iv)
collections history and (v) the trial balances, as of the close of business on
the day immediately preceding conversion to the Successor Servicer, reflecting
all applicable Contract information.
The Successor Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction or
any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Successor Servicer acting in accordance with
information prepared or supplied by a Person other than the Successor Servicer
or the failure of any such Person to prepare or provide such information. The
Successor Servicer shall have no responsibility, shall not be in default and
shall incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Trust Depositor or the Trustees or for any
inaccuracy or omission in a notice or communication received by the Successor
Servicer from any third party or (ii) which is due to or results from the
invalidity, unenforceability of any Contract with applicable law or the breach
or the inaccuracy of any representation or warrant made with respect to any
Contract.
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ARTICLE NINE
REPORTS
Section 9.01. Monthly Reports. With respect to each Distribution Date and
the related Collection Period, the Servicer will provided to each Trustee, and
each Rating Agency, on the related Determination Date, a monthly statement (a
"Monthly Report") substantially in the form of Exhibit I hereto.
Section 9.02. Officer's Certificate. Each Monthly Report delivered
pursuant to Section 9.01 shall be accompanied by a certificate of a Servicing
Officer substantially in the form of Exhibit C, certifying the accuracy of the
Monthly Report and that no Servicer Default or event that with notice or lapse
of time or both would become a Servicer Default has occurred, or if such event
has occurred and is continuing, specifying the event and its status.
Section 9.03. Other Data. In addition, the Servicer shall, upon the
request of any Trustees, or any Rating Agency, furnish such Trustee or Rating
Agency, as the case may be, such underlying data used to generate a Monthly
Report as may be reasonably requested.
Section 9.04. Annual Report of Accountants.
(a) The Servicer shall cause a firm of nationally recognized independent
certified public accountants (the "Independent Accountants"), who may also
render other services to the Servicer or its Affiliates, to deliver to the
Trustees and each Rating Agency, on or before March 31 (or 90 days after the end
of the Servicer's fiscal year, if other than December 31) of each year,
beginning on March 31, 1998 (i) with respect to the twelve months ended the
immediately preceding December 31 (or other applicable date), a report addressed
to the Board of Directors of the Servicer and to the Trustees, to the effect
that such firm (A) has reviewed certain documents and records relating to the
servicing of the Contracts in the Contract Pool, and (B) based on such review,
such firm is of the opinion that the Monthly Reports for such year were prepared
in compliance with this Agreement, except for such exceptions as it believes to
be immaterial and such other exceptions as will be set forth in such firm's
report, and (ii) a report with respect to the twelve months ended the
immediately preceding December 31 (or other applicable date) to the effect that
such accountants have applied certain agreed-upon procedures to certain
documents and records relating to the servicing of Contracts under this
Agreement, compared the information contained in the Servicer's certificates
delivered during the period covered by such report with such documents and
records and that no matters came to the attention of such accountants that
caused them to believe that such servicing was not conducted in compliance with
this Agreement, except for such exceptions as such accountants shall believe to
be immaterial and such other exceptions as shall be set forth in such statement.
A copy of such report (the "Accountant's Report") may be obtained by any
Securityholder by a request in writing to the Indenture Trustee, in the case of
a Noteholder, or to the Owner Trustee, in the case of a Certificateholder,
addressed to its respective Corporate Trust Office.
(b) The Accountant's Report shall also indicate that the firm is
independent of the Servicer within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.
Section 9.05. Annual Statement of Compliance from Servicer. The Servicer
will deliver to the Trustees, and each of the Rating Agencies, on or before
January 31 of each year commencing January 31, 1998, an Officer's Certificate
stating that (a) a review of the activities of the Servicer during the prior
calendar year and of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (b) to such officer's
knowledge, based on such review, the Servicer has fully performed or cause to be
performed in all material respects all its obligations under this Agreement and
no Servicer Default has occurred or is continuing, or, if there has been a
Servicer Default, specifying each such default known to such officer and the
nature and status thereof and the steps being taken or necessary to be taken to
remedy such event. A copy of such certificate may be obtained by any
Securityholder by a request in writing to the Indenture Trustee, with respect to
any Noteholder, or the Owner Trustee, with respect to any Certificateholder.
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Section 9.06. Annual Summary Statement. On or prior to January 31 of each
year, commencing January 31, 1998, the Servicer shall prepare and provide to
each Trustee, and each Rating Agency, a cumulative summary of the information
required to be included in the Monthly Reports for the Collection Periods ending
during the immediately preceding calendar year.
50
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ARTICLE TEN
TERMINATION
Section 10.01. Sale of Trust Assets.
(a) Upon any sale of the assets of the Trust pursuant to Section 9.02 of
the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Servicer
shall instruct the Indenture Trustee to allocate and apply (after the
application on such Distribution Date of Available Amounts and funds on deposit
in the Reserve Fund pursuant to Section 7.04) the Insolvency Proceeds as if (and
in the same order of priority as) the Insolvency Proceeds were Available Amounts
being allocated and distributed on such date pursuant to Section 7.04(b).
(b) As described in Article Nine of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee and
the Indenture Trustee as soon as practicable after the Servicer has received
notice thereof.
(c) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
51
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ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Amendment.
(a) This Agreement may be amended by the Trust Depositor, the Servicer, the
Indenture Trustee and the Owner Trustee on behalf of the Issuer, collectively,
without the consent of any Securityholders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement which are inconsistent with the
provisions herein, or to add any other provisions with respect to matters or
questions arising under this Agreement that shall not be inconsistent with the
provisions of this Agreement; provided, however that any such action shall not,
as evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of any Securityholder.
(b) This Agreement may also be amended from time to time by the Trust
Depositor, the Servicer, the Indenture Trustee and the Owner Trustee on behalf
of the Issuer, with the consent of the Required Holders, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; provided, however, that no such amendment
shall (i) increase or reduce in any manner the amount of, or accelerate or
delay the timing of (A) Collections of payments on the Contracts or
distributions that shall be required to be made on any Note or Certificate
(including by way of amendment of related definition), or (B) the manner in
which the Reserve Fund is applied, or (ii) change in any manner (including
through amendment of related definitions), the Holders which are required to
consent to any such amendment, or (iii) make any Note or Certificate payable in
money other than Dollars without the consent of the Holders of all Notes and
Certificates of the relevant Class then outstanding.
(c) Prior to the execution of any such amendment or consent, the Indenture
Trustee shall furnish written notification of the substance of such amendment or
consent, together with a copy thereof, to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee and the Indenture Trustee, as the case may be, shall furnish
written notification of the substance of such amendment or consent to each
Certificateholder and Noteholder, respectively. It shall not be necessary for
the consent of Noteholders and Certificateholders pursuant to Section 11.01(b)
to approve the particular form of any proposed amendment or consent, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization by
Noteholders and Certificateholders of the execution thereof shall be subject to
such reasonable requirements as the Owner Trustee or the Indenture Trustee may
prescribe.
(e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 11.02. Protection of Title to Trust.
(a) The Servicer shall execute and file such financing statements and cause
to be executed and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interest of the Issuer, the Securityholders, the Indenture Trustee and the
Owner Trustee in the Contracts and in the proceeds thereof. The Servicer shall
deliver (or cause to be delivered) to the Owner Trustee and the Indenture
Trustee file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) Neither the Seller, the Trust Depositor nor the Servicer shall change
its name, identity or corporate structure in any manner that would, could or
might make any financing statement or continuation statement filed in
52
<PAGE>
accordance with Section 4.02(a) seriously misleading within the meaning of
(S) 9-402(7) of the UCC, unless it shall have given the Issuer, the Owner
Trustee and the Indenture Trustee at least 60 days' prior written notice thereof
and shall have promptly filed appropriate amendments to all previously filed
financing statements or continuation statements.
(c) The Seller, the Trust Depositor and the Servicer shall give the Issuer,
the Owner Trustee and the Indenture Trustee at least 60 days' prior written
notice of any relocation of the principal executive office of any Seller, or the
Trust Depositor or the Servicer if, as a result of such relocation, the
applicable provisions of the UCC would require filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement, and the Servicer shall promptly file or cause to be filed any such
amendment or new financing statement. The Servicer shall at all times maintain
each office from which it shall service Contracts, and its principal executive
office, within the United States.
(d) The Servicer shall maintain or cause to be maintained accounts and
records as to each Contract accurately and in sufficient detail to permit (i)
the reader thereof to know at any time the status of such Contract, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Contract and the amounts from time to time deposited in or credited to the
Collection Account in respect of each Contract.
(e) The Servicer shall maintain or cause to be maintained its computer
systems so that, from and after the time of sale under this Agreement of the
Contracts, the Servicer's master computer records (including any backup
archives) that shall refer to a Contract indicate clearly the interest of the
Issuer and the Indenture Trustee in such Contract and that such Contract is
owned by the Issuer and has been pledged to the Indenture Trustee. Indication
of the Issuer's ownership of and the Indenture Trustee's interest in a Contract
shall be deleted from or modified on the Servicer's computer systems when, and
only when, the related Contract shall have been paid in full or repurchased or
substituted for.
(f) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee
and each Rating Agency promptly after the execution and delivery of this
Agreement and of each amendment hereto, an Opinion of Counsel either (A) stating
that, in the opinion of such counsel, all financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Owner Trustee and the Indenture Trustee and reciting
the details of each filings or referring to prior Opinions of Counsel in which
such details are given, or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest.
Section 11.03. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Illinois and the obligations, rights,
and remedies of the parties under the Agreement shall be determined in
accordance with such laws, except that the duties of the Owner Trustee shall be
governed by the laws of the State of Delaware.
Section 11.04. Notices. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Servicer or Seller:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Attention: [________]
Fax No.: (312) [_________]
53
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(ii) If to the Trust Depositor:
Heller Funding Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: [________]
Fax No.: (312) [_________]
(iii) If to the Indenture Trustee:
[____________]
Attention: Indenture Trust Administration
Fax No.: (___) [_______]
(iv) If to the Owner Trustee:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
Attention: Corporate Trust Administration
Fax No.: (302) 651-8882]
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Fitch:
[_________________]
Fax No.: (___) [_________]
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
Section 11.05. Severability of Provisions. If one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or
Certificates or the rights of the Holders thereof.
54
<PAGE>
Section 11.06. Third Party Beneficiaries. Except as otherwise
specifically provided herein, the parties hereto hereby manifest their intent
that no third party shall be deemed a third party beneficiary of this Agreement,
and specifically that the Obligors are not third party beneficiaries of this
Agreement.
Section 11.07. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall together
constitute but one and the same instrument.
Section 11.08. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 11.09. No Bankruptcy Petition. Each of the Indenture Trustee, the
Servicer, the Owner Trustee and each Holder (by acceptance of the applicable
Securities) covenants and agrees that, prior to the date that is one year and
one day after the payment in full of all amounts owing in respect of all
outstanding Securities, it will not institute against the Trust Depositor, or
the Trust, or join any other Person in instituting against the Trust Depositor
or the Trust, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceedings under the laws of the
United States or any state of the United States. This Section 11.09 will
survive the termination of this Agreement.
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
By: [________________________], not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust
By: _________________________________________
Printed Name:_________________________
Title:________________________________
HELLER FUNDING CORPORATION, as Trust Depositor
By: _________________________________________
Printed Name:_________________________
Title:________________________________
HELLER FINANCIAL, INC., as Servicer
By: _________________________________________
Printed Name:_________________________
Title:________________________________
[________________________], not in its
individual capacity but solely as Indenture
Trustee
By: _________________________________________
Printed Name:_________________________
Title:________________________________
56
<PAGE>
Exhibit A
[Form of Assignment]
In accordance with the Sale and Servicing Agreement (the "Sale and
Servicing Agreement") dated as of August [__], 1997 made by and between the
undersigned, as Trust Depositor ("Trust Depositor"), Heller Financial, Inc., as
Servicer, [____________], as Indenture Trustee and the Heller Equipment Asset
Receivables Trust 1997-1 (the "Trust"), as assignee thereunder, the undersigned
does hereby sell, transfer, convey and assign, set over and otherwise convey to
the Trust (i) all the right, title and interest of the Trust Depositor in and to
the Initial Contracts listed on the initial List of Contracts delivered on the
Closing Date (including, without limitation, all rights to receive Collections
with respect thereto on or after the Initial Cutoff Date, but excluding any
rights to receive payments which were collected pursuant thereto prior to the
Initial Cutoff Date), and (ii) all other Transferred Assets relating to the
foregoing.
Capitalized terms used herein have the meaning given such terms in the Sale
and Servicing Agreement.
This Assignment is made pursuant to and in reliance upon the representation
and warranties on the part of the undersigned contained in Article III of the
Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this _____ day of August, 1997.
HELLER FUNDING CORPORATION
By:________________________________________________
Printed Name: ______________________________
Title: _____________________________________
A-1
<PAGE>
Exhibit B
[Form of Closing Certificate of Trust Depositor]
Heller Funding Corporation
Officer's Certificate
The undersigned certifies that he/she is [________] of Heller Funding
Corporation, a Delaware corporation (the "Trust Depositor"), and that as such is
duly authorized to execute and deliver this certificate on behalf of the Trust
Depositor in connection with the Sale and Servicing Agreement (the "Agreement")
dated as of August [__], 1997 (the "Effective Date") by and among the Trust
Depositor, [____________] (the "Indenture Trustee"), as Indenture Trustee,
Heller Financial, Inc. ("HFI"), as Servicer, and the Heller Equipment Asset
Receivables Trust 1997-1 ("Issuer") (all capitalized terms used herein without
definition having the respective meanings set forth in the Agreement), and
further certifies as follows:
(1) Attached hereto as Exhibit I is a true and correct copy of the
Certificate of Incorporation of the Trust Depositor, together with all
amendments thereto as in effect on the date hereof.
(2) There has been no other amendment or other document filed
affecting the Certificate of Incorporation of the Trust Depositor since
_____, and no such amendment has been authorized by the Board of Directors
or shareholders of the Trust Depositor.
(3) Attached hereto as Exhibit II is a Certificate of the Secretary of
State of the State of Delaware dated August ___, 1997 stating that the
Trust Depositor is duly incorporated under the laws of the State of
Delaware and is in good standing.
(4) Attached hereto as Exhibit III is a true and correct copy of the
Bylaws of the Trust Depositor, as amended, which were in full force and
effect on August __, 1997, and at all times subsequent thereto.
(5) Attached hereto as Exhibit IV is a true and correct copy of
resolutions adopted pursuant to the unanimous written consent of the Board
of Directors of the Trust Depositor relating to the execution, delivery and
performance of (among other things) the Agreement; the Transfer and Sale
Agreement dated as of the Effective Date among the Trust Depositor, HFI and
Heller Financial Leasing, Inc.; the Trust Agreement dated as of the
Effective Date between the Trust Depositor and [ Wilmington Trust Company]
(the "Owner Trustee"), as Owner Trustee; the Administration Agreement dated
as of the Effective Date among the Trust Depositor, the Issuer, the
Indenture Trustee, and HFI, as Administrator; and the Underwriting
Agreement dated August ___, 1997 among the Trust Depositor, HFI and First
Union Capital Markets Corp. (collectively, the "Program Agreements"). Said
resolutions have not been amended, modified, annulled or revoked, and are
on the date hereof in full force and effect and are the only resolutions
relating to these matters which have been adopted by the Board of
Directors.
(6) No event with respect to the Trust Depositor has occurred and is
continuing which would constitute an Event of Default or an event that,
with notice or the passage of time or both, would become an Event of
Default as defined in the Agreement. To the best of my knowledge after
reasonable investigation, there has been no material adverse change in the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Trust Depositor, whether or not arising in the
ordinary course of business since the respective dates as of which
information is given in the Prospectus and except as set forth therein.
(7) All federal, state and local taxes of the Trust Depositor due and
owing as of the date hereof have been paid.
B-1
<PAGE>
(8) All representations and warranties of the Trust Depositor contained in
the Program Agreements or any other related documents, or in any document,
certificate or financial or other statement delivered in connection therewith
are true and correct as of the date hereof.
(9) There is no action, investigation or proceeding pending or, to our
knowledge, threatened against the Trust Depositor before any court,
administrative agency or other tribunal (a) asserting the invalidity of the
Program Agreements; (b) seeking to prevent the consummation of any of the
transactions contemplated by the Program Agreements; or (c) which is likely
materially and adversely to affect the Trust Depositor's performance of its
obligations under, or the validity or enforceability of, the Program Agreements.
(10) No consent, approval, authorization or order of, and no notice to or
filing with, any governmental agency or body or state or federal court is
required to be obtained by the Trust Depositor for the Trust Depositor's
consummation of the transactions contemplated by the Program Agreements, except
such as have been obtained or made and such as may be required under the blue
sky laws of any jurisdiction in connection with the issuance and sale of the
Securities.
(11) The Trust Depositor is not a party to any agreements or instruments
evidencing or governing indebtedness for money borrowed or by which the Trust
Depositor or its property is bound (other than the Program Agreements). Neither
the Sellers' transfer and assignment of the Contract Assets to the Trust
Depositor, the Trust Depositor's concurrent transfer and assignment of the Trust
Assets to the Trust, nor the concurrent transfer and assignment of the
Collateral by the Trust to the Indenture Trustee nor the issuance and sale of
the Certificates and the Notes, nor the execution and delivery of the Program
Agreements, nor the consummation of any other of the transactions contemplated
therein, will violate or conflict with any agreement or instrument to which the
Trust Depositor is a party or by which it is otherwise bound.
(12) In connection with the transfer of Contracts and related collateral
contemplated in the Agreement, (a) the Trust Depositor has not made such
transfer with actual intent to hinder, delay or defraud any creditor of the
Trust Depositor, and (b) the Trust Depositor has not received less than a
reasonably equivalent value in exchange for such transfer, is not on the date
thereof insolvent (nor will become insolvent as a result thereof), is not
engaged (or about to engage) in a business or transaction for which it has
unreasonably small capital, and does not intend to incur or believe it will
incur debts beyond its ability to pay when matured.
(13) Each of the agreements and conditions of the Trust Depositor to be
performed on or before the Closing Date pursuant to the Program Agreements have
been performed in all material respects.
* * * *
<PAGE>
In Witness Whereof, I have affixed my signature hereto this ___ day of
August, 1997.
By: ____________________________________
Printed Name: ______________________
Title: _____________________________
<PAGE>
Exhibit C
[Form of Closing Certificate of Servicer/Seller]
Heller Financial, Inc.
Officer's Certificate
The undersigned certifies that he/she is ___________ of Heller Financial,
Inc. ("HFI"), and that as such he/she is duly authorized to execute and deliver
this certificate on behalf of HFI, as Servicer, in connection with the Sale and
Servicing Agreement (the "Sale and Servicing Agreement") dated as of August
[__], 1997 (the "Effective Date") by and among HFI, as Servicer, Heller Funding
Corporation ("HFC"), [__________], as Indenture Trustee and Heller Equipment
Asset Receivables Trust 1997-1 ("Issuer"), and as a Seller in connection with
the Transfer and Sale Agreement dated as of the Effective Date (the "Transfer
and Sale Agreement") by and among HFI and Heller Leasing, as Sellers, and HFC
(all capitalized terms used herein without definition having the respective
meanings set forth in the Sale and Servicing Agreement), and further certifies
as follows:
(1) Attached hereto as Exhibit I is a true and correct copy of the
Certificate of Incorporation of HFI, together with all amendments thereto
as in effect on the date hereof.
(2) There has been no other amendment or other document filed
affecting the Certificate of Incorporation of HFI since [_______], 19__,
and no such amendment has been authorized by the Board of Directors or
shareholders of HFI.
(3) Attached hereto as Exhibit II is a Certificate of the Secretary of
State of the State of Delaware dated August __, 1997 stating that HFI is
duly incorporated under the laws of the State of Delaware and is in good
standing.
(4) Attached hereto as Exhibit III is a true and correct copy of the
Bylaws of HFI which were in full force and effect on [________], 19__ and
at all times subsequent thereto.
(5) Attached hereto as Exhibit IV is a true and correct copy of
resolutions adopted pursuant to a unanimous written consent of the Board of
Directors of HFI and relating to the authorization, execution, delivery and
performance of (among other things) the Transfer and Sale Agreement; the
Sale and Servicing Agreement; the Underwriting Agreement dated August ___,
1997 among HFI, HFC and First Union Capital Markets Corp. (the
"Underwriting Agreement"); and the Administration Agreement dated August
[__], 1997 among HFI, HFC, the Issuer and [__________], as Indenture
Trustee (the "Indenture Trustee") (the "Administration Agreement"). Said
resolutions have not been amended, modified, annulled or revoked, and are
on the date hereof in full force and effect and are the only resolutions
relating to these matters which have been adopted by the Board of
Directors.
(6) No event with respect to HFI has occurred and is continuing which
would constitute an Event of Default or Servicer Default or an event that,
with notice or the passage of time, would constitute an Event of Default or
Servicer Default as defined in the Sale and Servicing Agreement. To the
best of my knowledge after reasonable investigation, there has been no
material adverse change in the condition, financial or otherwise, or the
earnings, business affairs or business prospects of HFI, whether or not
arising in the ordinary course of business, since the respective dates as
of which information is given in the Prospectus and except as set forth
therein.
(7) All federal, state and local taxes of HFI due and owing as of the
date hereof have been paid.
C-1
<PAGE>
(8) All representations and warranties of HFI contained in the
Transfer and Sale Agreement, the Sale and Servicing Agreement, the
Underwriting Agreement and the Administration Agreement (collectively, the
"Program Agreements") or in any document, certificate or financial or other
statement delivered in connection therewith are true and correct as of the
date hereof.
(9) There is no action, investigation or proceeding pending or, to my
knowledge, threatened against HFI before any court, administrative agency
or other tribunal (a) asserting the invalidity of any Program Agreement to
which HFI is a party; or (b) which is likely materially and adversely to
affect HFI's performance of its obligations under, or the validity or
enforceability of, the Program Agreements.
(10) No consent, approval, authorization or order of, and no notice to
or filing with, any governmental agency or body or state or federal court
is required to be obtained by HFI for HFI's consummation of the
transactions contemplated by the Program Agreements, except such as have
been obtained or made and such as may be required under the blue sky laws
of any jurisdiction in connection with the issuance and sale of the Notes
or Certificates.
(11) Schedule A hereto contains a complete list of all material
agreements (other than the Transfer and Sale Agreement) or instruments
evidencing or governing indebtedness for money borrowed to which HFI is a
party or by which HFI or its property is bound. Neither HFI's transfer and
assignment of the Contract Assets to HFC, HFC's concurrent transfer and
assignment of the Trust Assets to the Trust, nor the concurrent transfer
and assignment by the Trust of the Collateral to the Indenture Trustee, nor
the issuance and sale of the Notes or Certificates or the entering into of
the Program Agreements, nor the consummation of any other of the
transactions contemplated therein, will violate or conflict with any
agreement or instrument to which HFI is a party or by which it is otherwise
bound.
(12) In connection with the transfers of Contracts and related assets
contemplated in the Transfer and Sale Agreement, (a) HFI has not made such
transfer with actual intent to hinder, delay or defraud any creditor of
HFI, and (b) HFI has not received less than a reasonably equivalent value
in exchange for such transfer, is not on the date hereof insolvent (nor
will HFI become insolvent as a result thereof), is not engaged (or about to
engage) in a business or transaction for which it has unreasonably small
capital, and does not intend to incur or believe it will incur debts beyond
its ability to pay when matured.
(13) Each of the agreements and conditions of HFI to be performed or
satisfied on or before the Closing Date under the Program Agreements has
been performed or satisfied in all material respects.
(14) Each Contract being transferred pursuant to the Transfer and Sale
Agreement is evidenced by a written agreement providing for a repayment
obligation as well as a security interest in the related Equipment securing
such obligation.
(16) HFI has not executed for filing any UCC financing statements
listing the Contract Assets as collateral other than financing statements
relating to the transactions contemplated in the Transfer and Sale
Agreement.
* * * * * *
C-2
<PAGE>
In Witness Whereof, I have affixed my signature hereto this ___ day of
August, 1997.
By: _________________________________________
Printed Name: _____________________
Title: _____________________________
<PAGE>
Exhibit D
[Form of Opinion of Counsel for Trust Depositor
Regarding General Corporate Matters
(Including Perfection Opinion)
D-1
<PAGE>
Exhibit E
[Form of Opinion of Counsel for Trust
Depositor Regarding the "True Sale" Nature
of the Transaction
E-1
<PAGE>
Exhibit F
[Form of Opinion of Counsel for Trust
Depositor Regarding Non-consolidation]
F-1
<PAGE>
Exhibit G
[Form of Certificate Regarding Repurchased Contracts]
Heller Financial, Inc.
Certificate Regarding Repurchased Contracts
The undersigned certifies that he/she is a ____________________________ of
Heller Financial, Inc., a Delaware corporation (the "Servicer"), and that as
such he/she is duly authorized to execute and deliver this certificate on behalf
of the Servicer pursuant to Section 7.07 of the Sale and Servicing Agreement
(the "Agreement") dated as of August [__], 1997 by and among Heller Funding
Corporation, as Trust Depositor, the Servicer, [__________], as Indenture
Trustee and Heller Equipment Asset Receivables Trust 1997-1 (all capitalized
terms used herein without definition having the respective meanings specified in
the Agreement), and further certifies that:
1. The Contracts on the attached schedule are to be repurchased by the
Seller on the date hereof, or substituted for by the Seller pursuant
to and in accordance with section 7.06 of the Agreement and Section
5.01 of the Transfer and Sale Agreement.
2. Upon deposit of the Transfer Deposit Amount for such Contracts (or the
effective conveyance of one or more Substitute Contracts therefor),
such Contracts may, pursuant to Section 7.07 of the Agreement, be
assigned by the Owner Trustee to the Seller.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ______ day of
August, 1997.
Heller Financial, Inc.
By: ______________________________________
Printed Name: _______________________
Title: _______________________________
G-1
<PAGE>
Exhibit H
[List of Contracts]
H-1
<PAGE>
Exhibit I
[Form of Monthly Report to Noteholders And Certificateholders]
I-1
<PAGE>
Exhibit J
[Seller's Representations and Warranties]
J-1
<PAGE>
Exhibit K
[Lockbox Banks and Lockbox Accounts]
K-1
<PAGE>
Exhibit L
[Form of Contract Stamp]
This Contract/Note is subject to a security interest granted to [______________]
as Owner Trustee for the Heller Equipment Asset Receivables Trust 1997-1. UCC-1
Financing Statements covering this Contract/Note have been filed with the
Secretary of State of the State of Illinois. Such lien will be released only in
connection with appropriate filings in such offices. Consequently, potential
purchasers of this Contract/Note must refer to such filings to determine whether
such lien has been released.
L-1
<PAGE>
Exhibit M
[Form of Subsequent Transfer Agreement]
[see Exhibit C of the Transfer and Sale Agreement]
M-1
<PAGE>
EXHIBIT 10.2
________________________________________________________________________________
ADMINISTRATION AGREEMENT
among
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1,
as Issuer,
HELLER FINANCIAL, INC.
as Administrator
HELLER FUNDING CORPORATION,
as Trust Depositor,
and
[_________________]
as Indenture Trustee
Dated as of August 1, 1997
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Duties of the Administrator.............................................................. 3
Section 2 Records.................................................................................. 6
Section 3. Compensation............................................................................. 6
Section 4. Additional Information to be Furnished to the Issuer..................................... 6
Section 5. Independence of the Administrator........................................................ 6
Section 6. No Joint Venture......................................................................... 6
Section 7. Other Activities of Administrator........................................................ 6
Section 8. Term of Agreement; Resignation and Removal of Administrator.............................. 6
Section 9. Action upon Termination, Resignation or Removal.......................................... 7
Section 10. Notices.................................................................................. 7
Section 11. Amendments............................................................................... 8
Section 12. Successors and Assigns................................................................... 8
Section 13. Governing Law............................................................................ 9
Section 14. Headings................................................................................. 9
Section 15. Counterparts............................................................................. 9
Section 16. Severability............................................................................. 9
Section 17. Not Applicable to Heller Financial in Other Capacities................................... 9
Section 18. Limitation of Liability of Owner Trustee and Indenture Trustee........................... 9
Section 19. Third-party Beneficiary.................................................................. 9
Section 20. Survivability............................................................................ 9
</TABLE>
<PAGE>
This Administration Agreement, dated as of August 1, 1997, among Heller
Equipment Asset Receivables Trust 1997-1 (the "Issuer"), Heller Financial, Inc.
(together with its successors and assigns "Heller Financial") in its capacity
as administrator, the "Administrator"), Heller Funding Corporation (together
with its successors and assigns, the "Trust Depositor") and [_______________],
not in its individual capacity but solely as Indenture Trustee (together with
its successors and assigns, the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, the Issuer is issuing [___]% Class A Receivable-Backed Notes,
[___]% Class B Receivable-Backed Notes and [___] Class C Receivable-Backed
Notes, (collectively, the "Notes") pursuant to the Indenture, dated as of the
date hereof (the "Indenture"), between the Issuer and the Indenture Trustee
(capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the Indenture);
WHEREAS, the Issuer has entered into certain agreements in connection with
the issuance of the Notes and of certain beneficial ownership interests of the
Issuer, including (i) a Sale and Servicing Agreement, dated as of the date
hereof (the "Sale and Servicing Agreement"), among the Issuer,
[_______________], not in its individual capacity but as Indenture Trustee, the
Trust Depositor and Heller Financial, as servicer (together with its successors
and assigns, in such capacity, the "Servicer"), and (ii) the Indenture
(collectively referred to hereinafter as the "Transaction Documents");
WHEREAS, pursuant to the Transaction Documents, the Issuer and the Owner
Trustee are required to perform certain duties in connection with (i) the Notes
and the collateral therefor pledged pursuant to the Indenture (the "Collateral")
and (ii) the beneficial ownership interests in the Issuer (the registered
holders of such interests being referred to herein as the "Owners");
WHEREAS, the Issuer and the Owner Trustee desire to have the Administrator
perform certain of the duties of the Issuer and the Owner Trustee referred to in
the preceding clause and to provide such additional services consistent with the
terms of this Agreement and the Transaction Documents as the Issuer and the
Owner Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
NOW, THEREAFTER, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
Section 1. Duties of the Administrator.
(a) Duties with respect to the Indenture.
(i) The Administrator agrees to perform all its duties as
Administrator and the duties of the Issuer and the Owner Trustee under the
Transaction Documents. In addition, the Administrator shall consult with
the Owner Trustee regarding the duties of the Issuer or the Owner Trustee
under the Indenture. The Administrator shall monitor the performance of the
Issuer and shall advise the Owner Trustee when action is necessary to
comply with the respective duties of the Issuer and the Owner Trustee under
the Indenture. The Administrator shall prepare for execution by the Issuer
or shall cause the preparation by other appropriate persons of, all such
documents, reports, filings, instruments, certificates and opinions that it
shall be the duty of the Issuer or the Owner Trustee to prepare, file or
deliver pursuant to the Indenture. In furtherance of the foregoing, the
Administrator shall take all appropriate action that the Issuer or the
Owner Trustee is required to take pursuant to the Indenture including,
without limitation, such of the foregoing as are required with respect to
the following matters under the Indenture (references are to Sections of
the Indenture):
<PAGE>
(A) the duty to cause the Note Register to be kept and to give the
Indenture Trustee notice of any appointment of a new Note Registrar and the
location, or change in location, of the Note Register (Section 2.04);
(B) the notification of Noteholders of the final principal payment on
their Notes (Section 2.07(b));
(C) the fixing or causing to be fixed of any special record date and
the notification of the Indenture Trustee and Noteholders with respect to
special payment dates, if any (Section 2.07(c));
(D) the preparation of or obtaining of the documents and instruments
required for execution and authentication of the Notes and delivery of the
same to the Indenture Trustee (Section 2.02);
(E) the preparation, obtaining or filing of the instruments, opinions
and certificates and other documents required for the release of Collateral
(Section 2.12);
(F) the maintenance of an office in the [City of Chicago, Illinois,]
for registration of transfer or exchange of Notes (Section 3.02);
(G) the duty to cause newly appointed Paying Agents, if any, to
deliver to the Indenture Trustee the instrument specified in the Indenture
regarding funds held in trust (Section 3.03);
(H) the direction to the Indenture Trustee to deposit monies with
Paying Agents, if any, other than the Indenture Trustee (Section 3.03);
(I) the obtaining and preservation of the Issuer's qualification to
do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the collateral and each other instrument and agreement included in
the Collateral (Section 3.04);
(J) the preparation of all supplements and amendments to the
Indenture and all financing statements, continuation statements,
instruments of further assurance and other instruments and the taking of
such other action as is necessary or advisable to protect the Collateral
other than as prepared by the Servicer (Section 3.05);
(K) the delivery of the Opinion of Counsel on the Closing Date and
certain other statements as to compliance with the Indenture (Sections 3.06
and 3.09);
(L) the identification to the Indenture Trustee in an Officer's
Certificate of a Person with whom the Issuer has contracted to perform its
duties under the Indenture (Section 3.07(b));
(M) the notification of the Indenture Trustee and each Rating Agency
of an Event of Termination under the Sale and Servicing Agreement;
(N) the duty to cause the Servicer to comply with Sections 4.09,
4.10, 4.11 and 5.07 and Article Five and Article Nine of the Sale and
Servicing Agreement (Section 3.14);
(O) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10(b) and Section 3.11(b));
2
<PAGE>
(P) the delivery of written notice to the Indenture Trustee and each
Rating Agency of each Event of Default under the Indenture and each Event
of Termination by the Servicer under the Sale and Servicing Agreement
(Section 3.18);
(Q) the monitoring of the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officer's
Certificate and the obtaining of the Opinion of Counsel and the Independent
Certificate relating thereto (Section 4.01);
(R) the compliance with any written directive of the Indenture
Trustee with respect to the sale of the Collateral in a commercially
reasonable manner if an Event of Default shall have occurred and be
continuing (Section 5.04);
(S) the preparation and delivery of notice to Noteholders of the
removal of the Indenture Trustee and the appointment of a successor
Indenture Trustee (Section 6.08);
(T) the preparation of any written instruments required to confirm
more fully the authority of any co-trustee or separate trustee and any
written instruments necessary in connection with the resignation or removal
of the Indenture Trustee or any co-trustee or separate trustee (Sections
6.08 and 6.10);
(U) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee is
not the Note Registrar (Section 7.01);
(V) the opening of one or more accounts in the Indenture Trustee's
name, the preparation and delivery of Issuer Orders, Officer's Certificates
and Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Trust Accounts (Sections 8.02
and 8.03);
(W) the preparation of an Issuer Request and Officer's Certificate
and the obtaining of an Opinion of Counsel and Independent Certificates, if
necessary, for the release of the Collateral (Sections 8.04 and 8.05);
(X) the preparation of Issuer Orders and the obtaining of Opinions of
Counsel with respect to the execution of supplemental indentures and the
mailing to the Noteholders of notices with respect to such supplemental
indentures (Sections 9.01, 9.02 and 9.03);
(Y) the execution and delivery of new Notes conforming to any
supplemental indenture (Section 9.06);
(Z) the duty to notify Noteholders of redemption of the Notes or to
cause the Indenture Trustee to provide such notification (Section 10.02);
(AA) the preparation and delivery of all Officer's Certificates,
Opinions of Counsel and Independent Certificates with respect to any
requests by the Issuer to the Indenture Trustee to take any action under
the Indenture (Section 11.01(a));
(BB) the preparation and delivery of Officer's Certificates and the
obtaining of Independent Certificates, if necessary, for the release of
property from the lien of the Indenture (Section 11.01(b));
(CC) the notification of the Rating Agencies, upon the failure of the
Issuer, the Owner Trustee or the Indenture Trustee to provide notification;
3
<PAGE>
(DD) the preparation and delivery to Noteholders and the Indenture
Trustee of any agreements with respect to alternate payment and notice
provisions (Section 11.06); and
(EE) the recording of the Indenture, if applicable (Section 11.14).
(ii) The Administrator will:
(A) except as otherwise expressly provided in the Indenture, pay the
Indenture Trustee's Fees and reimburse the Indenture Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or
made by the Indenture Trustee in accordance with any provision of the
Indenture (including the reasonable compensation, expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith;
(B) indemnify the Indenture Trustee and its agents for, and hold them
harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection with
the acceptance or administration of the transactions contemplated by the
Indenture, including the reasonable costs and expenses of defending
themselves against any claim or liability in connection with the exercise
or performance of any of their powers or duties under the Indenture; and
(C) indemnify the Owner Trustee and its agents for, and hold them
harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection with
the acceptance or administration of the transactions contemplated by the
Trust Agreement, including the reasonable costs and expenses of defending
themselves against any claim or liability in connection with the exercise
or performance of any of their powers or duties under the Trust Agreement.
(b) Additional Duties.
(i) In addition to the duties set forth in Section 1(a)(i), the
Administrator shall perform such calculations and shall prepare or shall
cause the preparation by other appropriate persons of, and shall execute on
behalf of the Issuer or the Owner Trustee, all such documents, reports,
filings, instruments, certificates and opinions that the Issuer or the
Owner Trustee are required to prepare, file or deliver pursuant to the
Transaction Documents or Section 5.05 of the Trust Agreement, and at the
request of the Owner Trustee shall take all appropriate action that the
Issuer or the Owner Trustee are required to take pursuant to the
Transaction Documents. In furtherance thereof, the Owner Trustee shall, on
behalf of itself and of the Issuer, execute and deliver to the
Administrator and to each successor Administrator appointed pursuant to the
terms hereof, one or more powers of attorney substantially in the form of
Exhibit A hereto, appointing the Administrator the attorney-in-fact of the
Owner Trustee and the Issuer for the purpose of executing on behalf of the
Owner Trustee and the Issuer all such documents, reports, filings,
instruments, certificates and opinions. Subject to Section 5, and in
accordance with the directions of the Issuer, the Administrator shall
administer, perform or supervise the performance of such other activities
in connection with the Collateral (including the Transaction Documents) as
are not covered by any of the foregoing provisions and as are expressly
requested by the Issuer and are reasonably within the capability of the
Administrator.
(ii) Notwithstanding anything in this Agreement or the Transaction
Documents to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax
is imposed on the Trust's payments (or allocations of income) to an Owner
as contemplated in Section 5.02(c) of the Trust Agreement. Any such notice
shall specify the amount of any withholding tax required to be withheld by
the Owner Trustee pursuant to such provision.
4
<PAGE>
(iii) Notwithstanding anything in this Agreement or the Transaction
Documents to the contrary, the Administrator shall be responsible for
performance of the duties of the Owner Trustee set forth in Section
5.05(a), (b), (c) and (d), the penultimate sentence of Section 5.05 and
Section 5.06(a) of the Trust Agreement with respect to, among other things,
accounting and reports to Owners; provided, however, that the Owner Trustee
shall retain responsibility for the distribution of information forms
necessary to enable each Owner to prepare its federal and state income tax
returns.
(iv) The Administrator shall satisfy its obligations with respect to
clauses (ii) and (iii) above by retaining, at the expense of the Trust
payable by the Administrator, a firm of independent public accountants (the
"Accountants") acceptable to the Owner Trustee, which shall perform the
obligations of the Administrator thereunder.
(v) The Administrator shall perform the duties of the Administrator
specified in Section 10.02 of the Trust Agreement required to be performed
in connection with the resignation or removal of the Owner Trustee, and any
other duties expressly required to be performed by the Administrator under
the Trust Agreement.
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions or otherwise deal with any of its Affiliates; provided,
however, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in
the Administrator's opinion, no less favorable to the Issuer than would be
available from unaffiliated parties.
(c) Non-Ministerial Matters.
(i) With respect to matters that in the reasonable judgment of the
Administrator are non-ministerial, the Administrator shall not take any
action unless within a reasonable time before the taking of such action,
the Administrator shall have notified the Owner Trustee of the proposed
action and the Owner Trustee shall not have withheld consent or provided an
alternative direction. For the purpose of the preceding sentence, "non-
ministerial matters" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Contracts);
(C) the amendment, change or modification of the Transaction
Documents;
(D) the appointment of successor Note Registrars, successor Paying
Agents and successor Indenture Trustees pursuant to the Indenture or the
appointment of successor Administrators or a successor Servicer, or the
consent to the assignment by the Note Registrar, Paying Agent or Indenture
Trustee of its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement, the
Administrator shall not be obligated to, and shall not, (A) make any
payments to the Noteholders under the Transaction Documents, (B) sell the
Collateral pursuant to clause (iv) of Section 5.04 of the Indenture, (C)
take any other action that the Issuer directs the Administrator not to take
on its behalf or (D) take any other action which may be construed as having
the effect of varying the investment of the Holders.
Section 2 Records. The Administrator shall maintain appropriate books of
account and records relating
5
<PAGE>
to services performed hereunder, which books of account and records shall be
accessible for inspection by the Issuer and the Owner Trustee at any time during
normal business hours.
Section 3. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to a monthly fee
which shall be solely an obligation of the Trust Depositor shall be agreeable
to the Trust Depositor and the Administrator.
Section 4. Additional Information to be Furnished to the Issuer. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
Section 5. Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Administrator shall
have no authority to act for or represent the Issuer or the Owner Trustee in any
way and shall not otherwise be deemed an agent of the Issuer or the Owner
Trustee.
Section 6. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Administrator and either of the Issuer or the Owner Trustee
as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
Section 7. Other Activities of Administrator. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other business or,
in its sole discretion, from acting in a similar capacity as an administrator
for any other Person or entity even though such person or entity may engage in
business activities similar to those of the Issuer, the Owner Trustee or the
Indenture Trustee.
Section 8. Term of Agreement; Resignation and Removal of Administrator.
This Agreement shall continue in force until the dissolution of the Issuer, upon
which event this Agreement shall automatically terminate.
(a) Subject to Section 8(d) and Section 8(e), the Administrator may resign
its duties hereunder by providing the Issuer with at least 60 days'
prior written notice.
(b) Subject to Section 8(d) and Section 8(e), the Issuer may remove the
Administrator without cause by providing the Administrator with at
least 60 days' prior written notice.
(c) Subject to Section 8(d) and Section 8(e), at the sole option of the
Issuer, the Administrator may be removed immediately upon written
notice of termination from the Issuer to the Administrator if any of
the following events shall occur:
(i) the Administrator shall default in the performance of any of its
duties under this Agreement and, after notice of such default,
shall not cure such default within ten days (or, if such default
cannot be cured in such time, shall not give within ten days such
assurance of cure as shall be reasonably satisfactory to the
Issuer);
(ii) a court having jurisdiction in the premises shall enter a decree
or order for relief, and such decree or order shall not have been
vacated within 60 days, in respect of the Administrator in any
involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect or appoint a
receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for the Administrator or any substantial part
of its property or order the winding-up or liquidation of its
affairs; or
6
<PAGE>
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order for
relief in an involuntary case under any such law, or shall
consent to the appointment of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official for the
Administrator or any substantial part of its property, shall
consent to the taking of possession by any such official of any
substantial part of its property, shall make any general
assignment for the benefit of creditors or shall fail generally
to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) above shall occur, it shall give written notice thereof to the
Issuer and the Indenture Trustee within seven days after the occurrence of such
event.
(d) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator shall
have been appointed by the Issuer and (ii) such successor
Administrator shall have agreed in writing to be bound by the terms of
this Agreement in the same manner as the Administrator is bound
hereunder.
(e) The appointment of any successor Administrator shall be effective only
after the satisfaction of the Rating Agency Condition with respect to
the proposed appointment.
(f) Subject to Section 8(d) and 8(e), the Administrator acknowledges that
upon the appointment of a Successor Servicer pursuant to the Sale and
Servicing Agreement, the Administrator shall immediately resign and
such Successor Servicer shall automatically become the Administrator
under this Agreement.
Section 9. Action upon Termination, Resignation or Removal. Promptly
upon the effective date of termination of this Agreement pursuant to Section 8
or the resignation or removal of the Administrator pursuant to Section 8(a), (b)
or (c) respectively, the Administrator shall be entitled to be paid all fees and
reimbursable expenses accruing to it to the date of such termination,
resignation or removal. The Administrator shall forthwith upon such termination
pursuant to Section 8 deliver to the Issuer all property and documents of or
relating to the Collateral then in the custody of the Administrator. In the
event of the resignation or removal of the Administrator pursuant to Section
(a), (b) or (c), respectively, the Administrator shall cooperate with the Issuer
and take all reasonable steps requested to assist the Issuer in making an
orderly transfer of the duties of the Administrator.
Section 10. Notices. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Administrator:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Attention: [________________]
Telecopier No.:
7
<PAGE>
(ii) If to the Trust Depositor:
Heller Funding Corporation
500 West Monroe street
Chicago, Illinois 60661
Telecopier No.:
(iii) If to the Indenture Trustee:
[_______________]
[_______________]
[_______________]
[_______________]
Attention: [________________]
Telecopier No.:
(iv) If to the Issuer or the Owner Trustee:
[________________]
[________________]
[________________]
[________________]
Attention: [________________]
Telecopier No.: [________________]
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
Section 11. Amendments. This Agreement may be amended from time to time
by a written amendment duly executed and delivered by the parties hereto, with
the written consent of the Owner Trustee but without the consent of the
Noteholders 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 or of modifying in any manner the rights of the Noteholders or
Certificateholders; provided that such amendment will not, in the Opinion of
Counsel satisfactory to the Indenture Trustee, materially and adversely affect
the interest of any Noteholder or Certificateholder. This Agreement may also be
amended by the parties hereto with the written consent of the Owner Trustee and
the holders of Notes evidencing at least a majority in the Outstanding Amount of
the Notes and the holders of Certificates evidencing at least a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of Noteholders or the Certificateholders;
provided, however, that no such amendment may (i) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on the Contracts or distributions that are required to be made for the
benefit of the Noteholders or Certificateholders or (ii) reduce the aforesaid
percentage of the holders of Notes and Certificates which are required to
consent to any such amendment, without the consent of the Insurer and the
holders of all outstanding Notes and Certificates. Notwithstanding the
foregoing, the Administrator may not amend this Agreement without the permission
of the Trust Depositor, which permission shall not be unreasonably withheld.
Section 12. Successors and Assigns. This Agreement may not be assigned
by the Administrator unless such assignment is previously consented to in
writing by the Issuer, the Indenture Trustee and the Owner Trustee and subject
to the satisfaction of the Rating Agency Condition in respect thereof. An
assignment with such consent and satisfaction, if accepted by the assignee,
shall bind the assignee hereunder in the same manner as the Administrator is
bound hereunder. Notwithstanding the foregoing, this Agreement may be assigned
by the Administrator without the consent of the Issuer or the Owner Trustee to a
corporation or other organization that is a successor (by merger, consolidation
or purchase of assets) to the Administrator; provided that such successor
organization executes and delivers to the Issuer, the Owner
8
<PAGE>
Trustee and the Indenture Trustee an agreement, in form and substance reasonably
satisfactory to the Owner Trustee and the Indenture Trustee, in which such
corporation or other organization agrees to be bound hereunder by the terms of
said assignment in the same manner as the Administrator is bound hereunder.
Subject to the foregoing, this Agreement shall bind any successors or assigns of
the parties hereto.
Section 13. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 14. Headings. The section and subsection headings hereof have
been inserted for convenience of reference only and shall not be construed to
affect the meaning, construction or effect of this Agreement.
Section 15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same agreement.
Section 16. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall 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 17. Not Applicable to Heller Financial in Other Capacities.
Nothing in this Agreement shall affect any obligation Heller Financial may have
in any other capacity.
Section 18. Limitation of Liability of Owner Trustee and Indenture
Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
instrument has been countersigned by [________________] not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in no
event shall [________________] in its individual capacity or any beneficial
owner of the Issuer have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder, as to all of
which recourse shall be had solely to the assets of the Issuer. For all
purposes of this Agreement, in the performance of any duties or obligations of
the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the
benefits of, the terms and provisions of Articles Six, Seven and Eight of the
Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by [_______________] not in its individual
capacity but solely as Indenture Trustee and in no event shall [_______________]
have any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer.
Section 19. Third-party Beneficiary. The Owner Trustee is a third-party
beneficiary to this Agreement and is entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it were a party hereto.
Section 20. Survivability. The obligations of the Administrator described
in Section 1(a)(ii) hereof shall survive termination of this Agreement.
[this portion of page intentionally left blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
By: [___________________________]
its individual capacity but solely as Owner Trustee
By: ________________________________________
Printed Name: __________________________
Title: _________________________________
HELLER FUNDING CORPORATION,
as Trust Depositor
By: ________________________________________
Printed Name: [______________]
Title: [ ]
[_______________], not in its individual
capacity but solely as Indenture Trustee
By: _________________________________________
Printed Name: [ ]
Title: Vice President
HELLER FINANCIAL, INC., as Administrator
By: _________________________________________
Printed Name: [______________]
Title: [ ]
10
<PAGE>
EXHIBIT A
LIMITED POWER OF ATTORNEY
State of Illinois )
) SS.
County of Cook )
KNOW ALL PERSONS BY THESE PRESENTS, that [________________], a Delaware
banking corporation (the "Owner Trustee"), whose principal executive office is
located at [________________], [________________________________________],
Attention: [________________], by and through its duly elected and authorized
officer, ________________________, a ___________________, on behalf of itself
and of Heller Equipment Asset Receivables Trust 1997-1 (the "Trust") as Issuer
under the Administration Agreement, dated as of August 1, 1997 (the
"Administration Agreement"), among the Trust, Heller Funding Corporation,
[_______________], as Indenture Trustee, and Heller Financial, Inc., as
Administrator, does hereby nominate, constitute and appoint Heller Financial,
Inc. a Nevada corporation, each of its officers from time to time and each of
its employees authorized by it from time to time to act hereunder, jointly and
each of them severally, together or acting alone, its true and lawful attorney-
in-fact, for the Owner Trustee and the Issuer in their name, place and stead, in
the sole discretion of such attorney-in-fact, to perform such calculations and
prepare or cause the preparation by other appropriate persons of, and to execute
on behalf of the Issuer or the Owner Trustee, all such documents, reports,
filings, instruments, certificates and opinions that the Issuer or the Owner
Trustee is required to prepare, file or deliver pursuant to the Administration
Agreement, and to take any and all other action, as such attorney-in-fact may
deem necessary or desirable in accordance with the directions of the Owner
Trustee and in connection with its duties as Administrator or successor
Administrator under the Administration Agreement. Capitalized terms used herein
that are not otherwise defined shall have the meanings ascribed thereto in the
Administration Agreement.
The Owner Trustee hereby ratifies and confirms the execution, delivery and
performance (whether before or after the date hereof) of the above-mentioned
documents, reports, filings, instruments, certificates and opinions, by the
attorney-in-fact and all that the attorney-in-fact shall lawfully do or cause to
be done by virtue hereof.
The Owner Trustee hereby agrees that no person or other entity dealing with
the attorney-in-fact shall be bound to inquire into such attorney-in-fact's
power and authority hereunder and any such person or entity shall be fully
protected in relying on such power of authority.
This Limited Power of Attorney may not be assigned without the prior
written consent of the Owner Trustee. It is effective immediately and will
continue until it is revoked.
This Limited Power of Attorney shall be governed and construed in
accordance with the laws of the State of Illinois without reference to
principles of conflicts of law.
Executed as of this _____ day of August, 1997.
[________________],
not in its individual capacity but solely as
Owner Trustee,
By: ______________________________________
Printed Name: ________________________
Title: _______________________________
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT OF
NOTARY PUBLIC
State of Illinois )
) SS.
County of Cook )
On August __, 1997 before me, ____________________________________________
[insert date] [Here insert name and title of notary]
personally appeared ____________________________________________________________
[_] personally known to me, or
[_] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ties), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature __________________________________________________ [SEAL]
<PAGE>
EXHIBIT 10.3
================================================================================
Transfer and Sale Agreement
by and among
Heller Financial, Inc.,
as Seller and as Servicer
Heller Financial Leasing, Inc.,
as Seller
and
Heller Funding Corporation
as Purchaser
Dated as of August [__], 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
<S> <C> <C>
DEFINITIONS.................................................................................................... 1
ARTICLE II
TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT................................................................. 1
Section 2.01. Closing......................................................................................... 1
Section 2.02. Conditions to the Closing....................................................................... 2
Section 2.03. Assignment of Agreement......................................................................... 3
Section 2.04. Conveyance of Subsequent Contracts.............................................................. 3
Section 2.05. Release of Excluded Amounts..................................................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES................................................................................. 4
Section 3.01. Representations and Warranties Regarding the Sellers............................................ 5
Section 3.02. Representations and Warranties Regarding Each Contract.......................................... 5
Section 3.03. Representations and Warranties Regarding the Initial Contracts in the Aggregate................. 6
Section 3.04. Representations and Warranties Regarding the Contract Files..................................... 6
Section 3.05. Representations and Warranties Regarding Concentrations of Initial Contracts.................... 6
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS.................................................... 7
Section 4.01. Custody of Contracts............................................................................ 7
Section 4.02. Filing.......................................................................................... 7
Section 4.03. Name Change or Relocation....................................................................... 7
Section 4.04. Chief Executive Office.......................................................................... 7
Section 4.05. Costs and Expenses.............................................................................. 7
Section 4.06. Sale Treatment.................................................................................. 7
ARTICLE V
REMEDIES UPON MISREPRESENTATION................................................................................ 8
Section 5.01. Repurchases and Substitutions of Contracts for Breach of Representations and
Warranties...................................................................................... 8
Section 5.02. Sellers' Repurchase Option...................................................................... 8
Section 5.03. Reassignment of Repurchased or Substituted Contracts............................................ 8
ARTICLE VI
INDEMNITIES.................................................................................................... 8
Section 6.01. Sellers Indemnification......................................................................... 8
Section 6.02. Liabilities to Obligors......................................................................... 9
Section 6.03. Tax Indemnification............................................................................. 9
Section 6.04. Adjustments..................................................................................... 9
Section 6.05. Operation of Indemnities........................................................................ 9
ARTICLE VII
</TABLE>
<PAGE>
<TABLE>
MISCELLANEOUS................................................................................................. 9
<S> <C> <C>
Section 7.01. Prohibited Transactions with Respect to the Trust.............................................. 9
Section 7.02. Merger or Consolidation........................................................................ 10
Section 7.03. Termination.................................................................................... 10
Section 7.04. Assignment or Delegation by the Sellers........................................................ 10
Section 7.05. Amendment...................................................................................... 10
Section 7.06. Notices........................................................................................ 11
Section 7.07. Merger and Integration......................................................................... 12
Section 7.08. Headings....................................................................................... 12
Section 7.09. Governing Law.................................................................................. 12
Section 7.10. No Bankruptcy Petition......................................................................... 12
EXHIBITS
- --------
Exhibit A Form of Assignment
Exhibit B Form of Subsequent Purchase Agreement
</TABLE>
<PAGE>
This TRANSFER AND SALE AGREEMENT, dated as of August [__], 1997, is made by
and among Heller Financial, Inc., a Delaware corporation, as a seller hereunder
(together with its successors and assigns "Heller Financial"), Heller Financial
Leasing, Inc. ("Heller Leasing" and together with Heller Financial, the
"Sellers") and Heller Funding Corporation, a Delaware corporation and wholly-
owned subsidiary of Heller Financial (together with its successors and assigns,
the "Trust Depositor"), as purchaser hereunder.
WHEREAS, in the regular course of their business, the Sellers originate and
purchase Contracts.
WHEREAS, the Sellers and Trust Depositor wish to set forth the terms and
conditions pursuant to which Trust Depositor will acquire Initial Contracts on
the Closing Date, and may acquire from time to time thereafter certain
Subsequent Contracts (such Initial Contracts and Subsequent Contracts, together
with certain related property as more fully described herein, being the Contract
Assets as defined below; and
WHEREAS, Trust Depositor intends concurrently with each transfer of
Contract Assets hereunder to convey all right, title and interest in such
Contract Assets to Heller Equipment Asset Receivables Trust 1997-1 (the "Trust")
pursuant to the Sale and Servicing Agreement dated as of August 1, 1997 by and
among Trust Depositor, Heller Financial, as Servicer, and Heller Equipment Asset
Receivables Trust 1997-1, as issuer (the "Issuer") (as amended, supplemented or
otherwise modified from time to time, the "Sale and Servicing Agreement"),
executed concurrently herewith;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the Sellers and the Trust Depositor agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. General. Unless otherwise defined in this Agreement,
capitalized terms used herein (including in the preamble above) shall have the
meanings assigned to them in the Sale and Servicing Agreement.
ARTICLE II
TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT
Section 2.01. Closing. Subject to and upon the terms and conditions set
forth in this Agreement, the Sellers hereby sell, transfer, assign, set over and
otherwise convey to Trust Depositor, in consideration of Trust Depositor's
payment of $[ ] in cash as the purchase price therefor, all the right,
title and interest of the Sellers in and to (items (i)-(vi) below, being
collectively referred to herein as the "Contract Assets"):
(i) the Initial Contracts, and all monies due or to become due in
payment of such Contracts on and after the Initial Cutoff Dates, any
Prepayment Amounts, any payments in respect of a casualty or early
termination, and any Recoveries received with respect thereto, but
excluding any Scheduled Payments due prior to the related Cutoff Date and
any Excluded Amounts;
(ii) the Equipment related to such Contracts, and, in the case of
any Vendor Loan, related Applicable Security, including all proceeds from
any sale or other disposition of such Equipment (but subject to the
exclusion and release herein of Excluded Amounts);
(iii) the Contract Files;
(iv) all payments made or to be made in the future with respect to
such Contracts or the Obligor thereunder under any Program Agreements or
Vendor Agreements with the related Seller and under any guarantee or
similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract; and
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<PAGE>
(vi) all income from and proceeds of the foregoing;
provided, that Contract Assets shall not include any Residual Investment.
The foregoing sale, transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an assumption by the
Trust Depositor of any obligation of the Sellers in connection with the Contract
Assets, or any agreement or instrument relating thereto, including, without
limitation, any obligation to any Obligor or End-User, or any other Person in
respect of services not financed by the Sellers, or (i) any taxes, fees, or
other charges imposed by any Governmental Authority and (ii) any insurance
premiums which remain owing with respect to any Contract at the time such
Contract is sold hereunder. Although the Sellers and the Trust Depositor agree
that any such transfer is intended to be a sale of ownership of the Contract
Assets, rather than the mere granting of a security interest to secure a
borrowing, in the event such transfer is deemed to be of a mere security
interest to secure indebtedness, the Sellers shall be deemed to have granted
Trust Depositor a perfected first priority security interest in such Contract
Assets and this Agreement shall constitute a security agreement under applicable
law, securing the repayment of the purchase price paid hereunder and the
obligations and/or interests represented by the Securities, in the order and
priorities, and subject to the other terms and conditions of, the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, together with such
other obligations or interests as may arise hereunder and thereunder in favor of
the parties hereto and thereto. If such transfer is deemed to be the mere
granting of a security interest to secure a borrowing, Trust Depositor may, to
secure Trust Depositor's own borrowing under the Sale and Servicing Agreement
(to the extent that the transfer of the Contract Assets thereunder is deemed to
be a mere granting of a security interest to secure a borrowing) repledge and
reassign (i) all or a portion of the Contract Assets pledged to Trust Depositor
and not released from the security interest of this Agreement at the time of
such pledge and assignment, and (ii) all proceeds thereof. Such repledge and
reassignment may be made by Trust Depositor with or without a repledge and
reassignment by Trust Depositor of its rights under this Agreement, and without
further notice to or acknowledgment from the Sellers. The Sellers waive, to the
extent permitted by applicable law, all claims, causes of action and remedies,
whether legal or equitable (including any right of setoff), against Trust
Depositor or any assignee of Trust Depositor relating to such action by Trust
Depositor in connection with the transactions contemplated by the Sale and
Servicing Agreement.
Section 2.02. Conditions to the Closing. On or before the Closing Date, the
Sellers shall deliver or cause to be delivered to Trust Depositor each of the
documents, certificates and other items as follows:
(a) The List of Contracts, certified by the Chairman of the Board,
President or any Vice President of the respective Seller together with an
Assignment substantially in the form attached as Exhibit A hereto.
(b) A certificate of an officer of each respective Seller substantially in
the form of Exhibit C-2 to the Sale and Servicing Agreement.
(c) An opinion of counsel for the Sellers substantially in the form of
Exhibit D to the Sale and Servicing Agreement.
(d) A letter from Arthur Andersen LLP, or another nationally recognized
accounting firm, addressed to Trust Depositor and the Issuer and the Trustees
and stating that such firm has reviewed a sample of the Contracts and performed
specific procedures for such sample with respect to certain contract terms and
identifying those Contracts which do not so conform.
(e) Copies of resolutions of the Board of Directors of the respective
Seller or of the Executive Committee of the Board of Directors of the respective
Seller approving the execution, delivery and performance of this Agreement and
the transactions contemplated hereunder, certified in each case by the Secretary
or an Assistant Secretary of the respective Seller.
(f) Officially certified recent evidence of due incorporation and good
standing of the Sellers under the laws of Delaware.
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<PAGE>
(g) An Officer's Certificate from the respective Seller confirming that
the respective Seller's compliance officer has reviewed the original of each
Contract and each related Contract File, that each Contract and related Contract
File conforms in all material respects with the List of Contracts and each such
Contract File is complete, that each document required be an original, and that
the face of each original Contract has been stamped with the following notation:
"This Contract is subject to a security interest granted to [ ] as
Owner Trustee for the Heller Equipment Asset Receivables Trust 1997-1.
UCC-1 Financing Statements covering this Contract have been filed with
the Secretary of State of the State of Delaware and the Secretary of
State of the State of Illinois. Such lien will be released only in
connection with appropriate filings in such offices. Consequently,
potential purchasers of this Contract must refer to such filings to
determine whether such lien has been released."
(h) The documents, certificates and other items described in Section 2.02
of the Sale and Servicing Agreement, to the extent not already described above.
Section 2.03. Assignment of Agreement. Trust Depositor has the right to
assign its interest under this Agreement to the Issuer and Owner Trustee as may
be required to effect the purposes of the Sale and Servicing Agreement, without
further notice to, or consent of, the Sellers, and the Issuer and the Trustees
shall succeed to such of the rights of Trust Depositor hereunder as shall be so
assigned. The Sellers acknowledge that, pursuant to the Sale and Servicing
Agreement, Trust Depositor will assign all of its right, title and interest in
and to the Contract Assets and its right to exercise the remedies created by
Section 5.01 hereof for breaches of representations and warranties of the
Sellers contained in Sections 3.01, 3.02, 3.03, 3.04 and 3.05 hereof to the
Issuer and the Trustees for the benefit of the Noteholders and
Certificateholders. The Sellers agree that, upon such assignment to the Issuer
and the Trustees, such representations will run to and be for the benefit of the
Issuer and the Trustees and the Issuer and the Trustees may enforce directly
without joinder of Trust Depositor, the repurchase obligations of the Sellers
set forth herein with respect to breaches of such representations and warranties
as set forth herein and in Section 7.06 of the Sale and Servicing Agreement.
Section 2.04. Conveyance of Subsequent Contracts. (a) Subject to the
satisfaction of the conditions set forth in section 2.04(b) of the Sale and
Servicing Agreement, the Sellers may at their option (but shall not be obligated
to) sell, transfer, assign, set over and otherwise convey to the Trust Depositor
(by delivery of an executed Subsequent Purchase Agreement substantially in the
form attached as Exhibit B hereto), without recourse other than as expressly
provided herein and therein (and the Trust Depositor shall be required to
purchase, either through payment by delivery of a cash purchase price in the
amount of the prepayment proceeds received by the Trust and released to the
Trust Depositor on the Subsequent Transfer Date, in the case of a Subsequent
Contract which is an Additional Contract, or through payment by exchange of one
or more related Contracts released by the Trust to the Trust Depositor on the
Subsequent Transfer Date, in the case of a Subsequent Contract which is a
Substitute Contract) all the right, title and interest of the Sellers in and
to (the property in clauses (i)-(vi) below, upon such transfer, becoming part of
the "Contract Assets"):
(i) the Subsequent Contracts identified in the related Addition
Notice, and all monies due or to become due in payment of such Contracts on
and after the related Subsequent Cutoff Dates, any Prepayment Amounts, any
payments in respect of a casualty or early termination, and any Recoveries
received with respect thereto, but excluding any Scheduled Payments due
prior to the related Cutoff Date and any Excluded Amounts;
(ii) the Equipment related to such Contracts and, in the case of any
Vendor Loan, related Applicable Security, including all proceeds from any
sale or other disposition of such Equipment (but subject to the exclusion
and release herein of Excluded Amounts);
(iii) the Contract Files;
(iv) all payments made or to be made in the future with respect to
such Contracts or the Obligor thereunder under any Program Agreements or
Vendor Agreements with the related Seller and under any guarantee or
similar credit enhancement with respect to such Contracts;
3
<PAGE>
(v) all Insurance Proceeds with respect to each such Contract; and
(vi) all income from and proceeds of the foregoing;
provided, that such Contract Assets shall in no case include any Residual
Investment.
The foregoing sale, transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an assumption by the
Trust Depositor of any obligation of the Sellers in connection with the Contract
Assets, or any agreement or instrument relating thereto, including, without
limitation, any obligation to any Obligor or End-User, or any other Person in
respect of services not financed by the Sellers, or (i) any taxes, fees, or
other charges imposed by any Governmental Authority and (ii) any insurance
premiums which remain owing with respect to any Contract at the time such
Contract is sold hereunder. Although the Sellers and the Trust Depositor agree
that any such transfer is intended to be a sale of ownership of the Contract
Assets, rather than the mere granting of a security interest to secure a
borrowing, in the event such transfer is deemed to be of a mere security
interest to secure indebtedness, the Sellers shall be deemed to have granted
Trust Depositor a perfected first priority security interest in such Contract
Assets and this Agreement shall constitute a security agreement under applicable
law, securing the repayment of the purchase price paid hereunder and the
obligations and/or interests represented by the Securities, in the order and
priorities, and subject to the other terms and conditions of, the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, together with such
other obligations or interests as may arise hereunder and thereunder in favor of
the parties hereto and thereto. If such transfer is deemed to be the mere
granting of a security interest to secure a borrowing, Trust Depositor may, to
secure Trust Depositor's own borrowing under the Sale and Servicing Agreement
(to the extent that the transfer of the Contract Assets thereunder is deemed to
be a mere granting of a security interest to secure a borrowing) repledge and
reassign (i) all or a portion of the Contract Assets pledged to Trust Depositor
and not released from the security interest of this Agreement at the time of
such pledge and assignment, and (ii) all proceeds thereof. Such repledge and
reassignment may be made by Trust Depositor with or without a repledge and
reassignment by Trust Depositor of its rights under this Agreement, and without
further notice to or acknowledgment from the Sellers. The Sellers waive, to the
extent permitted by applicable law, all claims, causes of action and remedies,
whether legal or equitable (including any right of setoff), against Trust
Depositor or any assignee of Trust Depositor relating to such action by Trust
Depositor in connection with the transactions contemplated by the Sale and
Servicing Agreement.
Section 2.05. Release of Excluded Amounts. Immediately upon the release to
the Trust Depositor by the Trustee, pursuant to Section 2.05 of the Sale and
Servicing Agreement, of Excluded Amounts, the Trust Depositor hereby irrevocably
agrees to release to the Sellers such Excluded Amounts, which release shall be
automatic and shall require no further act by the Trust Depositor, provided,
that the Trust Depositor shall execute and deliver such instruments of release
and assignment, or otherwise confirming the foregoing release of any Excluded
Amounts, as may be reasonably requested by the Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Sellers jointly and severally make, and upon execution of each
Subsequent Purchase Agreement are jointly and severally deemed to remake, the
following representations and warranties, on which Trust Depositor will rely in
purchasing the Contract Assets on the Closing Date (and on any Subsequent
Transfer Date) and concurrently reconveying the same to the Trust, and on which
the Trust, the Noteholders and Certificateholders will rely under the Sale and
Servicing Agreement. Such representations speak as of the execution and delivery
of this Agreement and as of the Closing Date (or Subsequent Transfer Date, as
applicable), but shall survive the sale, transfer and assignment of the
Contracts to the Trust. The repurchase obligation or substitution obligation of
the Sellers set forth in Section 5.01 below and in Section 7.06 of the Sale and
Servicing Agreement constitutes the sole remedy available for a breach of a
representation or warranty of the Sellers set forth in Sections 3.02, 3.03, 3.04
or 3.05 of this Agreement. Notwithstanding the foregoing, the Sellers shall not
be deemed to be remaking any of the representations set forth in Section 3.03 or
3.05 on a Subsequent Transfer Date with respect to the Subsequent Contracts, as
such representations
4
<PAGE>
relate solely to the composition of the Initial Contracts conveyed on the
Closing Date, provided, that any inaccurate representation as to concentrations
contained in any Addition Notice shall be subject to the same remedies hereunder
as if such representation were made under Section 3.05 on the Closing Date with
respect to an Initial Contract.
Section 3.01. Representations and Warranties Regarding the Sellers. Each
Seller jointly and severally represents and warrants, as of the execution and
delivery of this Agreement and as of the Closing Date (or Subsequent Transfer
Date, as applicable), that:
(a) Organization and Good Standing. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its assets
and to transact the business in which it is currently engaged. Each Seller is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or otherwise) of each Seller or
Trust Depositor. Each Seller is properly licensed in each jurisdiction to the
extent required by the laws of such jurisdiction to service the Contracts in
accordance with the terms of the Sale and Servicing Agreement.
(b) Authorization; Binding Obligation. Each Seller has the power and
authority to make, execute, deliver and perform this Agreement and the other
Transaction Documents to which the respective Seller is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which the respective Seller is a party, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the other Transaction Documents to which the respective Seller is
a party. This Agreement and the other Transaction Documents to which the
respective Seller is a party constitute the legal, valid and binding obligation
of each Seller is enforceable in accordance with their terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies.
(c) No Consent Required. Each Seller is not required to obtain the consent
of any other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement and the other Transaction Documents to which
the respective Seller is a party.
(d) No Violations. Each Seller's execution, delivery and performance of
this Agreement and the other Transaction Documents to which the respective
Seller is a party will not violate any provision of any existing law or
regulation or any order or decree of any court or the Articles of Incorporation
or Bylaws of the respective Seller, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the respective Seller
is a party or by which the respective Seller or any of the Seller's properties
may be bound.
(e) Litigation. No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to the
knowledge of a Seller threatened, against a Seller or any of its respective
properties or with respect to this Agreement or any other Transaction Document
to which the respective Seller is a party which, if adversely determined, would
in the opinion of the respective Seller has a material adverse effect on the
business, properties, assets or condition (financial or other) of a Seller or
the transactions contemplated by this Agreement or any other Transaction
Document to which the respective Seller is a party.
(f) Place of Business; No Changes. Each Seller's sole place of business or
chief executive office (within the meaning of Article 9 of the UCC) is as set
forth in Section 7.06 below and each location where a Seller maintains custody
of Contract Files is reflected in the definition of UCC Filing Location. Each
Seller has not changed its name whether by amendment of its Certificate of
Incorporation, by reorganization or otherwise, and has not changed the location
of its place of business, within the four months preceding the Closing Date (or
Subsequent Transfer Date, as applicable).
Section 3.02. Representations and Warranties Regarding Each Contract. Each
Seller jointly and severally
5
<PAGE>
represents and warrants as to each Contract as of the execution and delivery of
this Agreement and as of the Closing Date, and as of each Subsequent Transfer
Date with respect to each Subsequent Contract, that:
(a) List of Contracts. The information set forth in the List of Contracts
is true, complete and correct as of the applicable Cutoff Date.
(b) Eligible Contract. Such Contract satisfies the criteria for the
definition of Eligible Contract set forth in the Sale and Servicing Agreement as
of the date of its conveyance hereunder.
Section 3.03. Representations and Warranties Regarding the Initial
Contracts in the Aggregate. Each Seller jointly and severally represents and
warrants, as of the execution and delivery of this Agreement and as of the
Closing Date, that:
(a) Amounts. The ADCB of the Contracts as of the Initial Cutoff Date
equals the sum of the principal balance of the Class A-1 Notes, the Class A-2
Notes, the Class B Notes, the Class C Notes and Class D Notes on the Closing
Date.
(b) Characteristics. The Initial Contracts have the following
characteristics: (i) no Contract has a remaining maturity of more than [__]
months; and (ii) the final scheduled Distribution Date on the Contract with the
latest maturity is not later than [________]. Approximately [___]% of the ADCB
of the Contracts as of the Initial Cutoff Date is attributable to the financing
of new Equipment and approximately [___]% of such ADCB is attributable to the
financing of used Equipment. No Contract was originated after the Initial
Cutoff Date. The first payment on each Contract is due on or before [____],
1997.
(c) No "True Leases". In the Sellers' reasonable judgment, no Initial
Contract constituting a Lease is a "true lease" as distinguished from a
financing lease.
Section 3.04. Representations and Warranties Regarding the Contract Files.
Each Seller jointly and severally represents and warrants as of the execution
and delivery of this Agreement and as of the Closing Date (or Subsequent
Transfer Date, with respect to Subsequent Contracts), that (i) immediately prior
to such date (as applicable), each Seller will have possession of each original
Contract and the related complete Contract File, and there are and there will be
no other custodial agreements relating to the same in effect; (ii) each of such
documents which is required to be signed by the Obligor has been signed by the
Obligor in the appropriate spaces; (iii) all blanks on any form have been
properly filled in and each form has otherwise been correctly prepared; and (iv)
the complete Contract File for each Contract currently is in the possession of
the Servicer.
Section 3.05. Representations and Warranties Regarding Concentrations of
Initial Contracts. Each Seller represents and warrants as of the Closing Date,
as to the composition of the Initial Contracts in the Contract Pool as of the
Initial Cutoff Date, that:
(i) the ADCB of all End-User Contracts with Obligors that are
governmental entities or municipalities does not exceed [ ]% of the
ADCB of the Contract Pool;
(ii) the ADCB of all End-User Contracts which finance, lease or are
related to Software will not exceed 5.46% of the ADCB of the
Contract Pool;
(iii) the ADCB of all End-User Contracts with Obligors who comprise the ten
(10) largest Obligors (measured by ADCB as of the date of
determination) does not exceed 23.09% of the ADCB of the Contract
Pool;
(iv) the ADCB of all End-User Contracts with Obligors who comprise the
twenty (20) largest Obligors (measured by ADCB as of the date of
determination) does not exceed [24.59]% of the ADCB of the Contract
Pool;
(v) [the ADCB of all End-User Contracts related to a single Vendor, or
representing a Vendor Loan of such Vendor, does not exceed [ ]% of
the ADCB of the Contract Pool;] and
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(vi) the ADCB of all End-User Contracts with Obligors located in a single
State of the United States does not exceed 18.65% of the ADCB of
the Contract Pool.
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
Section 4.01. Custody of Contracts. Subject to the terms and conditions
of this Section 4.01, the contents of each Contract File shall be held in the
custody of the Servicer for the benefit of the Owner Trustee as the owner
thereof. The Sellers agree to cooperate with the Servicer in its efforts to
comply with all its obligations under the Sale and Servicing Agreement in
respect of the Contract Assets, and acknowledge and consent to the transactions
contemplated therein.
Section 4.02. Filing. On or prior to the Closing Date, the Sellers shall
cause the UCC financing statement(s) referred to in Section 2.02(g) hereof and
in Section 2.02(h) of the Sale and Servicing Agreement to be filed and from time
to time the Sellers shall take and cause to be taken such actions and execute
such documents as are necessary or desirable or as Trust Depositor or the Owner
Trustee may reasonably request to perfect and protect the Owner Trustee's
ownership interest in the Trust 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.
Section 4.03. Name Change or Relocation. (a) During the term of this
Agreement, no Seller shall change its name, identity or structure or relocate
its chief executive office, or relocate or establish a new location where
Contract Files are maintained, without first giving at least 30 days' prior
written notice to Trust Depositor and to the Trustees.
(b) If any change in a Seller's name, identity or structure or other action
would make any financing or continuation statement or notice of ownership
interest or lien filed under this Agreement seriously misleading within the
meaning of applicable provisions of the UCC or any title statute, the respective
Seller, no later than five days after the effective date of such change, shall
file such amendments as may be required to preserve and protect the Trustees'
interests in the Trust Assets and proceeds thereof. In addition, each Seller
shall not change its place of business or its chief executive office (within the
meaning of Article 9 of the UCC) from the location specified in Section 7.06
below, or relocate or establish a location where it maintains Contract Files
which is other than one of the UCC Filing Locations unless it has first taken
such action as is advisable or necessary to preserve and protect the Issuer's
and Trustees' interest in the Contract Assets. Promptly after taking any of the
foregoing actions, each Seller shall deliver to Trust Depositor and the Trustees
an opinion of counsel stating that, in the opinion of such counsel, all
financing statements or amendments necessary to preserve and protect the
interests of the Trustees in the Contract Assets have been filed, and reciting
the details of such filing.
Section 4.04. Chief Executive Office. During the term of this Agreement,
and subject to other terms and provisions herein relating to changes in
location, each Seller will maintain its chief executive office in one of the
States of the United States, except Louisiana, Tennessee, Colorado, Kansas, New
Mexico, Oklahoma, Utah or Wyoming.
Section 4.05. Costs and Expenses. The Sellers jointly and severally agree
to pay all reasonable costs and disbursements in connection with the perfection
and the maintenance of perfection, as against all third parties, of (i) Trust
Depositor's and the Trustees' right, title and interest in and to the Contract
Assets (including, without limitation, the security interest in the Equipment
related thereto) and (ii) the security interests provided for in the Indenture.
Section 4.06. Sale Treatment. Each Seller and Trust Depositor shall treat
the transfer of Contract Assets made hereunder for all purposes (including
financial accounting purposes) as a sale and purchase on all of its relevant
books, records, financial statements and other applicable documents. Not
withstanding the preceding sentence, for federal income tax purposes the
transfer of Contract Assets by the Trust Depositor hereunder shall not be
treated as a sale and purchase for federal income tax purposes so long as the
Trust is disregarded as a separate entity pursuant to Treasury Regulations
Sections 301.7701-3(b)(i)(ii).
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ARTICLE V
REMEDIES UPON MISREPRESENTATION
Section 5.01. Repurchases and Substitutions of Contracts for Breach of
Representations and Warranties. Each Seller hereby jointly and severally
agrees, for the benefit of the Trustees and the Trust Depositor, that it shall
repurchase an Ineligible Contract or Excess Contract (together with all related
Contract Assets), at a repurchase price equal to the Transfer Deposit Amount,
not later than ninety (90) days following the date the Seller becomes aware of,
or receives written notice from any Trustee, the Servicer or the Trust Depositor
of, the related breach or inaccuracy or representation and which breach or
inaccuracy has not otherwise been cured; provided, however, that if the Seller
is able to effect a substitution for any such Ineligible Contract or Excess
Contract in compliance with Section 2.04, the Seller may, in lieu of
repurchasing such Contract, effect a substitution for such affected Contract
with a Substitute Contract not later than the date a repurchase of such affected
Contract would be required hereunder; provided further, that with respect to a
breach of representation or warranty relating to the Contracts in the aggregate
and not to any particular Contract, the Sellers may select Contracts (without
adverse selection) to repurchase or substitute for such that had such Contracts
not been reconveyed by Trust Depositor and included as part of the Trust there
would have been no breach of such representation or warranty.
Section 5.02. Sellers' Repurchase Option. On written notice to the Owner
Trustee and the Indenture Trustee at least 20 days prior to a Distribution
Date,, and provided that the ADCB of all Contracts in the Contract Pool is then
less than 10% of the ADCB of such Contracts as of the Initial Cutoff Date, the
Sellers, through the Trust Depositor, may (but are not required to) repurchase
from the Trust Depositor on that Distribution Date all outstanding Contracts at
a price equal to the aggregate outstanding Principal Amount of the Securities
(other than the Class D Certificates) as of the current Distribution Date
thereon, the amount of unreimbursed Servicer Advances (if any) as well as
accrued and unpaid monthly Servicing Fees to the date of such repurchase. Such
price is to be deposited in the Collection Account one Business Day before such
Distribution Date, against the Owner Trustee's and Indenture Trustee's and Trust
Depositor's release of the Contracts and the Contract Files to the Sellers.
Section 5.03. Reassignment of Repurchased or Substituted Contracts. Upon
receipt by the Indenture Trustee for deposit in the Collection Account of
the repurchase price as described in Section 5.01 or 5.02 (or upon the
Subsequent Transfer Date related to a Substitute Contract described in Section
5.01), and upon receipt of a certificate of a Servicing Officer in the form
attached hereto as Exhibit G, the Trust Depositor shall assign to the original
applicable Seller all of the Trust Depositor's right, title and interest in the
repurchased or substituted Contract and related Trust Assets, in each case
received from the Trust and the Indenture Trustee in accordance with Section
7.07 of the Sale and Servicing Agreement, without recourse, representation or
warranty.
ARTICLE VI
INDEMNITIES
Section 6.01. Sellers Indemnification. The Sellers will jointly and
severally defend and indemnify Trust Depositor, the Trust, the Trustees, any
agents of the Trustees and the Certificateholders and Noteholders against any
and all costs, expenses, losses, damages, claims and liabilities, joint or
several, including reasonable fees and expenses of counsel and expenses of
litigation arising out of or resulting from (i) this Agreement or the use,
ownership or operation of any Equipment by the respective Seller or the Servicer
or any Affiliate of either, (ii) any representation or warranty or covenant made
by the respective Seller in this Agreement being untrue or incorrect (subject to
the second sentence of the preamble to Article III of this Agreement above), and
(iii) any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or in any amendment thereto or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement was made in conformity with information
furnished to Trust Depositor by the Sellers specifically for use therein.
Notwithstanding any other provision of this Agreement, the obligation of the
Sellers under this Section 6.01 shall not terminate upon a Service Transfer
pursuant to Article VIII of the Sale and Servicing Agreement and shall survive
any
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termination of that agreement or this Agreement.
Section 6.02. Liabilities to Obligors. No obligation or liability to
any Obligor under any of the Contracts is intended to be assumed by the
Trustees, the Trust, the Noteholders or the Certificateholders under or as a
result of this Agreement and the transactions contemplated hereby.
Section 6.03. Tax Indemnification. The Sellers jointly and severally
agree to pay, and to indemnify, defend and hold harmless the Trust Depositor,
the Trust, the Trustees, the Noteholders or the Certificateholders from, any
taxes which may at any time be asserted with respect to, and as of the date of,
the transfer of the Contracts to Trust Depositor hereunder and the concurrent
reconveyance to the Trust and the further pledge by the Trust to the Indenture
Trustee, including, without limitation, any sales, gross receipts, general
corporation, personal property, privilege or license taxes (but not including
any federal, state or other taxes arising out of the creation of the Trust and
the issuance of the Notes and Certificates) and costs, expenses and reasonable
counsel fees in defending against the same, whether arising by reason of the
acts to be performed by a Seller or the Servicer under this Agreement or the
Sale and Servicing Agreement or imposed against the Trust, a Noteholder, a
Certificateholder or otherwise. Notwithstanding any other provision of this
Agreement, the obligation of the Sellers under this Section 6.03 shall not
terminate upon a Service Transfer pursuant to Article VIII of the Sale and
Servicing Agreement and shall survive any termination of this Agreement.
Section 6.04. Adjustments. The Sellers jointly and severally agree
that, with respect to each Contract (i) which provides for a Prepayment Amount
less than the amount calculated in accordance with the definition thereof and
(ii) as to which the related Vendor has not agreed to indemnify the Trust
Depositor or any assignee of the Trust Depositor in an amount at least equal to
the excess of the "Prepayment Amount" as calculated in accordance with the
definition thereof over the amount otherwise payable upon prepayment of such
Contract, the Sellers shall indemnify the Trust depositor or the Trust as
assignee thereof, in an amount equal to the amount specified in the foregoing
clause (ii).
The Sellers hereby agree that if, with respect to any Lease with
Lessees that are governmental entities or municipalities, (i) such Lease may be
canceled in accordance with its terms and (ii) the Vendor that assigned such
Lease to the respective Seller is not unconditionally obligated to repurchase
such Lease from the Sellers for a purchase price not less than the Discounted
Contract Balance of such Lease as of the date of repurchase (assuming that the
interest rate to be applied in calculating the Discounted Contract Balance of
such Lease is the Discount Rate on the date of repurchase) plus interest at the
Discount Rate through the date of repurchase (such amount, the "Required Lease
Cancellation Payment") then the respective Seller shall indemnify the Trust
Depositor or the Trust as assignee thereof against such cancellation in an
amount equal to the difference between the amount, if any, received from the
related Vendor and the Required Lease Cancellation Payment.
Section 6.05. Operation of Indemnities. Indemnification under this
Article VI shall include, without limitation, reasonable fees and expenses of
counsel and expenses of litigation. If a Seller has made any indemnity payments
to Trust Depositor or the Trustees pursuant to this Article VI and Trust
Depositor or the Trustees thereafter collects any of such amounts from others,
Trust Depositor or the Trustees will repay such amounts collected to the
respective Seller's, except that any payments received by Trust Depositor or the
Trustees from an insurance provider as a result of the events under which the
respective Seller's indemnity payments arose shall be repaid prior to any
repayment of the Sellers' indemnity payment.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Prohibited Transactions with Respect to the Trust. The
Sellers shall not:
(a) Provide credit to any Noteholder or Certificateholder for the
purpose of enabling such Noteholder or Certificateholder to purchase Notes or
Certificates, respectively;
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(b) Purchase any Notes or Certificates in an agency or trustee capacity; or
(c) Except in its capacity as Servicer as provided in the Sale and
Servicing Agreement, lend any money to the Trust.
Section 7.02. Merger or Consolidation. (a) Except as otherwise provided
in this Section 7.02, the Sellers will keep in full force and effect its
existence, rights and franchises as Delaware corporations, 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 and of any of the Contracts and to
perform its duties under this Agreement.
(b) Any person into which the Sellers may be merged or consolidated, or any
corporation resulting from such merger or consolidation to which the Sellers are
a party, or any person succeeding to the business of the Sellers, shall be the
successor to the Sellers 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.
(c) Upon the merger or consolidation of the Sellers as described in this
Section 7.02, the Sellers shall provide Fitch and Moody's notice of such merger
or consolidation within thirty (30) days after completion of the same.
Section 7.03. Termination. This Agreement shall terminate (after
distribution of all amounts distributable pursuant to Section 7.05 of the Sale
and Servicing Agreement) on the Distribution Date on which the principal balance
of the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D
Notes and the Certificates is reduced to zero; provided, that the Sellers'
representations and warranties and indemnities by each respective Seller shall
survive termination.
Section 7.04. Assignment or Delegation by the Sellers. Except as
specifically authorized hereunder, the Sellers may not convey and assign or
delegate any of its rights or obligations hereunder absent the prior written
consent of Trust Depositor and the Trustees, and any attempt to do so without
such consent shall be void.
Section 7.05. Amendment. (a) This Agreement may be amended from time
to time by the Sellers and Trust Depositor, with notice to the Rating Agencies,
but without the consent of the Trustees or any of the Noteholders or
Certificateholders, to correct manifest error, to cure any ambiguity, to correct
or supplement any provisions herein or therein which may be inconsistent with
any other provisions herein or therein, as the case may be, or to add any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement; provided,
however, that such action shall not, as evidenced by an opinion of Counsel for
the Sellers acceptable to the Trustees, adversely affect the interests of any
Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time by the Sellers and
Trust Depositor, with consent of the Required Holders, 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
Trustees for the benefit of Noteholders or Certificateholders; provided,
however, that no such amendment or waiver shall (a) reduce in any manner the
amount of, or delay the timing of, collections of payments on the Contracts or
distributions which are required to be made on any Note or Certificate or (b)
reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the holders of all affected Securities then outstanding.
(c) Promptly after the execution of any amendment or consent pursuant
to this Section 7.05, Trust Depositor shall furnish written notification of the
substance of such amendment and a copy of such amendment to each Trustee,
Moody's and Fitch.
(d) It shall not be necessary for the consent of Noteholders or
Certificateholders under this Section 7.05
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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 consents and of evidencing the authorization of the execution
thereof by Noteholders and Certificateholders shall be subject to such
reasonable requirements as the Trustees may prescribe.
(e) Upon the execution of any amendment or consent pursuant to this
Section 7.05, this Agreement shall be modified in accordance therewith, and such
amendment or consent shall form a part of this Agreement for all purposes, and
every holder of Notes and Certificates theretofore or thereafter issued
hereunder shall be bound thereby.
Section 7.06. Notices. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows:
(i) If to the Sellers:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Telecopier No.:
Heller Financial Leasing, Inc.
[500 West Monroe Street]
[Chicago, Illinois 60661]
Telecopier No.:
(ii) If to the Trust Depositor:
Heller Funding Corporation
500 West Monroe Street
Chicago, Illinois 60661
Telecopier No.:
(iii) If to the Indenture Trustee:
[________________________]
[________________________]
[________________________]
[________________________]
Attention: [________________________]
Telecopier No.: [________________________]
(iv) If to the Owner Trustee:
[________________________]
[________________________]
[________________________]
[________________________]
Attention: [________________________]
Telecopier No.: [________________________]
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(v) If to Moody's:
Moody's Investor's Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Fitch:
Telecopier No.:
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
All communications and notices pursuant hereto to a Noteholders or
Certificateholder shall be in writing and delivered or mailed at the address
shown in the Note Register or Certificate Register, respectively.
Section 7.07. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
Section 7.08. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 7.09. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Illinois.
Section 7.10. No Bankruptcy Petition. Each Seller covenants and agrees
that, prior to the date that is one year and one day after the payment in full
of all amounts owing in respect of all outstanding Securities, it will not
institute against the Trust Depositor, or the Trust, or join any other Person in
instituting against the Trust Depositor or the Trust, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States. This Section 7.10 will survive the termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
HELLER FUNDING CORPORATION
By: _________________________________
Printed Name:____________________
Title: __________________________
HELLER FINANCIAL, INC.
By: _________________________________
Printed Name:____________________
Title:___________________________
HELLER FINANCIAL LEASING, INC.
By: _________________________________
Printed Name:____________________
Title:___________________________
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Exhibit A
Transfer and Sale
Agreement
FORM OF ASSIGNMENT
In accordance with the Transfer and Sale Agreement (the "Agreement") dated
as of August 1, 1997 made by and between the undersigned, as thereunder
("Sellers"), and [________________________], a Delaware corporation and wholly-
owned subsidiary of Heller Financial, Inc. ("Trust Depositor"), as purchaser
thereunder, the undersigned does hereby sell, transfer, convey and assign, set
over and otherwise convey to Trust Depositor all its right, title and interest
in and to:
(i) the Initial Contracts, and all monies due or to become due in
payment of such Contracts on and after the Initial Cutoff Date, any
Prepayment Amounts, any payments in respect of a casualty or early
termination, and any Recoveries received with respect thereto, but
excluding any Scheduled Payments due prior to the related Cutoff Date and
any Excluded Amounts;
(ii) the Equipment related to such Contracts and, in the case of any
Vendor Loans, related Applicable Security, including all proceeds from any
sale or other disposition of such Equipment (but subject to the exclusion
and release in the Agreement of the Excluded Amounts);
(iii) the Contract Files;
(iv) all payments made or to be made in the future with respect to
such Contracts or the Obligor thereunder under any Program Agreements or
Vendor Agreements with the related Seller and under any guarantee or
similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract; and
(vi) all income from and proceeds of the foregoing; provided, that
the property described above shall not include any Residual Investment.
This Assignment is made pursuant to and in reliance upon the representation
and warranties on the part of the undersigned contained in Article III of the
Agreement and no others. Capitalized terms used in this Assignment and not
defined shall have the same meanings as such terms would have if used in the
Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this ___ day of August, 1997.
HELLER FINANCIAL, INC.
By:_____________________________________
Printed Name:________________________
Title:_______________________________
HELLER FINANCIAL LEASING, INC.
By:_____________________________________
Printed Name:________________________
Title:_______________________________
<PAGE>
Exhibit B
Transfer and Sale
Agreement
FORM OF SUBSEQUENT PURCHASE AGREEMENT
(to come)
