<PAGE>
As filed with the Securities and Exchange Commission on September 21, 1998
Registration No. 333-58909
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PROVIDENT EQUIPMENT LEASE TRUST 1998-A
(Issuer)
PROVIDENT LEASE RECEIVABLES CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 9999 31-1605466
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
1023 West Eighth Street
Cincinnati, Ohio 45203
(513) 579-2867
(Address, including zip code, and telephone number, including area
code, of principal executive offices of Registrant)
Mark Magee
One East Fourth Street
Cincinnati, Ohio 45202
(513) 579-2867
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Robert F. Hugi, Esq. Stuart M. Litwin, Esq.
Mayer, Brown & Platt Mayer, Brown & Platt
190 South LaSalle Street 190 South LaSalle Street
Chicago, Illinois 60603 Chicago, Illinois 60603
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d)
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>
Proposed Proposed
Title of Each Maximum Maximum Amount of
Class of Securities Amount to be Offering Price Aggregate Registration
to be Registered Registered Per Unit(1) Price(1) Fee
<S> <C> <C> <C> <C>
Notes $211,000,000 100% $211,000,000 $62,245
</TABLE>
(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(o) of the Securities Act.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROVIDENT EQUIPMENT LEASE TRUST 1998-A
PROVIDENT LEASE RECEIVABLES CORPORATION
Cross Reference Sheet Furnished
Pursuant to Rule 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Item and Caption in Form S-1 Caption or Location in Prospectus
<S> <C> <C>
1. Forepart of Registration Statement Forepart of Registration Statement; Outside Front Cover Page of
and Outside Cover Page of Prospectus Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover Pages of Prospectus
Pages of Prospectus
3. Summary Information, Risk Factors and Summary; Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price *
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Underwriting
9. Description of Securities to be Summary; The Trust; The Lease Pool; Prepayment and Yield
Registered Considerations; Description of the Notes
10. Interests of Named Experts and Counsel *
11. Information With Respect to the The Trust; The Transferor
Registrant
12. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
</TABLE>
* Answer negative or item inapplicable.
2
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 21, 1998
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchanges Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
approximately $209,218,000
Provident Equipment Lease Trust 1998-A, Issuer
Provident Lease Receivables Corporation, Transferor
Information Leasing Corporation, Servicer
approximately $73,048,000 % Class A-1 Lease-Backed Notes
approximately $19,204,000 % Class A-2 Lease-Backed Notes
approximately $90,724,000 % Class A-3 Lease-Backed Notes
approximately $18,574,000 % Class A-4 Lease-Backed Notes
approximately $7,668,000 % Class B Lease-Backed Notes
The Provident Equipment Lease Trust 1998-A (the "Trust") will be formed
pursuant to a Trust Agreement, to be dated as of September 1, 1998, between
Provident Lease Receivables Corporation (the "Transferor") and First Union Trust
Company, National Association, as Trustee (in such capacity, the "Trustee") and
will issue the % Class A-1 Lease-Backed Notes (the "Class A-1 Notes"), the %
Class A-2 Lease-Backed Notes (the "Class A-2 Notes"), the % Class A-3
Lease-Backed Notes (the "Class A-3 Notes"), the % Class A-4 Lease-Backed Notes
(the "Class A-4 Notes"; together with the Class A-1 Notes, the Class A-2 Notes
and the Class A-3 Notes, the "Class A Notes"), and the % Class B Lease-Backed
Notes (the "Class B Notes"; and together with the Class A Notes, the "Notes").
The Notes will be issued pursuant to an Indenture, to be dated as of September
1, 1998, between the Trust and Norwest Bank Minnesota, National Association, as
Indenture Trustee (in such capacity, the "Indenture Trustee"). The Trust will
also issue approximately $6,572,000 % Lease-Backed Certificates (the
"Certificates"; and together with the Notes, the "Securities"), but the
Certificates are not offered hereby.
The Notes will represent secured obligations of the Trust. The assets of
the Trust will include a pool of equipment leases and all of the Trust's
interest in the equipment underlying the leases (which includes computer
equipment and software, medical equipment, retail equipment, phone equipment,
office equipment, industrial equipment and food service equipment). The leases
and the related interests in the equipment were originated or acquired by
Information Leasing Corporation ("ILC"), an Ohio corporation that is a
wholly-owned subsidiary of The Provident Bank, as described herein and will be
transferred by ILC to Provident Lease Receivables Corporation (the
"Transferor"), a special purpose bankruptcy remote subsidiary of ILC under a
contribution agreement (the "Contribution Agreement") by and between ILC and the
Transferor, and will in turn be transferred by the Transferor to the Trust
pursuant to the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") to be entered into among the Trust, the Transferor and the Servicer.
(Cover continued on next page)
------------------------------------
Prospective investors should consider the "Risk Factors" commencing on page
12 for a discussion of certain factors that should be considered in
connection with an investment in the Notes.
THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN THE TRANSFEROR, THE SERVICER OR ANY OF THEIR
RESPECTIVE AFFILIATES. NONE OF THE NOTES OR THE LEASES ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY.
------------------------------------
<TABLE>
<CAPTION>
Initial Public Proceeds to
Offering Price Underwriting Discount Transferor(1)
<S> <C> <C> <C>
Per Class A-1 Note % % $
Per Class A-2 Note % % $
Per Class A-3 Note % % $
Per Class A-4 Note % % $
Per Class B Note % % $
Total $ $ $
</TABLE>
(1) Before deducting expenses estimated to be $500,000.
The Notes are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel, or modify any order without notice.
It is expected that delivery of the Notes will be made in book-entry form
through the facilities of The Depository Trust Company on or about September ,
1998.
------------------------------------
LEHMAN BROTHERS PRUDENTIAL SECURITIES INCORPORATED
(with respect to Class A Notes only)
The date of this Prospectus is September , 1998.
3
<PAGE>
(cover page continued)
Payments of principal and interest to the holders of record (the "Holders") of
the Class A Notes (the "Class A Noteholders") will have the benefit of limited
credit support consisting of the subordination of the Class B Notes and the
Certificates, funds on deposit in the Reserve Account, Residual Realizations,
including funds on deposit in the Residual Account, if any, and the
Overcollateralization Amount. The Holders of the Class B Notes (the "Class B
Noteholders"; and together with the Class A Noteholders, the "Noteholders") will
have the benefit of limited credit support in the form of the subordination of
the Certificates, funds on deposit in the Reserve Account, Residual
Realizations, including funds on deposit in the Residual Account, if any, and
the Overcollateralization Amount. Capitalized terms used herein will have the
meanings ascribed to such terms herein. The pages on which terms are defined are
set forth on the Index of Terms contained herein.
Interest on the Notes will be payable monthly in arrears on the 25th day of
each month (or if such date is not a business day, the next succeeding business
day) beginning on November 25, 1998 (each, a "Payment Date") with respect to the
period from and including the immediately preceding Payment Date (or with
respect to the initial Payment Date, the Issuance Date) to the day prior to such
current Payment Date. Principal payments with respect to the Notes will be
payable on each Payment Date beginning on November 25, 1998. The stated maturity
date with respect to the Class A-1 Notes is the Payment Date in October, 1999,
the stated maturity date with respect to the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class B Notes is the Payment Date in April,
2006. However, if all payments on the leases are made as scheduled, final
payment with respect to the Notes would occur prior to stated maturity and it is
expected that the Notes will mature prior to stated maturity. See "Prospectus
Summary--Expected Maturity; Stated Maturity". In addition, if Early Lease
Terminations or Casualties (each, as described herein) occur, or if an Event of
Default occurs, repayment of principal on the Notes may be earlier than would
otherwise be the case.
The Servicer will have the option, subject to certain conditions, to
repurchase the Leases and cause the Trust to redeem all, but not less than all,
of the Notes and thereby cause early repayment of the Notes as of any Payment
Date on which the Discounted Present Value of the Performing Leases (after
giving effect to the payment of principal on such Payment Date) is less than or
equal to 5% of the Discounted Present Value of the Leases as of the Cut-Off
Date. The Discounted Present Value of the Leases at any time will be determined
by discounting the remaining amounts scheduled to be paid under the Leases after
the end of the related Due Period. See "Description of the Transfer and
Servicing Agreements--Servicing Procedures" for a description of the limited
circumstances in which such amounts may be adjusted. The Trust will give notice
of such redemption to each Noteholder and the Indenture Trustee at least 30 days
before the Payment Date fixed for such prepayment. Upon deposit of funds
necessary to effect such redemption, the Indenture Trustee will pay the
remaining unpaid principal amount on the Notes and all accrued and unpaid
interest as of the Payment Date fixed for redemption. See "Description of the
Notes--Redemption".
The Notes offered hereby are being offered pursuant to this Prospectus.
Sales of the Notes may not be consummated unless the purchaser has received this
Prospectus.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE NOTES OFFERED HEREBY, INCLUDING PURCHASES OF NOTES TO STABILIZE THE MARKET
PRICE AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES
SEE "UNDERWRITING" HEREIN.
AVAILABLE INFORMATION
The Transferor, 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
4
<PAGE>
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 Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
REPORTS TO NOTEHOLDERS
During such time as the Notes remain in book-entry form, monthly unaudited
reports containing information concerning the Notes and the Leases will be
prepared by the Servicer and will be sent on behalf of the Trust to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC"), as the registered
holder of the Notes. Such reports will be made available by DTC, and its
participants to holders of interests in the Notes (the "Note Owners") in
accordance with the rules, regulations and procedures creating and affecting
DTC. See "Certain Information Regarding the Notes--Book Entry Registration".
However, such reports will not be sent directly to any beneficial owner while
the Notes are in book-entry form. Upon the issuance of fully registered,
certificated Notes, such reports will be sent directly to each Note Owner. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. The Transferor, as originator of the
Trust, will file with the Commission such periodic reports with respect to the
Trust as are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations of the Commission thereunder.
5
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. A listing of pages
on which terms are defined can be found in the "Index of Terms" herein.
<TABLE>
<S> <C>
Trust............................ Provident Equipment Lease Trust 1998-A (the
"Trust"), a trust to be formed under the
laws of the State of New York pursuant to
the Trust Agreement, to be dated as of
September 1, 1998 (the "Trust Agreement")
between the Transferor and the Trustee. The
activities of the Trust will be limited by
the terms of the Trust Agreement to
acquiring and managing the Leases, issuing
and making payments on the Notes and the
Certificates, and other activities related
to the foregoing. The Trust will have no
significant assets other than the Trust
Property and no officers, directors or
employees.
Transferor....................... Provident Lease Receivables Corporation (the
"Transferor"), a Delaware corporation. The
Transferor's offices are located at 1023
West Eighth Street, Cincinnati, Ohio 45203,
and its phone number is (513) 579-2861. The
Transferor will be established as a
wholly-owned bankruptcy remote subsidiary of
ILC and is intended to be a limited-purpose
corporation. Accordingly, the Transferor's
operations have been restricted to (a) limit
its ability to engage in business with, or
incur liabilities to, any other entity which
may bring bankruptcy proceedings against the
Transferor; and (b) decrease the risk that
it would be consolidated into the bankruptcy
proceedings of any other entity.
Servicer......................... ILC (the "Servicer"), an Ohio corporation
that is a wholly-owned subsidiary of The
Provident Bank. ILC will enter into a
contribution agreement (the "Contribution
Agreement") to be dated September 1, 1998,
with the Transferor to transfer its interest
in the Equipment to the Transferor, and will
also enter into a Pooling and Servicing
Agreement (the "Pooling and Servicing
Agreement"), to be dated September 1, 1998,
with the Transferor and the Trust pursuant
to which the Transferor will transfer the
Leases and its interest in the Equipment to
the Trust and the Servicer will agree to
service the Leases included in the Lease
Pool and make Servicer Advances.
Indenture Trustee................ Norwest Bank Minnesota, National
Association, as indenture trustee (the
"Indenture Trustee") under the Indenture, to
be dated as of September 1, 1998 (the
"Indenture") between the Trust and the
Indenture Trustee.
Trustee.......................... First Union Trust Company, National
Association, as trustee under the Trust
Agreement (the "Trustee").
The Notes........................ approximately $73,048,000 aggregate
principal amount (the "Class A-1 Initial
Principal Amount") of % Class A-1
Lease-Backed Notes (the "Class A-1 Notes"),
approximately $19,204,000 aggregate
principal amount (the "Class A-2 Initial
Principal Amount") of % Class A-2
Lease-Backed Notes (the "Class A-2 Notes"),
approximately $90,724,000 aggregate
principal amount (the "Class A-3 Initial
Principal Amount") of % Class A-3
Lease-Backed Notes (the "Class A-3 Notes"),
approximately $18,574,000 aggregate
principal amount (the "Class A-4 Initial
Principal Amount", together with the Class
A-1 Initial Principal Amount, the Class A-2
Initial Principal Amount and the Class A-3
Initial Principal Amount, the "Class
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
A Initial Amount") of % Class A-4
Lease-Backed Notes (the "Class A-4 Notes";
together with the Class A-1 Notes, the Class
A-2 Notes and the Class A-3 Notes, the
"Class A Notes"), and
approximately $7,668,000 aggregate principal
amount (the "Class B Initial Principal
Amount", together with the Class A Initial
Principal Amount, the "Initial Principal
Amount") of % Class B Lease-Backed Notes
(the "Class B Notes"; together with the
Class A Notes, the "Notes").
The Notes will be issued pursuant to the
Indenture and will be secured by the assets
of the Trust pursuant to the Indenture. The
Class B Notes will be subordinated to the
Class A Notes to the extent provided in the
Indenture as described herein. See
"--Application of Payments" and "Description
of the Notes".
Discounted Present Value
of the Leases ................. The Initial Principal Amounts of the Class A
Notes and the Class B Notes set forth in
"--The Notes" above in this preliminary
prospectus are based upon the Discounted
Present Value of the Leases as of the close
of business on August 31, 1998 (the "Cut-Off
Date") calculated at a rate equal to 6.70%
(the "Statistical Discount Rate"). Certain
information concerning the Leases has been
calculated based on the Discounted Present
Value of the Leases as of the Cut-Off Date
calculated at the Statistical Discount Rate.
The actual Initial Principal Amount of the
Notes and the Certificates will be
calculated using the actual Discount Rate
and will be set out in the final prospectus
for the Notes. See "--Initial Principal
Amounts".
The "Discounted Present Value of the Leases"
at any given time, shall equal the future
remaining scheduled payments (including
Payaheads but excluding Third Party Amounts
and, after the Closing Date, delinquent
amounts) from the Leases (including
Non-Performing Leases), discounted at a rate
equal to % (the "Discount Rate"), which rate
is equal to the sum of (a) the weighted
average Interest Rate of the Class A Notes
(utilizing the Class A-4 Interest Rate), the
Class B Notes and Certificates on the
Issuance Date and (b) the Servicing Fee Rate
of 0.75% per annum. The "Discounted Present
Value of the Performing Leases" equals the
Discounted Present Value of the Leases
reduced by the Discounted Present Value of
the Non-Performing Leases. See "Description
of the Transfer and Servicing
Agreements--Distributions". Each of the
Indenture and the Pooling and Servicing
Agreement will provide that any calculation
of future remaining scheduled payments made
on a Determination Date or with respect to a
Payment Date will be calculated as of the
related Determination Date after giving
effect to any payments received during the
related Due Period to the extent such
payments relate to scheduled payments due
and payable by the Lessees with respect to
the related Due Period and all prior Due
Periods. "Statistical Discounted Present
Value of the Leases" means an amount equal
to the future remaining scheduled payments
(including Payaheads but excluding Third
Party Amounts and, after the Closing Date,
delinquent amounts), from the Leases as of
the Cut-Off Date, discounted at the
Statistical Discount Rate. The Statistical
Discounted Present Value of the Leases as of
the Cut-Off Date is $218,899,819.97 and will
not vary more than 10% from the Discounted
Present Value of the Leases as of the
Cut-Off Date. See "The Lease Pool--The
Equipment". The aggregate Discounted Present
Value of the Leases as of the Cut-Off Date,
calculated at the Discount Rate is $ .
"Non-Performing Leases" are (a) Leases that
the Servicer has determined to be more than
93 days delinquent or (b) Leases that have
been accelerated by the Servicer or Leases
that the Servicer has determined to be
uncollectible in accordance with its
customary practices. See "The Lease
Pool--The Leases". The Transferor will
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
represent in the Pooling and Servicing
Agreement that as of the Cut-Off Date, no
Lease was a Non-Performing Lease.
Subordination.................... So long as no Event of Default has occurred
and the Notes have not been accelerated,
distributions of interest and principal on
the Notes will be payable as follows. On
each Payment Date, interest will be paid
first, to the Class A Noteholders, second to
the Class B Noteholders and finally to the
Holders of the Certificates. See "--Terms of
the Notes; Interest Payments". No payment of
principal will be made on Class A- 2 Notes,
the Class A-3 Notes, the Class A-4 Notes,
the Class B Notes or the Certificates until
the Class A-1 Notes have been paid in full.
Thereafter, on each Payment Date, principal
will be paid first on the Class A-2 Notes,
in the amount of the Class A Principal
Payment, then on the Class A-3 Notes, in the
amount of the Class A Principal Payment,
then on the Class A-4 Notes, in the amount
of the Class A Principal Payment, then on
the Class B Notes, in the amount of the
Class B Principal Payment, and finally, on
the Certificates, in the amount of the
Certificate Principal Payment. See "--Terms
of the Notes; Principal Payments". After
making payments of principal set forth in
the preceding sentence on each Payment Date,
Additional Principal, if any, will be paid
to the most senior class of Notes then
outstanding. Payments of interest and
principal will be made on each Payment Date
only to the extent of Available Funds
available therefor in accordance with the
Priority of Payments. Upon the occurrence of
an Event of Default and the acceleration of
the Notes and until such Event of Default
has been rescinded, distributions will be
made in the priority described in
"Description of the Transfer and Servicing
Agreement--Distributions". See also
"--Application of Payments" and "Description
of the Notes".
Terms of the Notes
A. Interest Payments......... Interest will accrue on the Class A-1 Notes
at the rate of % per annum (the "Class A-1
Interest Rate") and will be calculated on
the basis of a year of 360 days and the
actual number of days in each Interest
Accrual Period. Interest will accrue on the
Class A-2 Notes at the rate of % per annum
(the "Class A-2 Interest Rate"), on the
Class A-3 Notes at the rate of % per annum
(the "Class A-3 Interest Rate"), on the
Class A-4 Notes at the rate of % per annum
(the "Class A-4 Interest Rate") and on the
Class B Notes at the rate of % per annum
(the "Class B Interest Rate"), in each case
calculated on the basis of a year of 360
days comprised of twelve 30-day months. With
respect to any particular class of Notes,
the "Interest Rate" refers to the applicable
rate indicated in the immediately preceding
sentence.
On each Payment Date, the interest due with
respect to each of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class B Notes will
be the interest that has accrued on such
class of Notes from (and including) the
immediately preceding Payment Date to (but
excluding) such Payment Date, or in the case
of the first Payment Date, from (and
including) the Issuance Date (each such
period, an "Interest Accrual Period") at the
applicable Interest Rate applied to the
unpaid principal amount (the "Outstanding
Principal Amount") of such class of Notes,
in each case calculated as of the
immediately preceding Payment Date after
giving effect to all payments of principal
on such class of Notes made on such
preceding Payment Date. See "Description of
the Notes--Interest Payments" and
"Description of the Transfer and Servicing
Agreements--Distributions".
B. Principal Payments........ On each Payment Date, to the extent funds
are available therefor in accordance with
the Priority of Payments, the principal
payments will be paid to the Noteholders in
the following priority: (a) (i) to the Class
A-1 Noteholders only, until the Outstanding
Principal Amount on the Class A-1 Notes has
been reduced to zero, the Class A Principal
Payment, then (ii) to the Class A-2
Noteholders only, until the Outstanding
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Principal Amount on the Class A-2 Notes has
been reduced to zero, the Class A Principal
Payment, then (iii) to the Class A-3
Noteholders only, until the Outstanding
Principal Amount on the Class A-3 Notes has
been reduced to zero, the Class A Principal
Payment, then (iv) to the Class A-4
Noteholders only, until the Outstanding
Principal Amount on the Class A-4 Notes has
been reduced to zero, the Class A Principal
Payment, (b) to the Class B Noteholders, the
Class B Principal Payment, (c) to the
Certificateholders, the Certificate
Principal Payment, and (d) to the extent
that the Class B Floor exceeds the Class B
Target Investor Principal Amount and/or the
Certificate Floor exceeds the Certificate
Target Investor Principal Amount, Additional
Principal shall be distributed,
sequentially, as an additional principal
payment on the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes and
the Class B Notes until the Outstanding
Principal Amount of each class has been
reduced to zero.
"Additional Principal" with respect to each
Payment Date is an amount equal to (a) the
difference between (i) the Discounted
Present Value of the Performing Leases as of
the Determination Date for the preceding
Payment Date and (ii) the Discounted Present
Value of the Performing Leases as of the
related Determination Date, less (b) the
Class A Principal Payment, the Class B
Principal Payment and the Certificate
Principal Payment to be paid on such Payment
Date.
The "Certificate Floor" with respect to each
Payment Date means (a) 1.50% of the initial
Discounted Present Value of the Leases as of
the Cut-Off Date, plus (b) the Cumulative
Loss Amount with respect to such Payment
Date, minus (c) the sum of the
Overcollateralization Amount as of such
Payment Date plus the amount on deposit in
the Reserve Account after giving effect to
withdrawals to be made on such Payment Date.
The "Certificate Principal Payment" means
(a) while the Class A-1 Notes are
outstanding, zero and (b) after the
Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the
amount necessary to reduce the Certificate
Balance to the greater of the Certificate
Target Investor Principal Amount and the
Certificate Floor.
The "Certificate Target Investor Principal
Amount" with respect to each Payment Date is
an amount equal to the product of (a)
4.5005% (the "Certificate Percentage") and
(b) the Discounted Present Value of the
Performing Leases as of the related
Determination Date.
The "Class A Principal Payment" means (a)
while the Class A-1 Notes are outstanding,
(i) on all Payment Dates prior to the
October, 1999 Payment Date, the lesser of
(1) the amount necessary to reduce the
Outstanding Principal Amount on the Class
A-1 Notes to zero and (2) the difference
between (A) the Discounted Present Value of
the Performing Leases as of the
Determination Date for the preceding Payment
Date, and (B) the Discounted Present Value
of the Performing Leases as of the related
Determination Date, and (ii) on the October,
1999 Payment Date and thereafter until the
Class A-1 Notes have been paid in full, the
entire Outstanding Principal Amount on the
Class A-1 Notes and (b) after the Class A-1
Notes have been paid in full, the amount
necessary to reduce the aggregate
Outstanding Principal Amount on the Class A
Notes to the Class A Target Investor
Principal Amount.
The "Class A Target Investor Principal
Amount" with respect to each Payment Date is
an amount equal to the product of (a)
87.9976% (the "Class A Percentage") and (b)
the Discounted Present Value of the
Performing Leases as of the related
Determination Date.
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The "Class B Principal Payment" means (a)
while the Class A-1 Notes are outstanding,
zero and (b) after the Outstanding Principal
Amount on the Class A-1 Notes has been
reduced to zero, the amount necessary to
reduce the Outstanding Principal Amount of
the Class B Notes to the greater of the
Class B Target Investor Principal Amount and
the Class B Floor.
The "Class B Floor" with respect to each
Payment Date (the "subject Payment Date")
means (a) 2.5% of the initial Discounted
Present Value of the Leases as of the
Cut-Off Date, plus (b) the Cumulative Loss
Amount with respect to the subject Payment
Date, minus (c) the sum of the Certificate
Balance as of the preceding Payment Date
after giving effect to all payments made on
such Payment Date plus the
Overcollateralization Amount as of the
subject Payment Date plus the amount on
deposit in the Reserve Account after giving
effect to withdrawals to be made on the
subject Payment Date.
The "Class B Target Investor Principal
Amount" with respect to each Payment Date is
an amount equal to the product of (a)
5.2510% (the "Class B Percentage") and (b)
the Discounted Present Value of the
Performing Leases as of the related
Determination Date.
The "Cumulative Loss Amount" with respect to
each Payment Date (the "subject Payment
Date") is an amount equal to the excess, if
any, of (a) the difference of (i) the sum of
the Outstanding Principal Amount of the
Notes and the Certificate Balance as of the
immediately preceding Payment Date after
giving effect to all payments made on such
Payment Date, minus (ii) the lesser of (A)
the Discounted Present Value of the
Performing Leases as of the Determination
Date relating to the immediately preceding
Payment Date minus the Discounted Present
Value of the Performing Leases as of the
Determination Date related to the subject
Payment Date and (B) Available Funds
remaining after the payment of amounts owing
to the Servicer and in respect of interest
on the Securities on the subject Payment
Date over (b) the Discounted Present Value
of Performing Leases as of the Determination
Date related to the subject Payment Date.
The "Overcollateralization Amount" with
respect to each Payment Date is an amount
equal to (a) the Discounted Present Value of
the Performing Leases as of the related
Determination Date minus (b) the Outstanding
Principal Amount of the Notes and the
Certificate Balance (after giving effect to
payments of principal (other than Additional
Principal) on such Payment Date); provided,
that such amount will never be less than
zero.
C. Redemption............... The Servicer will have the option, subject
to certain conditions, to repurchase the
Leases and cause the Trust to redeem all,
but not less than all, of the Notes and
thereby cause early repayment of the Notes
as of any Payment Date on which the
Discounted Present Value of the Performing
Leases is less than or equal to 5% of the
Discounted Present Value of the Leases as of
the Cut-Off Date. Upon the Payment Date
fixed for such prepayment, the remaining
unpaid principal amount on the Notes and all
accrued and unpaid interest thereon shall
become due and payable. See "Description of
the Notes--Redemption".
The Certificates................. approximately $6,572,000 aggregate principal
of % Lease-Backed Certificates (the
"Certificates"; and together with the Notes,
the "Securities"). The Certificates
represent fractional undivided interests in
the Trust and will be issued pursuant to the
Trust Agreement. Distributions of interest
and principal on the Certificates will be
subordinated in priority of payment to
interest and principal on the Notes to the
extent described herein. See "The Transfer
and Servicing
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Agreements--Distributions on Securities"
herein. The Certificates are not offered
hereby.
Issuance Date.................... On or about September , 1998.
Determination Date............... The third day prior to each Payment Date or,
if such day is not a business day, the
preceding business day (each, a
"Determination Date"). On each Determination
Date, the Servicer will determine the amount
of payments received on the Leases during
the immediately preceding calendar month or,
in the case of the initial Determination
Date, from, but not including, the Cut-Off
Date through October 31, 1998 (each such
period, a "Due Period") which will be
available for distribution on the related
Payment Date. See "Description of the
Transfer and Servicing
Agreements--Distributions".
Payment Date..................... Payments on the Notes will be made on the
25th day of each month (or if such day is
not a business day, the next succeeding
business day), commencing on November 25,
1998 (each, a "Payment Date"), to holders of
record ("Holders") of the Notes as of the
last day of the immediately preceding
calendar month (each, a "Record Date"). See
"Description of the Transfer and Servicing
Agreements--Distributions on Securities".
Denominations.................... The Notes will be issued in minimum
denominations of $1,000 and integral
multiples of $1,000 in excess thereof,
except that one Class A Note and Class B
Note may be issued in another denomination.
Expected Maturity;
Stated Maturity.................. The expected maturity with respect to the
Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes and the Class B Notes
are the Payment Dates in August, 1999,
November, 1999, December, 2001, February,
2003, and April, 2003, respectively. The
stated maturity date with respect to the
Class A-1 Notes will be the Payment Date in
October, 1999, and with respect to all other
Notes will be the Payment Date in April,
2006. However, if all payments on the Leases
are made as scheduled, final payment with
respect to the Notes will occur prior to
stated maturity.
Trust Property................... The "Trust Property" will consist of a pool
(the "Lease Pool") of equipment leases (the
"Lease Contracts"), and all of the Trust's
interest in the equipment (the "Equipment")
underlying the leases (which includes
computer equipment and software, medical
equipment, retail equipment, phone
equipment, office equipment, industrial
equipment and food service equipment),
including all payments not collected
thereunder on or prior to the Cut-Off Date
(the "Lease Receivables"; together with the
Lease Contracts, the "Leases"). In addition,
the Trust Property will include the funds on
deposit in the Reserve Account, if any, and
to the limited extent provided in the
Pooling and Servicing Agreement, amounts on
deposit in the Residual Account, if any.
The Lease Pool................... On the Issuance Date, the Lease Pool will
consist of the Leases as of the Cut-Off Date
and the interest of the Trust in the related
Equipment. Thereafter, the Lease Pool will
consist of the Leases as of the Issuance
Date plus any Substitute Leases but
excluding any Leases which have been
replaced by one or more Substitute Leases,
and the interest of the Trust in the related
Equipment. See "--Substitutions", "The Lease
Pool" and "Certain Legal Matters Affecting a
Lessee's Rights and Obligations".
Less than 2% of the Statistical Discounted
Present Value of the Leases as of the CutOff
Date relate to Lessees located outside of
the United States.
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ILC will represent and warrant that, as of
the Cut-Off Date, all Leases were current or
less than 63 days delinquent and that, as of
the initial Determination Date, all Lessees
will have made at least one lease payment.
Equipment........................ The Equipment is comprised primarily of
computer equipment and software, medical
equipment, retail equipment, phone
equipment, office equipment, industrial
equipment and food service equipment. As of
the Cut-Off Date, the Lease Pool had
approximately 30 equipment categories.
Lessees.......................... The Leases are comprised of commercial
equipment leases in a variety of industries
with businesses and individual business
owners (each, a "Lessee"; and collectively,
the "Lessees"), with no single Lessee
concentration of greater than 6.31%. As of
the Cut-Off Date, the Lease Pool included
5,447 separate Leases and approximately
4,280 Lessees.
As of the Cut-Off Date approximately 20.20%,
15.08%, 7.58%, 7.14% and 6.47% of the Leases
(based on Statistical Discounted Present
Value of the Leases) were located in Ohio,
California, Texas, Minnesota and South
Carolina, respectively. No other state
accounts for more than 5% of the Leases.
Accordingly, adverse economic conditions or
other factors particularly affecting any of
these regions could adversely affect the
performance of the Leases. See "Risk
Factors--Geographic Concentration of
Leases".
Certain Lease Terms.............. The Leases are triple-net leases, requiring
the Lessee to pay all taxes, maintenance and
insurance associated with the Equipment. The
Leases are non-cancelable by the Lessees.
All payments under the Leases are absolute,
unconditional obligations of the Lessees
without right of offset for any reason. Each
Lessee entered into its Lease for specified
Equipment designated in schedules
incorporated into the Lease. The schedules,
among other things, establish the payments
and the term of the Lease with respect to
such Equipment. The Leases have remaining
terms, calculated as of the Cut-Off Date, of
between approximately 3 and 80 months and a
weighted average remaining term of 39.57
months. See "The Lease Pool--The Leases".
Although the Leases will be non-cancelable
by the Lessees, ILC has, from time to time,
permitted early termination by Lessees
("Early Lease Termination") or other
modifications of the lease terms in certain
circumstances, including in connection with
a full or partial buy-out or equipment
upgrade. If ILC allows an Early Lease
Termination or other modification of the
lease term in connection with a partial
buy-out, the amount prepaid by the lessor
must be at least equal to the Discounted
Present Value of the terminated Lease (or,
in the case of a partial buy-out, the
portion thereof related to such buy-out)
plus any delinquent payments. See "The Lease
Pool--The Leases".
Substitutions.................... If Transferor or Servicer is required to
repurchase any Lease as a result of a breach
of representation, warranty or covenant
relating to such Lease, adjustments made to
such Lease by the Servicer or the early
termination of such Lease (each, a
"Predecessor Lease"), in lieu of such
repurchase (other than repurchases relating
to early terminations), the Transferor may
substitute one or more leases originated or
acquired using the same credit criteria as
the initial Leases and having similar
characteristics (each, a "Substitute Lease")
for Leases subject to repurchase in
accordance with the preceding paragraph, so
long as the following conditions are met:
(i) after giving effect to such
substitution, the aggregate Booked Residual
Value (without duplication) of all
Substitute Leases will not be less than 90%
of the aggregate Booked Residual Value of
all Predecessor Leases since the Issuance
Date, (ii) after giving effect to such
adjustment or substitution, either the final
payment on such Substitute Lease must be on
or prior to April, 2005 or, to the extent
the final
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payment is due later, only scheduled
payments due on or prior to such date are
included in the Discounted Present Value of
such Lease for the purpose of making any
calculation under the Pooling and Servicing
Agreement, (iii) after giving effect to such
substitution, the aggregate amount of Lease
Payments through the term of the Leases will
not be more than 5% less than the aggregate
scheduled Lease Payments of the Leases prior
to such substitution, and (iv) after giving
effect to such substitution, the Discounted
Present Value of the Performing Leases is
not less than the Discounted Present Value
of the Performing Leases prior to such
substitution. See "Description of the
Transfer and Servicing Agreements--Transfer
of Leases" and "--Servicing Procedures".
No substitutions will be permitted if after
giving effect to such substitution, the
aggregate Discounted Present Value of all
Predecessor Leases would exceed 10% of the
Discounted Present Value of the Leases as of
the Cut-Off Date.
Although the limitations set forth above are
intended to minimize the probability that
substitutions would result in losses or
delays in payments to the Noteholders, no
assurances can be given to this effect. If
and when the aggregate Discounted Present
Value of all Leases for which a Substitute
Lease has been substituted equals 10% of the
Discounted Present Value of the Leases as of
the Cut-Off Date, the Servicer, on behalf of
the Trust, will file an interim report on
Form 8-K updating the distribution tables
set forth under "The Lease Pool" herein.
Payments on Leases............... All payments on Leases will be made by the
Lessees to the address specified by the
Servicer. Because the rate of payment of
principal on the Notes will depend, among
other things, on the rate of payment on the
Leases, prepayments of leases, payments as a
result of Non-Performing Leases, Casualty
Payments, and payments upon repurchase of
Leases by the Transferor or the Servicer
could impact the rate of payment and yield
on the Notes. Specifically, in the case of
Notes purchased at a discount, a slower than
anticipated rate of principal payments could
result in an actual yield that is less than
the anticipated yield. Conversely, in the
case of Notes purchased at a premium, a
faster than anticipated rate of principal
payments could result in an actual yield
that is less than the anticipated yield. See
"Risk Factors--Early Termination and Related
Investment Risk" and "Prepayment and Yield
Considerations".
Unless otherwise permitted to make deposits
monthly, the Servicer will deposit the
proceeds of such payments to the Collection
Account within two business days of the
receipt thereof. See "Description of
Transfer and Servicing
Agreements--Distributions--Deposits to
Collection Account".
Advances by Servicer............. On any Determination Date, the Servicer (x)
if ILC or one of its affiliates, will be
required, and (y) if any other person, will
have the option, to advance (each, a
"Servicer Advance") to the Trustee for
distribution as Available Funds on the
related Payment Date, an amount sufficient
to cover delinquencies on any scheduled
payment under Leases in the Trust Property
due during the related Due Period; provided
that the Servicer will not be required to
make any Servicer Advance if it determines
that such Servicer Advance may not
ultimately be recoverable by it from
recoveries from the applicable Leases. The
Servicer will be reimbursed for Servicer
Advances not recovered from late payments or
proceeds from the sale or lease of the
Equipment under a Lease with respect to
which the Servicer has made a Servicer
Advance to the extent that funds are
available therefor in accordance with the
Priority of Payments on the second Payment
Date following the Determination Date on
which the Servicer made such Servicer
Advance. See "Description of the Transfer
and Servicing Agreements--Distributions".
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Servicing Fee.................... A Servicing Fee (the "Servicing Fee"), will
be paid monthly to the Servicer on each
Payment Date from amounts in the Collection
Account and will accrue during each Interest
Accrual Period at the rate of 0.75% per
annum (calculated on the basis of a year of
360 days comprised of twelve 30-day months)
on a balance equal to the lesser of (i) the
sum of the aggregate Outstanding Principal
Amount of the Notes and outstanding
Certificate Balance, each calculated as of
the preceding Payment Date, after giving
effect to all payments made on such Payment
Date and (ii) the Discounted Present Value
of the Performing Leases calculated as of
the related Determination Date.
The Servicing Fee will be paid to the
Servicer for servicing the Lease Pool and to
pay certain administrative expenses in
connection with the Notes and the
Certificates, including Trustee and
Indenture Trustee fees and expenses and the
Management Fee. The Servicing Fee in respect
of a Due Period (together with any portion
of the Servicing Fee that remains unpaid
from prior Payment Dates) may be paid at the
beginning of such Due Period out of
collections for such Due Period. See
"Description of the Transfer and Servicing
Agreements--Servicing Compensation."
The Servicer will also collect and retain
any late fees, extension fees, prepayment
charges and certain non-sufficient funds
charges and other administrative fees or
similar charges (the "Supplemental Servicing
Fee") allowed by applicable law with respect
to the Leases.
In addition to the Servicing Fee and the
Supplemental Servicing Fee, the Servicer is
also entitled to retain, out of any amounts
received by the Servicer in connection with
the sale or lease of any Equipment subject
to a Non-Performing Lease upon the early
termination of such Lease or otherwise, (i)
the Servicer's actual out-of-pocket expenses
reasonably incurred in connection with such
sale or lease and (ii) if the Servicer has
made any Servicer Advances with respect to
any Lease which thereafter became a
Non-Performing Lease and the Servicer has
not otherwise been fully reimbursed for such
Servicer Advance, the unreimbursed portion
thereof.
Available Funds.................. All payments made on or with respect to the
Leases with respect to the immediately
preceding Due Period received on or prior to
the Record Date for such Due Period
("Available Funds") will be available for
distribution by the Trustee on a Payment
Date and will include:
a) Lease Payments due during the
prior Due Period (net of any
Third Party Amounts);
b) Residual Realizations up to
the Residual Amount Cap;
c) recoveries from Non-Performing
Leases (net of amounts
retained by the Servicer);
d) proceeds from repurchases by
Transferor or Servicer of
Predecessor Leases if
Transferor has not substituted
Substitute Leases for such
Leases;
e) proceeds from investment of
funds in the Collection
Account (other than Security
Deposit Earnings), the Reserve
Account and the Residual
Account, if any;
f) Casualty Payments;
g) Servicer Advances;
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h) Termination Payments;
i) funds, if any, on deposit in
the Reserve Account; and
j) funds, if any, on deposit in
the Residual Account to the
limited extent provided in the
Pooling and Servicing
Agreement.
Application of
Payments......................... The "Priority of Payments" for the Securities is as follows:
So long as no Event of Default has occurred
and the Notes have not been accelerated,
distributions will be made on each Payment
Date from Available Funds in the following
priority:
a) to pay the then accrued and
unpaid Servicing Fee;
b) to reimburse unreimbursed
Servicer Advances in respect
of a prior Payment Date;
c) to make Interest Payments
owing on the Class A Notes,
pro rata based on the
respective amounts due under
this priority, to the Class
A-1 Noteholders, Class A-2
Noteholders, Class A-3
Noteholders and Class A-4
Noteholders;
d) to make Interest Payments
owing on the Class B Notes;
e) to make Interest Payments
owing on the Certificates;
f) to make the Class A Principal
Payment (i) to the Class A-1
Noteholders only, until the
Outstanding Principal Amount
on the Class A-1 Notes is
reduced to zero, then (ii) to
the Class A-2 Noteholders
only, until the Outstanding
Principal Amount on the Class
A-2 Notes is reduced to zero,
then (iii) to the Class A-3
Noteholders only, until the
Outstanding Principal Amount
on the Class A-3 Notes is
reduced to zero, then (iv) to
the Class A-4 Noteholders
only, until the Outstanding
Principal Amount on the Class
A-4 Notes is reduced to zero;
g) to make the Class B Principal
Payment;
h) to make the Certificate
Principal Payment;
i) to pay the Additional
Principal, if any, to the
Class A Noteholders then
receiving the Class A
Principal Payment as provided
in clause (f) above until the
Outstanding Principal Amount
on all of the Class A Notes
has been reduced to zero, then
to the Class B Noteholders
until the Outstanding
Principal Amount on the Class
B Notes has been reduced to
zero and thereafter to the
Certificateholders until the
Certificate Balance has been
reduced to zero;
j) to the Reserve Account, an
amount equal to the excess of
the Required Reserve Amount
over the Available Reserve
Amount;
k) following a Residual Event, to
the Residual Account an amount
equal to Residual Realizations
up to the Residual Amount Cap;
and
l) to the Transferor, the
balance, if any.
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Upon the occurrence of an Event of Default
and the acceleration of the Notes and until
such Event of Default has been rescinded,
distributions will be made in the priority
described in "Description of the Transfer
and Servicing Agreement--Distributions". For
a description of Events of Default and
conditions to the acceleration of the Notes,
see "Description of the Notes--the
Indenture".
Residual Realizations............ Following the Issuance Date, Residual
Realizations will be deposited into the
Collection Account until the aggregate
Residual Realizations used (without
duplication) to cover amounts owing the
Noteholders and Holders of the Certificates
(collectively, the "Securityholders") and
the Servicer, deposited into the Reserve
Account, on deposit in the Residual Account,
or withdrawn from the Residual Account as a
result of an Available Funds Shortfall,
equals $ , which represents 5.0% of the
Discounted Present Value of the Leases as of
the Cut-Off Date (the "Residual Amount
Cap"), and will provide additional credit
support to the Notes and the Certificates.
Actual Residual Realizations may be more or
less than the residual value of the
Equipment recorded on the books of the
Transferor based on amounts estimated by
management utilizing past experience, market
data and judgment (the "Booked Residual
Value"). Upon the occurrence of a Residual
Event, the Residual Realizations not
distributed to Securityholders, paid to the
Servicer or deposited into the Reserve
Account will be deposited in the Residual
Account. Funds on deposit in the Residual
Account will be available to cover
shortfalls in the amount available to pay
the amounts owing the Servicer and to make
interest and principal payments on the Notes
and the Certificates. Following the
termination of a Residual Event, amounts on
deposit in the Residual Account will be
deposited into the Reserve Account to the
extent that the amount on deposit in the
Reserve Account is less than the required
Reserve Amount and thereafter will be
disbursed to the Transferor.
"Residual Realizations" mean net cash flows
realized by and allocable to ILC from the
sale or lease of the Equipment or extension
of Leases following the scheduled expiration
dates of such Leases; provided that such
cash flows relating to NonPerforming Leases
will only be included as "Residual
Realizations" to the extent such amounts
exceed the Discounted Present Value of such
Lease as of the Payment Date immediately
following the first Determination Date on
which such Lease was a NonPerforming Lease.
A "Residual Event" means the occurrence of
one or more of the following including but
not limited to: (a) ILC is no longer the
Servicer, (b) with respect to the December,
1998 Due Period and each Due Period
thereafter, the Three-Month Servicer
Realization Percentage calculated on any
Determination Date is less than 100%, (c)
with respect to the December, 1998 Due
Period and each Due Period thereafter, the
Three-Month Delinquency Percentage is
greater than 8.0% (d) with respect to the
December, 1998 Due Period and each Due
Period thereafter, the Three-Month Default
Percentage is greater than 2.0%, (e) the
Cumulative Net Loss Ratio is greater than
(i) 2.0%, for any Due Period occurring on or
before the August, 1999 Due Period, (ii)
3.0%, for any Due Period occurring after the
August, 1999 Due Period and on or before the
August, 2000 Due Period and (iii) 4.0%, for
any Due Period occurring after the August,
2000 Due Period or (f) such other events, if
any, required by the Rating Agencies;
provided, that (i) the Residual Event
referred to in clause (b) may be cured if
the Three-Month Servicer Realization
Percentage is greater than or equal to 100%
for three consecutive Due Periods
thereafter, (ii) the Residual Event referred
to in clause (c) may be cured if the
Three-Month Delinquency Percentage for any
Due Period thereafter is less than or equal
to 7.0%, (iii) the Residual Event referred
to in clause (d) may be cured if the
Three-Month Default Percentage for any Due
Period thereafter is less than or equal to
2.0% and (iv) the Residual Event referred to
in clause (e) may be cured if the Cumulative
Net Loss Ratio for any Due Period thereafter
is less than or equal to the ratio specified
in
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clause (e) for such Due Period. For a
description of the Three-Month Servicer
Realization Percentage, the Three-Month
Delinquency Percentage, the Three-Month
Default Percentage and the Cumulative Net
Loss Ratio, see "Description of the Transfer
and Servicing Agreements--Residual Account."
The aggregate Booked Residual Value of the
Leases as of the Cut-Off Date equals
$21,453,071.94.
Reserve Account.................. The Securityholders will have the benefit of
funds on deposit in an account (the "Reserve
Account") to the extent that there is a
shortfall in the amount available to pay
amounts owing the Servicer and to make
interest and principal payments on the Notes
and the Certificates, on any Payment Date.
The Reserve Account will be funded by an
initial deposit of 1% of the Discounted
Present Value of the Leases as of the
Cut-Off Date. Thereafter, on any Payment
Date to the extent funds are available
therefor in accordance with the Priority of
Payments (and, on any Payment Date following
the termination of a Residual Event, from
the Residual Account), additional deposits
will be made to the Reserve Account to the
extent that the amount on deposit in the
Reserve Account (the "Available Reserve
Amount") is less than the Required Reserve
Amount. The "Required Reserve Amount" equals
the lesser of (a) 1% of the Discounted
Present Value of the Performing Leases as of
the Cut-Off Date and (b) the Outstanding
Principal Amount of the Notes and the
Certificate Balance. Amounts on deposit in
the Reserve Account in excess of the
Required Reserve Amount will be disbursed to
the Trust in accordance with the provisions
of the Indenture.
Federal Income Tax
Considerations................... In the opinion of Mayer, Brown & Platt,
special federal tax counsel for the Trust,
for 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 "U.S. Federal
Income Tax Considerations".
Ohio State Tax
Considerations................... In the opinion of Keating, Muething and
Klekamp, P.L.L., special Ohio tax counsel,
unless the Noteholders are Ohio residents or
are otherwise subject to the Ohio personal
income tax, the Ohio corporate franchise tax
or the Ohio tax on dealers in intangibles,
the Noteholders will not be subject to the
foregoing taxes solely as a result of
purchasing and owning the Notes.
ERISA Considerations............. The Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and Section
4975 of the Code place certain restrictions
on those pension and other employee benefits
plans to which they apply. Pursuant to
regulations issued by the United States
Department of Labor defining "plan assets",
if the Notes are considered to be
indebtedness under local law without
substantial equity features, the assets of
the Trust will not be considered assets of
any ERISA plan holding the Notes, thereby
generally avoiding potential application of
the prohibited transaction rules under ERISA
and the Code to transactions entered into by
the Trust. However, regardless of whether
the Notes constitute an equity interest in
the Trust, the prohibited transaction rules
would be applicable to a plan's purchase and
holding of the Notes. Certain exemptions
from the prohibited transaction rules could
be applicable, however, with
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respect to the acquisition and holding of
the Notes. Accordingly, the Notes may be
acquired by ERISA plans, subject to certain
restrictions. Before purchasing any of the
Notes, fiduciaries of such plans should
determine whether an investment in the Notes
is appropriate under ERISA. By its
acquisition of a Note, each purchaser shall
be deemed to represent and warrant that its
purchase and holding of the Note will not
result in a nonexempt prohibited transaction
under ERISA or the Code. See "ERISA
Considerations".
Legal Investment................. The Class A-1 Notes will be an "eligible
security" within the meaning of Rule 2a-7
promulgated under the Investment Company Act
of 1940, as amended.
Rating........................... It is a condition to the issuance of any of
the Notes that the Class A-1 Notes be rated
at least "P-1" and "F1+/AAA", that the Class
A-2 Notes be rated at least "Aaa" and "AAA",
that the Class A-3 Notes be rated at least
"Aaa" and "AAA", that the Class A-4 Notes be
rated at least "Aaa" and "AAA" and that the
Class B Notes be rated at least "Aa3" and
"A", in each case by Moody's Investors
Service, Inc. ("Moody's") and Fitch IBCA,
Inc. ("Fitch IBCA"), respectively. Fitch
IBCA and Moody's are referred to herein
collectively as the "Rating Agencies". The
ratings assess the likelihood of timely
payment of interest and the ultimate payment
of principal to the Noteholders by the
Stated Maturity date. There is no assurance
that any rating will not be lowered or
withdrawn if, in the judgement of any Rating
Agency, circumstances in the future so
warrant. See "Rating of the Notes".
</TABLE>
18
<PAGE>
RISK FACTORS
Limited Liquidity. There is currently no public market for the Notes,
and there is no assurance that one will develop. The Underwriters expect but are
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.
Early Termination and Related Reinvestment Risk. Because the rate of
payment of principal on the Notes will depend, among other things, on the rate
of payment on the Leases, such rate of payments of principal on the Notes cannot
be predicted. Payments on the Leases will include scheduled payments as well as
prepayments permitted by ILC, payments as a result of Non-Performing Leases,
Casualty Payments, and payments upon repurchases by the Transferor and Servicer
on account of a breach of certain representations, warranties or covenants in
the Pooling and Servicing Agreement or the Contribution Agreement (to the extent
not replaced by Substitute Leases) (any such voluntary or involuntary
prepayment, a "Lease Prepayment"). The rate of early terminations of Leases due
to Lease Prepayments and defaults may be influenced by a variety of economic and
other factors. For example, adverse economic conditions and certain natural
disasters such as floods, hurricanes, earthquakes and tornadoes may affect Lease
Prepayments. Lease Prepayments will affect the weighted average life of each
Class of Notes. This will in turn have an impact on the effective yield on each
Class of Notes, since interest accrues on the outstanding principal balance of
the Notes. Specifically, in the case of Notes purchased at a discount, a slower
than anticipated rate of principal payments could result in an actual yield that
is less than the anticipated yield. Conversely, in the case of Notes purchased
at a premium, a faster than anticipated rate of principal payments could result
in an actual yield that is less than the anticipated yield. See "Prepayment and
Yield Considerations".
Security Interests in the Equipment; Certain Security Interests Not
Perfected. The Leases will consist of either finance leases (where substantially
all of the value of the Equipment is financed by the lease payments) or
operating leases (where substantially less than all of the value of the
Equipment is recovered through the lease payments). See "The Lease Pool--The
Leases". Finance leases include Leases ("Nominal Buy-Out Leases") which contain
a nominal purchase option upon expiration or other terms which may be deemed
effectively to vest equitable ownership of the Equipment in the Lessee. Prior to
the Cut-Off Date, ILC will have filed Uniform Commercial Code ("UCC") financing
statements in its favor against Lessees in respect of Equipment, including
Equipment subject to Nominal-Buy-Out Leases, with an original Equipment cost in
excess of $10,000, which make up approximately 95.61% of the Statistical
Discounted Present Value of the Leases. Consistent with ILC's policies with
respect to all Leases originated or acquired by it, no action will be taken to
perfect the interest of ILC in any Equipment to the extent the original
Equipment cost of the related Equipment is less than $10,000. As a result, ILC
does not have a perfected security interest in Equipment with an original
Equipment cost of less than or equal to $10,000.
Also, Leases representing approximately 4.36% of the Statistical
Discounted Present Value of the Leases relate to leasehold improvements and
other equipment types that may be classified as "fixtures" under the UCC. ILC's
(and therefore the Trust's) security interests in fixtures are junior to the
claims of persons (other than the related lessee) with
19
<PAGE>
recorded ownership or mortgage interests in the real estate to which the
fixtures are attached, unless ILC has obtained waivers from such persons. Due to
various factors (including creditworthiness of the lessee or ILC policies at the
time a particular lease was originated), such waivers have not been obtained
with respect to most of the Equipment that may constitute fixtures. As a result,
the interests of the Trust and the Noteholders in Equipment constituting
fixtures may be junior to the rights of owners and mortgagees of the related
real estate.
In addition to the filings referred to in the second preceding
paragraph, the Pooling and Servicing Agreement, the Trust Agreement and the
Indenture will require UCC financing statements covering the Equipment to be
filed in favor of the Transferor, the Trust and the Indenture Trustee,
respectively, in states in which as of the Closing Date (i) Equipment relating
to not less than 75% of the original cost of the Equipment under the Leases as
of the Cut-Off Date is located and (ii) Equipment relating to not less than 75%
of the Booked Residual Value of such Equipment as of the Cut-Off Date is located
(the "Filing Locations"). To the extent UCC financing statements evidencing
ILC's security interest in the Equipment have not been filed against the Lessee
(i.e., with respect to those Leases relating to Equipment with an original cost
of less than $10,000) and to the extent the Equipment is located in the states
other than the Filing Locations, any such security interests in the Equipment
will not be perfected in favor of ILC, the Transferor, the Trust nor the
Indenture Trustee, respectively, and another party (such as other creditors of
ILC) may acquire rights in ILC's interest in the Equipment superior to those of
the Transferor, the Trust and the Indenture Trustee. See "Certain Legal Matters
Affecting a Lessee's Rights and Obligations". The lack of a perfected security
interest in certain Equipment will result in claims against Lessees being
unsecured and may adversely affect the ability of the Trust to realize on such
Equipment.
No Rights in Software Subject to Certain Leases. Leases representing
approximately 2.04% of the Statistical Present Value of the Leases relate
exclusively to computer software that is not owned by ILC. As a result, no
interest in such software will be transferred to the Trust. Accordingly, if the
Lessee under such a Lease defaults, the Trust will not realize any proceeds from
the related software. Also, because software is generally eligible for
protection under the Federal copyright laws, a security interest in software
generally cannot be perfected without a filing at the U.S. Copyright Office.
Some legal authority indicates that this filing requirement could also extend to
a lease of software. Since no filings at the U.S. Copyright Office will be made
with respect to the Leases, this could mean that the Trust may not have a
perfected ownership interest in software-only Leases. Also, certain case law
authority indicates that in Ohio and certain other states a sale of a "general
intangible" (such as a software-only Lease) cannot be perfected without notice
to the obligor (i.e., the Lessee). For reasons of administrative convenience, no
such notices will be given with respect to software-only Leases transferred to
the Trust. As a result of the foregoing, the interests of the Trust and the
Noteholders in software-only Leases may be junior to the rights of other
creditors of ILC or the Transferor.
Restrictions on Recoveries. State laws impose requirements and
restrictions relating to foreclosure sales and obtaining deficiency judgments
following such sales. If the Trust must rely on repossession and disposition of
Equipment to cover losses on Non-Performing Leases, the Trust may not realize
the full amount due because of the application of those requirements and
restrictions. Other factors that may affect the ability of the Trust to realize
the full amount due on a Lease include the failure to file financing statements
to perfect the Trust's security interest in the Equipment against a Lessee,
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. See
"Certain Legal Matters Affecting a Lessee's Rights and Obligations".
20
<PAGE>
Recharacterization of Contribution Treatment. Each transfer of the
Leases to the Transferor will be documented as a contribution. However, in the
event of an insolvency of ILC, a creditor or trustee in bankruptcy, or ILC as
debtor in possession, could attempt to recharacterize the contribution of the
related Leases by ILC to the Transferor as a loan to ILC from the Transferor,
secured by a pledge of such Leases or a court could allow the trustee in
bankruptcy to repudiate the Leases that are operating leases and all obligations
thereunder. Moreover, in the event of an insolvency of ILC, a creditor or
trustee in bankruptcy, or ILC as debtor in possession, could attempt to
consolidate the assets of the Transferor with those of ILC. Either attempt, even
if unsuccessful, could result in delays in payments of the Notes. If such
attempts were successful, the Notes would be accelerated, and the Indenture
Trustee's recovery on behalf of the Noteholders could be limited to the then
current value of the Leases or the underlying Equipment. Thus, the Noteholders
could lose the right to future payments and might incur reinvestment losses on
amounts recovered. For tax purposes the Leases will be treated as assets of ILC
on the tax return for its consolidated group, which might increase the risk of
recharacterization of the transfer to the Trust as a financing. See "Certain
Legal Matters Affecting a Lessee's Rights and Obligations".
Bankruptcy of a Lessee. In the case of operating leases, the Bankruptcy
Code grants to the bankruptcy trustee or the debtor-in-possession a right to
elect to assume or reject any executory contract or unexpired lease. Any
rejection of such a lease or contract constitutes a breach of such lease or
contract, entitling the nonbreaching party to a claim for damages for breach of
contract. The net proceeds from any resulting judgment would be deposited by the
Servicer into the Collection Account and allocated to the Noteholders as more
fully described herein. Upon the bankruptcy of a Lessee, if the bankruptcy
trustee or debtor-in-possession elected to reject a Lease, the flow of scheduled
payments to Noteholders would cease. If, as a result of the bankruptcy of a
Lessee, the Servicer is prevented from collecting scheduled payments with
respect to Leases and such Leases become Non-Performing Leases, no recourse
would be available against ILC (except for misrepresentation or breach of
warranty or covenant) and the Noteholders could suffer a loss with respect to
the Notes. Similarly, upon the bankruptcy of the Transferor, if the bankruptcy
trustee or debtor-in-possession elected to reject a Lease, the flow of Lease
payments to the Trust and the Noteholders would cease. As noted above, however,
the Transferor has been structured so that the filing of a bankruptcy petition
with respect to it is unlikely. See "The Transferor".
These bankruptcy provisions, in addition to the possible decrease in
value of a repossessed item of Equipment, may limit the amount realized on the
sale of Equipment to less than the amount due on the related Lease.
Limited Credit Enhancement. Credit enhancement with respect to the
Notes will be provided by the subordination of the Certificates, funds on
deposit in the Reserve Account, the Overcollateralization Amount and, to the
limited extent provided in the Indenture, the Residual Account. In addition, the
Class A Notes have the benefit of the subordination of the Class B Notes.
However, on any Payment Date the amount available to Noteholders is limited to
the extent of funds on deposit in the Collection Account (including Residual
Realizations up to the Residual Cap Amount), the Reserve Account and, to the
limited extent provided in the Indenture, the Residual Account. Therefore, if a
Lease becomes a Non-Performing Lease at a time when total losses on the Leases
are in excess of the outstanding principal amount of any subordinated class and,
the amounts, if any, available to be withdrawn from the Reserve Account and the
Residual Account are reduced
21
<PAGE>
to zero, the holders of Notes of any senior class may be forced to rely solely
on the amount of Residual Realizations on the Equipment for ultimate payment of
principal and interest on such class of Notes. The aggregate amount of Residual
Realizations available to Noteholders to pay (without duplication) the amounts
owing the Servicer, to be deposited in the Reserve Account, on deposit in the
Residual Account or withdrawn from the Residual Account as the result of an
Available Funds Shortfall after the Issuance Date will not exceed the Residual
Amount Cap.
Non-Recourse Obligations. The Notes represent debt obligations of the
Trust and do not represent interests in or recourse obligations of the
Transferor, ILC or any of their respective affiliates. The Trust is not expected
to have any significant assets other than the Trust Property. Consequently, the
Noteholders must rely solely upon the Leases, the Equipment and funds in the
Reserve Account and the Residual Account, if any, for payment of principal of
and interest on the Notes. If no funds are on deposit in the Reserve Account or
the Residual Account and the payments made on the Leases 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. The Notes offered hereby initially will be
represented by one or more certificates 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 Trust, the Indenture Trustee or the Trustee
as Noteholders, as that term is used in the Indenture and the Trust Agreement.
Hence, until such time, beneficial owners will only be able to exercise the
rights of Noteholders indirectly, through DTC, and its participating
organizations, and will receive reports and other information provided for under
the Indenture and the Trust Agreement only if, when and to the extent provided
by DTC and its participating organizations. See "Certain Information Regarding
the Notes--Book-Entry Registration".
Geographic Concentration of Leases. As of the Cut-Off Date
approximately 20.20%, 15.08%, 7.58%, 7.14% and 6.47% of the Leases (based on
Statistical Discounted Present Value of the Leases) were located in Ohio,
California, Texas, Minnesota and South Carolina, respectively. No other state
accounts for more than 5% of the Leases. See "The Lease Pool". Accordingly,
adverse economic conditions particularly affecting any of these regions could
adversely affect the performance on the Leases. The Transferor is not aware of
any existing adverse economic conditions particularly affecting any of these
regions which are material to Noteholders, but no assurance can be given that
materially adverse economic conditions will not develop in the future.
Risk of Delayed Payment Due to Commingling of Funds. Under the Pooling
and Servicing Agreement, the Servicer is required to deposit all Lease Payments,
Casualty Payments and Termination Payments received after the Cut-Off Date, and
all Payahead relating to payments due after the Cut-Off Date, into the
Collection Account, in each case within two business days of receipt thereof;
however, under certain circumstances, the Servicer will only be required to make
such deposits monthly. See "Description of the Transfer and Servicing
Agreements--Distributions--Deposits to Collection Account". If bankruptcy or
reorganization proceedings were commenced with respect to the Servicer, those
funds held by the Servicer prior to deposit in the Collection Account may be
subject to an automatic stay resulting in a delay in the transfer of such funds
to the Trust Property.
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<PAGE>
Insolvency of Lessees. To the extent Lessees default on the Leases,
including through insolvency, Lease Payments deposited into the Collection
Account will decrease and accordingly Available Funds will be reduced.
USE OF PROCEEDS
The Transferor will use the net proceeds from the sale of the Notes to
make the initial deposit into the Reserve Account and, if applicable, the
Residual Account, and to pay dividends to ILC.
THE TRUST
General. The Trust will be formed under the laws of the State of New
York pursuant to the Trust Agreement. After its formation, the Trust will not
engage in any activity other than acquiring and managing the Leases, issuing and
making payments on the Notes and the Certificates and other activities related
to the foregoing. The Trust will have no officers, directors or employees.
The "Trust Property" will consist of a pool (the "Lease Pool") of
equipment leases (the "Lease Contracts"), and all of the Trust's interest in the
equipment (the "Equipment") underlying the leases (which includes computer,
medical equipment, office equipment, food service equipment, industrial
equipment and service station equipment), including all payments not collected
thereunder on or prior to the Cut-Off Date (the "Lease Receivables"; together
with the Lease Contracts, the "Leases"). In addition, the Trust Property will
include the funds on deposit in the Reserve Account, if any, and to the limited
extent provided in the Pooling and Servicing Agreement, amounts on deposit in
the Residual Account, if any.
The Servicer will continue to service the Leases and will receive fees
for such services. See "Description of the Transfer and Servicing
Agreements--Servicing Compensation". To facilitate the servicing of the Leases,
the Transferor, the Trustee and the Indenture Trustee will authorize the
Servicer to retain physical possession of the Leases and other documents
relating thereto as custodian for the Trust.
If the protection provided to the Noteholders by the subordination of
the Certificates (and in the case of the Class A Notes, the Class B Notes), the
Overcollateralization Amount and by the availability of amounts on deposit in
the Reserve Account and under limited circumstances, the Residual Account, is
insufficient, such Noteholders would have to look principally to the Lessees on
the Lease Contracts, the proceeds from the repossession and sale of the
Equipment which relate to defaulted Lease Receivables for payment on such Notes.
In such event, certain factors, such as ILC, the Transferor, the Trust or the
Indenture Trustee not having a first priority perfected ownership or security
interest, as applicable, in the Equipment subject to some of the Leases may
affect the Servicer's ability to repossess and sell the Equipment subject to
those Leases, and thus may reduce or eliminate the proceeds from such Equipment
to be distributed to the holders of the Notes. See "Risk Factors--Security
Interests in the Equipment; Certain Security Interests Not Perfected".
The Trust's principal offices are in Wilmington, Delaware, in care of
First Union Trust Company, National Association, as Trustee, at the address
listed below under "--The Trustee".
23
<PAGE>
Capitalization of the Trust. The following table illustrates the
capitalization of the Trust as of the Cut-Off Date, as if the issuance and sale
of the Notes and the Certificates had taken place on such date:
<TABLE>
<CAPTION>
<S> <C>
approximately Class A-1 % Lease-Backed Notes............................. $73,048,000
approximately Class A-2 % Lease-Backed Notes............................. 19,204,000
approximately Class A-3 % Lease-Backed Notes............................. 90,724,000
approximately Class A-4 % Lease-Backed Notes............................. 18,574,000
approximately Class B % Lease-Backed Notes............................ 7,668,000
approximately % Lease-Backed Certificates................................. 6,572,000
Total (approximately)......................................................... $215,790,000
</TABLE>
The Trustee. First Union Trust Company, National Association, will be
the Trustee under the Trust Agreement. First Union Trust Company, National
Association, is a national banking association and its principal offices are
located at One Rodney Square, 920 King Street, First Floor, Wilmington, Delaware
19801. In the ordinary course of its business, the Trustee and its affiliates
have engaged and may in the future engage in commercial banking or financial
advisory transactions with Information Leasing and its affiliates.
The Trustee's liability in connection with the issuance and sale of the
Notes is limited solely to the express obligations of such Trustee set forth in
the Trust Agreement and the Pooling and Servicing Agreement. The Trustee may
resign at any time, in which event the Servicer must appoint a successor
trustee. The Servicer may also remove the Trustee if the Trustee ceases to be
eligible to continue as Trustee under the related Trust Agreement or if the
Trustee becomes insolvent. In such circumstances, the Servicer must appoint a
successor trustee. Any resignation or removal of the Trustee and appointment of
a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
THE TRANSFEROR
The Transferor is a wholly-owned bankruptcy remote subsidiary of ILC
and is intended to be a limited-purpose corporation. Accordingly, the
Transferor's operations have been restricted to (a) limit its ability to engage
in business with, or incur liabilities to, any other entity which may bring
bankruptcy proceedings against the Transferor; and (b) diminish the risk that it
will be consolidated into the bankruptcy proceedings of any other entity. The
Transferor's offices are located at 1023 West Eighth Street, Cincinnati, Ohio
45203 and its phone number is (513) 579-2861.
As of the date of this Prospectus, the Transferor has had no operating
history. The net proceeds of the sale of the Notes will be used to pay a
dividend payment to ILC. See "Use of Proceeds". The Transferor is prohibited by
its Certificate of Incorporation from engaging in business other than (i) the
acquisition of equipment leases and lease receivables (including equipment) from
ILC and its affiliates, (ii) the transfer of such assets to the Trust and (iii)
engaging in acts incidental, necessary or convenient to the foregoing and
permitted under Delaware law. The Transferor's ability to incur, assume or
guaranty indebtedness for borrowed money is also restricted by its Certificate
of
24
<PAGE>
Incorporation. As of the date of this Prospectus, the Transferor is not the
subject of any legal proceedings.
THE SERVICER
General
Information Leasing Corporation ("ILC"), an Ohio corporation, was
incorporated in September 1984. ILC is a wholly-owned subsidiary of The
Provident Bank ("Provident"), which acquired ILC in December 1996. ILC's primary
business consists of originating and servicing leases to businesses and business
owners in the United States. ILC has 15 sales offices located throughout the
United States and is headquartered at 1023 West Eighth Street, Cincinnati, Ohio
45203 and its phone number is (513) 421-9191. As of June 30, 1998, ILC had total
assets of approximately $259,224,000.
ILC's parent company, Provident is the principal banking subsidiary of
Provident Financial Group, Inc., a Cincinnati based commercial banking and
financial services holding company registered under the Bank Holding Company
Act. Provident Financial Group, Inc. operates throughout Ohio, northern
Kentucky, southeastern Indiana and Florida. As of June 30, 1998, Provident
Financial Group, Inc. had total assets of $7.9 billion, net loans and leases of
$5.5 billion, deposits of $4.8 billion and total shareholders' equity of $702
million. Provident Financial Group, Inc.'s tier 1 and total risked-based capital
ratios were 10.31% and 13.44%, respectively. For the six-months ended June 30,
1998, Provident Financial Group, Inc. had net earnings of $62.4 million.
Provident represents approximately 94% of Provident Financial Group, Inc.'s
assets.
ILC is a full service equipment leasing company that focuses on
establishing strategic relationships with high volume, quality equipment vendors
and customers. ILC establishes customized financing programs for its customers
as well as for the end-user customers of equipment vendors and select financial
intermediaries that focus on customers who meet ILC's general customer profiles.
ILC currently consists of four groups: Major Accounts group, Vendor
Programs group, Brokerage Services and Capital Lending Services.
Major Accounts group focuses on developing creative financing solutions
for its customers. Its customer base ranges from middle market to Fortune 100
entities. This group generates its business primarily by establishing master
lease agreements with its customers.
Vendor Programs group focuses on establishing formal and informal
programs with equipment vendors including equipment manufacturers, dealers and
distributors to provide point of sale financing for their customers. ILC has
formal and informal programs established with sellers of office equipment such
as personal computers and related peripherals, copy machines, fax machines,
office furniture, telephone and voice mail systems, beverage dispensing
equipment, satellite communication equipment, machine tools and automotive
diagnostic equipment. ILC offers a variety of financing programs including
private label and usage based programs as well as traditional lease financing
programs.
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<PAGE>
Broker Services focuses on buying transactions originated outside ILC
and establishing strategic relationships with equipment lease brokers. Generally
these relationships are long term and well developed with ILC acting as the
primary and often exclusive funding source for small lessors and brokers who
often have vendor programs of their own. The equipment financed generally
mirrors the rest of the portfolio with special emphasis on medical and
ophthalmic equipment.
Capital Lending Services focuses on providing creative financing
solutions for the retail petroleum industry, primarily at the chain store level.
The Equipment financed typically includes point of sale systems, leak detection
systems, fueling dispensers, and other in-store equipment such as coolers and
shelving.
As of the Cut-Off Date, no more than 10% of the Statistical Discounted
Present Value of the Leases relates to any single vendor, broker or major
account or affiliated group of vendors, brokers or major accounts.
Year 2000 Compliance
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
Year 2000.
The Year 2000 issue is being actively addressed by Provident Financial
Group, Inc. ("Provident Financial") and its subsidiaries, including Transferor
and ILC, as it could significantly affect their operations. Many of the computer
systems of Provident Financial and its subsidiaries do not meet Year 2000
requirements. It is management's estimate that it will cost approximately $10
million to correct all of the application systems of Provident Financial and its
subsidiaries. As of December 31, 1997, Provident Financial had expensed $1.5
million for the correction of this problem. The plan of Provident Financial
management calls for all computer programs to be corrected by the end of the
third quarter of 1998, with subsequent testing of the programs during the fourth
quarter of 1998 and all of 1999.
Additionally, Provident Financial is also taking actions to receive
assurance that its customers, including Lessees, are taking necessary steps to
remedy their Year 2000 issues due to the fact that noncompliance could adversely
effect their ability to repay obligations owing to Provident Financial and the
Transferor.
THE LEASE POOL
The Leases. As of the close of business on August 31, 1998 (the
"Cut-Off Date"), the Notes will be secured with approximately 5,447 Leases. The
Leases were primarily originated by ILC, although approximately 4.59% of the
Statistical Discounted Present Value of the Leases as of the Cut-Off Date were
existing Leases acquired by ILC. The underwriting criteria used in acquiring
these Leases was the same as the underwriting criteria used by ILC in
originating Leases. The weighted average remaining term of the Lease Pool is
39.57 months.
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<PAGE>
The leases are generally in one of two forms: (a) a master lease
agreement containing all of the general terms and conditions of the lease
transaction or transactions, with schedules setting forth the specific terms of
each transaction with that particular Lessee; or (b) a specific lease agreement
form containing all of the terms and conditions of the transaction. The Leases
follow one of several different forms of lease agreement, with occasional
modifications which do not materially affect the basic terms of the Lease. ILC
is willing to finance the full acquisition cost of the related Equipment under
the Leases and generally requires that the first installment of rent and either
the last installment of rent or a security deposit in that amount be paid at the
time a Lease is generated.
The leases are triple-net leases which impose no affirmative
obligations on the lessor, and are non-cancelable by the Lessees. None of the
leases permit the prepayment or early termination of the Lease. Under certain
conditions, however, ILC may consent to the prepayment of the Leases. Generally,
ILC will consent to a prepayment of a Lease where the Lessee is upgrading the
Equipment. All payments under the Leases are absolute, unconditional obligations
of the Lessees without right of offset for any reason and are required to be
made regardless of the condition or suitability of the related Equipment. Such
payments will be made by the Lessees to the address specified by the Servicer.
Lessees covenant to maintain the Equipment and install it at a place of
business agreed upon with ILC. Lessees may not move the equipment without the
prior consent of ILC. The Leases require the Lessees to assume the
responsibility for payment of all expenses of the related Equipment including,
without limitation, any expenses in connection with the maintenance and repair
of the related Equipment, the payment of any and all premiums for casualty and
liability insurance and the payment of all taxes relating to the equipment. The
Leases also require that the Lessees bear responsibility for any loss, theft or
destruction to the Equipment from any cause whatsoever.
Lessees are required to carry insurance against risks of loss and
damage from any cause in an amount not less than the unpaid balance of the lease
plus the then current fair market value of the Equipment. The Lessees must name
ILC as a loss payee and an additional insured. Lessees are provided with written
information concerning the types of insurance required under the Lease. In some
cases, should the Lessee not provide satisfactory evidence of its own insurance
coverage, ILC is entitled under the related Lease Contract to receive a risk
charge of 0.25% per month of the original cost of the Equipment. Such payments
will be made by the Lessees to the Servicer for the account of the Trust.
The Leases permit the assignment thereof by ILC without consent of the
Lessee. The Leases do not permit the assignment, sale, transfer or sublease of
the Equipment or of the Lessee's interest in the Lease without prior consent of
ILC.
Any defaults under a Lease permit a declaration as immediately due and
payable all remaining Lease payments under the Lease and the immediate return of
the Equipment. Generally, any payments received six days after the scheduled
payment date are subject to late charges.
At end of the Lease term, the Lessee must, at its expense, deliver the
equipment to ILC in as good condition as when the lessee received it, except for
normal wear and tear, to any place in the United States so designated by ILC.
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<PAGE>
Pursuant to terms of the Lease, the Lessee is required to advise ILC at
least 90 days prior to the end of the initial term of the Lease of its intent to
return or purchase the Equipment. In most cases, failure to provide such
notification results in an automatic renewal of the Lease for a specified period
of time until Lessee delivers the Equipment to ILC or exercises one if its end
of lease options.
The Equipment. The Equipment subject to the Leases is purchased by ILC
under direct specifications and instructions from the Lessees. The Equipment is
comprised primarily of office equipment, such as personal computers, copy
machines and facsimile machines, medical and ophthalmic equipment and retail
petroleum industry equipment, such as leak detection systems, fueling dispensers
and other in-store equipment such as coolers and shelving. As of the Cut-Off
Date, the Lease Pool had approximately 30 equipment types. See "--Distribution
of Leases by Equipment Type" for a listing of the types of Equipment subject to
the Leases.
Certain Information with respect to the Leases and Lessees. The
following tables summarize certain information with respect to the Leases and
the Lessees as of the Cut-Off Date. Percentages in the tables below may not add
up to 100% due to rounding.
28
<PAGE>
DISTRIBUTION OF LEASES BY STATE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Percentage of
Number Percentage of Discounted Present Discounted Original
of Number Value Present Value Aggregate Original Equipment
State Leases of Leases of Leases of Leases Equipment Cost Cost
- ----- -------- ----------- ----------- ---------- ---------------- -----
<S> <C> <C> <C> <C> <C> <C>
Alabama 152 2.79 1,521,464.84 0.70 1,919,441.93 0.73
Alaska 6 0.11 49,671.58 0.02 54,469.22 0.02
Arizona 50 0.92 3,610,435.32 1.65 4,049,867.25 1.54
Arkansas 59 1.08 732,872.24 0.33 781,422.14 0.30
California 513 9.42 33,019,321.17 15.08 33,488,558.68 12.75
Canada 7 0.13 977,318.95 0.45 1,382,246.15 0.53
Colorado 77 1.41 1,177,329.56 0.54 1,265,755.62 0.48
Connecticut 38 0.70 2,556,467.42 1.17 3,075,138.35 1.17
Delaware 8 0.15 92,181.65 0.04 141,593.46 0.05
District of Columbia 22 0.40 336,412.51 0.15 359,368.17 0.14
England 19 0.35 1,401,580.46 0.64 1,876,462.85 0.71
Florida 176 3.23 5,789,201.26 2.64 6,691,337.21 2.55
Georgia 122 2.24 2,834,578.54 1.29 2,945,093.23 1.12
Hawaii 4 0.07 979,652.27 0.45 1,056,131.49 0.40
Idaho 12 0.22 57,852.79 0.03 53,205.35 0.02
Illinois 161 2.96 5,858,799.20 2.68 6,489,135.34 2.47
Indiana 74 1.36 1,642,737.07 0.75 1,914,569.19 0.73
Iowa 39 0.72 1,448,300.94 0.66 1,793,801.45 0.68
Kansas 17 0.31 448,703.83 0.20 438,427.26 0.17
Kentucky 262 4.81 5,218,497.47 2.38 8,496,234.90 3.24
Louisiana 176 3.23 3,444,029.09 1.57 3,377,112.31 1.29
Maine 20 0.37 195,543.81 0.09 254,557.27 0.10
Maryland 95 1.74 2,181,495.31 1.00 2,495,864.02 0.95
Massachusetts 114 2.09 3,036,037.44 1.39 3,953,242.30 1.51
Michigan 97 1.78 3,251,542.62 1.49 3,659,570.76 1.39
Minnesota 129 2.37 15,629,444.36 7.14 21,671,003.37 8.25
Mississippi 77 1.41 1,337,496.94 0.61 1,261,670.24 0.48
Missouri 88 1.62 4,548,844.04 2.08 5,095,623.29 1.94
Montana 14 0.26 697,401.03 0.32 697,885.91 0.27
Nebraska 18 0.33 211,673.71 0.10 243,761.63 0.09
Nevada 29 0.53 603,187.00 0.28 668,196.37 0.25
New Hampshire 25 0.46 345,075.83 0.16 436,410.33 0.17
New Jersey 90 1.65 3,680,396.79 1.68 3,505,522.09 1.34
New Mexico 20 0.37 1,052,853.68 0.48 896,296.96 0.34
New York 224 4.11 6,521,153.69 2.98 7,192,189.69 2.74
North Carolina 78 1.43 2,920,995.08 1.33 3,305,308.95 1.26
North Dakota 4 0.07 18,469.78 0.01 18,434.04 0.01
Ohio 1,108 20.34 44,221,066.05 20.20 60,486,791.58 23.04
Oklahoma 48 0.88 1,879,825.39 0.86 2,493,082.40 0.95
Oregon 58 1.06 1,534,933.83 0.70 1,629,846.12 0.62
Pennsylvania 172 3.16 7,052,432.47 3.22 7,841,329.13 2.99
Rhode Island 10 0.18 158,543.54 0.07 157,277.82 0.06
South Carolina 49 0.90 14,169,255.85 6.47 19,462,407.63 7.41
South Dakota 8 0.15 167,125.77 0.08 203,041.47 0.08
Tennessee 151 2.77 4,215,880.79 1.93 5,040,380.68 1.92
Texas 372 6.83 16,599,856.65 7.58 17,538,754.01 6.68
Utah 21 0.39 451,614.11 0.21 461,703.22 0.18
Vermont 18 0.33 198,343.61 0.09 173,443.54 0.07
Virginia 159 2.92 5,061,172.86 2.31 6,248,391.07 2.38
Washington 88 1.62 2,074,544.89 0.95 1,990,027.51 0.76
West Virginia 20 0.37 190,102.61 0.09 236,940.87 0.09
Wisconsin 47 0.86 1,473,862.78 0.67 1,567,672.02 0.60
Wyoming 2 0.04 22,269.50 0.01 21,416.23 0.01
Total................ 5,447 100.00% $218,899,819.97 100.00% $262,557,414.07 100.00%
===== ====== =============== ====== =============== ======
</TABLE>
29
<PAGE>
DISTRIBUTION OF LEASES BY LEASE BALANCE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Percentage of
Statistical Discounted Percentage of Discounted Discounted Aggregate Original Original
Present Value of the Number Number Present Value Present Value Equipment Equipment
Leases of Leases of Leases of Leases of Leases Cost Cost
- --------------------------- --------- ------------- ------------- -------------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
$0.01 - 5,000.00 1,791 32.88 3,685,839.05 1.68 5,324,760.31 2.03
5,000.01 - 10,000.00 919 16.87 7,143,099.97 3.26 9,191,300.04 3.50
10,000.01 - 15,000.00 809 14.85 9,959,006.80 4.55 11,552,729.72 4.40
15,000.01 - 20,000.00 366 6.72 6,307,189.39 2.88 7,621,812.19 2.90
20,000.01 - 25,000.00 202 3.71 4,525,669.61 2.07 5,973,578.93 2.28
25,000.01 - 30,000.00 152 2.79 4,158,474.85 1.90 5,860,222.46 2.23
30,000.01 - 35,000.00 112 2.06 3,624,689.70 1.66 4,460,870.93 1.70
35,000.01 - 40,000.00 87 1.60 3,252,565.75 1.49 4,261,591.75 1.62
40,000.01 - 45,000.00 88 1.62 3,749,829.58 1.71 4,725,689.17 1.80
45,000.01 - 50,000.00 75 1.38 3,550,397.24 1.62 4,256,227.37 1.62
50,000.01 - 60,000.00 114 2.09 6,237,315.74 2.85 7,571,672.44 2.88
60,000.01 - 70,000.00 98 1.80 6,365,817.98 2.91 7,956,191.86 3.03
70,000.01 - 80,000.00 76 1.40 5,675,906.99 2.59 7,157,119.09 2.73
80,000.01 - 90,000.00 63 1.16 5,356,680.53 2.45 6,283,293.14 2.39
90,000.01 - 100,000.00 60 1.10 5,673,967.81 2.59 6,509,149.97 2.48
100,000.01 - 125,000.00 92 1.69 10,348,716.17 4.73 12,537,163.15 4.78
125,000.01 - 150,000.00 55 1.01 7,516,664.90 3.43 8,239,223.51 3.14
150,000.01 - 175,000.00 33 0.61 5,317,839.60 2.43 5,808,468.94 2.21
175,000.01 - 200,000.00 35 0.64 6,636,276.71 3.03 8,735,173.28 3.33
200,000.01 - 300,000.00 79 1.45 19,154,233.11 8.75 22,810,331.47 8.69
300,000.01 - 400,000.00 46 0.84 15,918,181.47 7.27 18,300,787.40 6.97
400,000.01 - 500,000.00 32 0.59 14,512,356.08 6.63 16,362,955.89 6.23
500,000.01 - 600,000.00 30 0.55 16,336,067.19 7.46 16,506,980.82 6.29
600,000.01 - 700,000.00 9 0.17 6,019,886.35 2.75 7,583,876.15 2.89
700,000.01 - 800,000.00 7 0.13 5,257,362.38 2.40 5,969,832.25 2.27
800,000.01 - 900,000.00 3 0.06 2,442,570.86 1.12 2,452,193.34 0.93
900,000.01 - 1,000,000.00 1 0.02 969,706.65 0.44 1,100,126.71 0.42
1,000,000.01 - 1,500,000.00 5 0.09 6,240,440.52 2.85 7,453,143.22 2.84
1,500,000.01 - 2,000,000.00 3 0.06 5,012,192.05 2.29 6,591,088.98 2.51
greater than $2,000,000.01 5 0.09 17,950,874.94 8.20 23,399,859.59 8.91
----- ------ --------------- ------ --------------- -------
Total...................... 5,447 100.00% $218,899,819.97 100.00% $262,557,414.07 100.00%
===== ====== =============== ====== =============== ======
</TABLE>
30
<PAGE>
DISTRIBUTION OF LEASES BY
REMAINING TERM
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage
Percentage Discounted Discounted Original of Original
Remaining Number of Number Present Value Present Value Equipment Equipment
Term of Leases of Leases of Leases of Leases Cost Cost
---------- --------- ---------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1-6 55 1.01 612,790.19 0.28 2,803,017.96 1.07
7-12 346 6.35 5,296,762.74 2.42 14,907,026.86 5.68
13-18 362 6.65 8,752,384.87 4.00 16,143,280.95 6.15
19-24 554 10.17 24,071,047.43 11.00 36,303,791.00 13.83
25-30 840 15.42 28,157,860.40 12.86 36,083,910.03 13.74
31-36 1,069 19.63 29,854,859.80 13.64 32,203,222.46 12.27
37-42 457 8.39 22,346,676.84 10.21 27,812,954.76 10.59
43-48 463 8.50 20,537,402.26 9.38 21,463,789.39 8.17
49-54 565 10.37 34,298,336.51 15.67 33,096,839.37 12.61
55-60 692 12.70 42,070,571.46 19.22 38,948,658.68 14.83
61-66 43 0.79 2,547,994.35 1.16 2,425,239.36 0.92
79-84 1 0.02 353,133.12 0.16 365,683.25 0.14
---------------------------------------------------------------------------------------------------------
Total 5,447 100.00% $218,899,819.97 100.00% $262,557,414.07 100.00%
=========================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage
Percentage Discounted Discounted Original of Original
Number of Number Present Value Present Value Equipment Equipment
Lease Type of Leases of Leases of Leases of Leases Cost Cost
---------- --------- ----------- ----------- ----------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Finance Lease 5,124 94.07 187,416,274.58 85.62 218,333,627.81 83.16
Operating Lease 323 5.93 31,483,545.39 14.38 44,223,786.26 16.84
---------------------------------------------------------------------------------------------------------
Total............ 5,447 100.00% $218,899,819.97 100.00% $262,557,414.07 100.00%
=========================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY PURCHASE OPTION
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage
Percentage Discounted Discounted Original of Original
Number of Number Present Value Present Value Equipment Equipment
Lease Type of Leases of Leases of Leases of Leases Cost Cost
---------- --------- ----------- ----------- ----------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Nominal Buyout 2,451 45.00 $ 81,832,267.30 37.38 $ 87,970,658.02 33.51
Fair Market Value 2,631 48.30 119,476,204.60 54.58 157,682,948.06 60.06
Put 365 6.70 17,591,348.07 8.04 16,903,807.99 6.44
---------------------------------------------------------------------------------------------------------
Total............ 5,447 100.00% $218,899,819.97 100.00% $262,557,414.07 100.00%
=========================================================================================================
</TABLE>
31
<PAGE>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage
Percentage Discounted Discounted Original of Original
Number of Number Present Value Present Value Equipment Equipment
Equipment Type of Leases of Leases of Leases of Leases Cost Cost
- -------------- --------- ---------- ------------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Computer Related Equipment 895 16.44 57,776,339.89 26.39 78,637,777.72 29.95
Medical Equipment 128 2.35 24,846,945.15 11.35 26,474,900.20 10.08
Retail Equipment 1688 30.99 21,778,848.20 9.95 22,730,977.90 8.66
Phone Equipment 285 5.23 10,835,655.51 4.95 12,932,838.80 4.93
Office Equipment 388 7.13 10,122,830.73 4.63 11,730,349.48 4.47
Leasehold Fixtures 103 1.89 9,535,461.35 4.36 11,891,758.67 4.53
Manufacturing/Production 132 2.42 9,496,542.80 4.34 10,868,696.53 4.14
Equipment
Food Service Equipment 467 8.57 9,049,374.60 4.13 8,966,847.19 3.42
Industrial Power Equipment 100 1.84 6,326,892.93 2.89 6,704,374.60 2.55
Machine Tool Equipment 115 2.11 4,480,407.95 2.05 5,182,144.11 1.97
Multiple Equipment Types (1) 541 9.93 30,961,094.91 14.14 35,040,595.69 13.35
Miscellaneous Equipment (2) 605 11.08 23,689,425.95 10.82 31,396,153.18 11.96
----------------------------------------------------------------------------------------------
Total........................ 5,447 100.00% $218,899,819.97 100.00% $262,557,414.07 100.00%
==============================================================================================
</TABLE>
(1) The "Multiple Equipment Types" category represents Leases that cover more
than one type of equipment and hence have been coded with "multiple" as the
equipment type on ILC's computer systems.
(2) The "Miscellaneous" category aggregates equipment types that individually
make up less than 2% of the Statistical Discounted Present Value of the
Leases.
32
<PAGE>
HISTORICAL DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
At December 31,
-----------------------------------------------------------------------
At June 30, 1998 1997 1996 1995
----------------------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Receivables Balance(1) $259,822,008 100% $203,494,406 100% $127,600,911 100% $87,658,275 100%
No. of Delinquent Days(1)(2)
31-60 Days $3,254,609 1.25% $8,099,506 3.98% $1,564,823 1.23% $2,938,416 3.35%
61-90 Days 3,298,886 1.27 921,400 0.45 725,769 0.57 0 0.00
91 Days + 3,746,697 1.44 5,652,229 2.78 1,898,759 1.49 2,044,179 2.33
- -------------------------- -------------- --------- -------------- -------- -------------- --------- ------------- -------
Total Delinquency $10,300,192 3.96% $14,673,135 7.21% $4,189,351 3.29% $4,982,595 5.68%
</TABLE>
- ----------
(1) The Total Receivables Balance and Delinquent Amounts are equal to
the aggregate future rent owing on the leases.
(2) These amounts represent gross lease receivables with the following
adjustments.
(a) Amounts are not considered delinquent if interim rents are not
received.
(b) Amounts are not considered delinquent if the past due amount is less
than 20% of the monthly lease payment.
(c) Amounts are not considered delinquent if the amount is under research
for customer service adjustments.
Telephone contact is normally initiated once an account is 15 days
past due. ILC utilizes a variety of collection techniques depending on the
nature of the delinquency, prior collection experiences with an account, and
the relationship with the vendor of the Equipment. General delinquency
information for equipment leases that are owned by ILC is set forth above. In
late 1997, ILC expanded its collections department, which expansion has had a
favorable impact on the level of delinquencies.
HISTORICAL CHARGE-OFF EXPERIENCE
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
-------------------------------------------------------------
June 30, 1998 1997 1996 1995
-------------- ------ ------ -----
<S> <C> <C> <C> <C>
Average Receivables Outstanding (1)..... $220,208,636 $158,447,666 $104,208,522 $64,091,430
Net Losses.............................. $1,033,119 $661,356 $222,878 $92,485
Net Losses as a Percentage of 0.94%(2) 0.42% 0.21% 0.14%
Average Receivables....................
</TABLE>
- ----------
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the leases.
(2) Annualized.
ILC requires that accounts determined by it to be 93 days past due are
deemed to be "non-earning" and are placed on a non-accrual status. A charge-off
is recommended by the collections staff to senior management of ILC when the
collections staff has determined that a lease is uncollectible. In determining
whether a Lease is uncollectible, the collections staff will evaluate several
factors, including the Lessee's current financial condition, the Lessee's stated
intention toward repayment and the value of the related Equipment. This
determination may be made earlier or later than when the account is determined
to be 93 days past due, depending on the collections staff's assessment of the
creditworthiness of the related Lessee. All charge-offs must be approved by the
president of ILC. General charge-off information for leases owned and serviced
by ILC is set forth above.
33
<PAGE>
Net losses as a percentage of average receivables outstanding shown
above remain at low levels despite significant net losses under Leases relating
to two relationships totaling approximately $327,870 in 1997 and $441,921 in
1998. Leases generated under these relationships are not included in the Lease
Pool.
ILC'S UNDERWRITING AND SERVICING PRACTICES
The management of ILC, which includes senior management of Provident,
has established policies, controls, systems and procedures to manage and limit
credit risk. Provident's Audit Group performs reviews to monitor the quality and
consistency of ILC's underwriting practices and to evaluate ILC's systems of
internal controls, adherence to internal controls and management directives, and
the reliability and integrity of financial and management information systems.
Credit Review. Credit approval limits are established by the board of
directors of ILC. ILC has assigned each credit officer a specific lending limit
based upon experience and seniority. ILC has also assigned credit approval
limits to the president of ILC as well as certain vice presidents and sales
managers. The ILC Loan Committee, which also includes members of senior
management of Provident, must approve all transactions or aggregate exposures to
one customer in excess of $1.5 million.
Credit data are submitted for credit review in Cincinnati, Ohio. Credit
decisions are based on the credit characteristics of the applicant including an
analysis of the credit reports of the business entity as well as any guarantor;
bank and trade information, the amount, terms and conditions of the proposed
transaction and the type of equipment to be financed. If the credit request
exceeds $75,000 or increases ILC's exposure to a particular customer to above
$75,000, the credit review also includes a review of the prospect's most recent
financial statements. In general, potential lessees should have been in business
for at least two years and have a minimum of two trade references.
ILC will finance up to the full acquisition cost of Equipment through a
Lease. Lessees are generally required to pay the first installment of rent and
either the last installment of rent or a security deposit in that amount at the
time of origination of the Lease.
Residual Values. Residual realizations from the sale or lease of
Equipment after the end of the applicable Lease term are not a primary source of
payment on the Notes, but residual realizations serve as credit enhancement for
the Notes up to the Residual Amount Cap. ILC has realized residual values which,
on average, have exceeded the residual values booked with respect to such
leases. Residual values are either established or approved by the president or
sales managers of ILC. For leases in which there is a pre-determined buy-out
price, the buy-out price is the residual value recorded on ILC's books. ILC
utilizes the services of its vendors, some of whom are contractually obligated
to perform remarketing services, and other remarketing resources to recover
residuals on returned equipment. ILC is generally able to dispose of equipment
within one month after expiration of the applicable lease. There can be no
assurance, however, that residual realizations on the Equipment included in the
Trust will exceed or equal the booked residual values on the Equipment or that
ILC will be able to dispose of such Equipment within any particular period of
time.
Documentation. Prior to funding a transaction, a complete documentation
package must be completed. Generally, the package includes a credit application,
signed agreement, vendor invoice, initial or advanced payment, proof of
insurance, delivery and acceptance acknowledgments, certificates of incumbency,
appropriate UCC financing statements, and other documents required as part of
the underwriting process. UCC filings are generally required if the underlying
equipment cost exceeds $10,000.
Collections. ILC services all of its leases. Although in a limited
number of cases, it permits a vendor to invoice the Lessee in connection with
vendor programs that entitle a vendor to certain Third Party Amounts, ILC
maintains collection responsibilities. ILC generates invoices approximately 25
days prior to the due date of the payment. A late charge is assessed after the
grace period lapses, typically 6 days after the payment due date. Telephone
contact is normally initiated when an account is 15 days past due. ILC utilizes
a variety of collection techniques depending on the nature of the delinquency,
prior collection experiences with the account, and the relationship with the
vendor of the equipment. All
34
<PAGE>
collection activity is entered into the computerized collection system. Activity
notes are input directly into the collection system in order to facilitate
routine collection activity.
Charge-off Policy. ILC requires that accounts determined by it to be 93
days past due are deemed "non-earning" and are placed on a non-accrual status. A
charge-off is recommended by the collections staff to senior management of ILC
when the collections staff has determined that the lease is uncollectible. In
determining whether a Lease is uncollectible, the collections staff will
evaluate several factors, including the Lessee's current financial condition,
the Lessee's stated intention toward repayment and the value of the related
Equipment. This determination may be made earlier or later than when the account
is determined to be 93 days past due, depending on the collections staff's
assessment of the creditworthiness of the related Lessee. The rewriting or
extension of an account must be approved at a level of management commensurate
with the size of the account. All charge-offs must be approved by the president
of ILC.
On-going Credit Review. ILC management monitors the quality and
consistency of its underwriting policies and procedures, evaluates the inherent
risk in the portfolio and monitors the adequacy of credit loss reserves. ILC's
loan committee reviews all credit exposures in excess of $1.5 million on an
annual basis.
DESCRIPTION OF THE NOTES
The Notes will be issued pursuant to the Indenture (the "Indenture")
between the Trust and Norwest Bank Minnesota, National Association, as indenture
trustee (the "Indenture Trustee"). The following statements with respect to the
Notes summarize the material terms of the Notes and the Indenture, forms of
which are filed as an exhibit to the registration statement of which this
Prospectus forms a part.
General. The Notes represent secured debt obligations of the Trust and
do not represent an interest in or a recourse obligation of the Transferor, the
Servicer or any of their affiliates. The Trust will have no significant assets
other than the Trust Property. Consequently, Noteholders must rely solely upon
the Leases, the interests in the Equipment, and funds on deposit in the
Collection Account, the Reserve Account and the Residual Account, if any, for
payment of principal of and interest on the Notes.
Payments of Interest. Each Note will bear interest from the Issuance
Date at the applicable Interest Rate, calculated on the basis of a year of 360
days comprised of twelve 30-day months, except in the case of the Class A-1
Notes, which interest will be calculated on the basis of a year of 360 days and
the actual number of days in the related Interest Accrual Period, payable on the
25th day of each month, or if such day is not a business day the next succeeding
business day (each, a "Payment Date"), to the person in whose name the Note was
registered at the close of business on the preceding Record Date. Principal will
be payable as set forth under "Description of Transfer and Servicing
Agreements--Distributions".
Payments of Principal. For each Payment Date, principal payments due
with respect to the Class A Notes and the Class B Notes will be the Class A
Principal Payment (which will be paid sequentially to the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes and Class A-4 Notes) and the Class B Principal
Payment, respectively. In addition, to the extent that the Class B Floor exceeds
the Class B Target Investor Principal Amount and/or the Certificate Floor
exceeds the Certificate Target Investor Principal Amount, Additional Principal
shall be distributed, sequentially, as an additional principal payment on the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and the Class
B Notes until the Outstanding Principal Amount of each Class has been reduced to
zero.
Redemption. The Servicer will have the option, subject to certain
conditions, to repurchase the Leases and cause the Trust to redeem all, but not
less than all, of the Notes and thereby cause early repayment of the Notes as of
any Payment Date on which the Discounted Present Value of the Performing Leases
is less than or equal to 5% of the Discounted Present Value of the Leases as of
the Cut-Off Date. Upon the Payment Date fixed for such prepayment, the remaining
unpaid principal amount on the Notes and all accrued and unpaid interest thereon
shall become due and payable.
35
<PAGE>
The Indenture
Modification of Indenture. Without the consent of any Noteholders, the
Trust and the Indenture Trustee may execute a supplemental indenture for any of
the following purposes: (i) to add to the covenants of the Trust for the benefit
of the Noteholders, or to surrender any right or power conferred upon the Trust
in the Indenture, (ii) to cure any ambiguity, to correct or supplement any
provision of the Indenture that may be inconsistent with any other provision of
the Indenture or (iii) to correct or amplify the description of any property at
any time subject to the security interest arising under the Indenture, or to
better assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subjected to the security interest under the
Indenture; in any case so long as such action will not adversely affect the
interests of the Noteholders in any respect. Additionally, the Trust and the
Indenture Trustee, without the consent of any Noteholders, may execute a
supplemental indenture to conform the Indenture to the description thereof and
of the Securities contained in this Prospectus.
The Indenture also permits the Trust and the Indenture Trustee, with
the consent of Holders of not less than 662/3% in aggregate principal amount of
the Notes then outstanding under the Indenture, to execute a supplemental
indenture for the purpose of adding or changing any provisions of the Indenture
or modifying the rights of the Noteholders in any manner; provided, that no such
modification may be made which would (i) change the due date of any installment
of principal of or interest on any Note or reduce the principal amount thereof,
the interest rate specified thereon or the redemption price with respect thereto
or change any place of payment where or the coin or currency in which any Note
or any interest thereon is payable; (ii) impair the right to institute suit for
the enforcement of certain provisions of the Indenture regarding payment; (iii)
reduce the percentage of the aggregate amount of the outstanding Notes, the
consent of the Holders of which is required for any such supplemental indenture
or the consent of the Holders of which is required for any waiver of compliance
with certain provisions of the Indenture or of certain defaults thereunder and
their consequences as provided for in such Indenture, or the consent of the
Holders of which is required to take any action under the Indenture or to
instruct the Indenture Trustee to take (or refrain from taking) any action; (iv)
modify or alter the provisions of the Indenture regarding the voting of Notes
held by the Trust, the Transferor, the Servicer or an affiliate of any of them;
(v) decrease the percentage of the aggregate principal amount of the Notes
required to amend the sections of the Indenture which specify the applicable
percentage of aggregate principal amount of the Notes necessary to amend the
Indenture or certain other related agreements; or (vi) permit the creation of
any lien ranking prior to or on a parity with the lien created under the
Indenture with respect to any of the collateral for the Notes or, except as
otherwise permitted or contemplated in such Indenture, terminate the lien of
such Indenture on any such collateral or deprive the Holder of any Note of the
security afforded by the lien of such Indenture.
Events of Default; Rights upon Event of Default. "Events of Default"
under the Indenture will consist of: (i) a default in the payment of any
principal of or interest on any Note when the same becomes due and payable; (ii)
a default in the observance or performance of any covenant or agreement of the
Trust made in the Indenture and the continuation of any such default for a
period of 30 days after notice thereof is given to the Trust by the Indenture
Trustee or to the Trust and the Indenture Trustee by the Holders of at least 25%
in principal amount of the Notes then outstanding; (iii) any representation or
warranty made by the Trust in the Indenture or in any certificate delivered
pursuant thereto or in connection therewith having been incorrect in a material
respect as of the time made, and such breach not having been cured within 30
days after notice thereof is given to the Trust by the Indenture Trustee or to
the Trust and the Indenture Trustee by the Holders of at least 25% in principal
amount of the Notes then outstanding or (iv) certain events of bankruptcy,
insolvency, receivership or liquidation of the Trust. However, the amount of
principal required to be paid to Noteholders under the Indenture on any Payment
Date prior to the final scheduled Payment Date of any class of Note will be
limited to amounts available therefor in accordance with the Priority of
Payments. Therefore, the failure to pay principal on a class of Notes will not
result in the occurrence of an Event of Default until the final scheduled
Payment Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to
the Notes, the Indenture Trustee may, or at the direction of Holders of 662/3%
of the principal amount of the Notes then outstanding shall, declare the
principal of the Notes to be immediately due and payable. Such declaration may,
under certain circumstances, be rescinded by the Holders of 662/3% of the
principal amount of the Notes then outstanding.
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If the Notes have been declared due and payable following an Event of
Default with respect thereto, the Indenture Trustee may institute proceedings to
collect amounts due or foreclose on Trust property, exercise remedies as a
secured party, sell the Lease Receivables or elect to have the Trust maintain
possession of such Lease Receivables and continue to apply collections on such
Lease Receivables as if there had been no declaration of acceleration. However,
the Indenture Trustee is prohibited from selling the Lease Receivables following
an Event of Default, other than a default in the payment of any principal of or
a default for five days or more in the payment of any interest on any Note,
unless (i) the Holders of all outstanding Notes consent to such sale, (ii) the
proceeds of such sale are sufficient to pay in full the principal of and the
accrued interest on the outstanding Notes at the date of such sale or (iii) the
Indenture Trustee determines that the proceeds of Lease Receivables would not be
sufficient on an ongoing basis to make all payments on the Notes as such
payments would have become due if such obligations had not been declared due and
payable, and the Indenture Trustee obtains the consent of the Holders of 662/3%
of the aggregate outstanding amount of the Notes.
Subject to the provisions of the Indenture relating to the duties of
the Indenture Trustee, if an Event of Default occurs and is continuing with
respect to the Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the Holders of the Notes, if the Indenture Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, the Holders of 662/3% of the outstanding principal
amount of the Notes will have the right to direct the time, method and place of
conducting any proceeding or any remedy available to the Indenture Trustee, and
the Holders of 662/3% of the principal amount of the Notes then outstanding may,
in certain cases, waive any default with respect thereto, except a default in
the payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or consent
of all the Holders of such outstanding Notes.
No Holder of a Note will have the right to institute any proceeding
with respect to the Indenture, unless (i) such Holder previously has given to
the Indenture Trustee written notice of a continuing Event of Default, (ii) the
Holders of not less than 25% in principal amount of the outstanding Notes have
made written request to the Indenture Trustee to institute such proceeding in
its own name as Indenture Trustee, (iii) such Holder or Holders have offered the
Indenture Trustee reasonable indemnity, (iv) the Indenture Trustee has for 60
days failed to institute such proceeding 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 662/3% of the principal amount of the Notes.
In addition, the Indenture Trustee and the Noteholders, by accepting
the Notes, will covenant that they will not at any time institute against the
Trust or the Transferor any bankruptcy, reorganization or other proceeding under
any Federal or state bankruptcy or similar law.
Neither the Trustee nor the Indenture Trustee in its individual
capacity, nor any Holder of a Certificate representing an ownership interest in
such Trust nor any of their respective owners, beneficiaries, agents, officers,
directors, employees, affiliates, successors or assigns will, in the absence of
an express agreement to the contrary, be personally liable for the payment of
the principal of or interest on the Notes or for the agreements of such Trust
contained in the Indenture.
Certain Covenants. The Indenture will provide that the Trust may not
consolidate with or merge into any other entity, unless (i) the entity formed by
or surviving such consolidation or merger is organized under the laws of the
United States or any state, (ii) such entity expressly assumes the Trust's
obligation to make due and punctual payments upon the Notes and the performance
or observance of every agreement and covenant of such Trust under the Indenture,
(iii) no Event of Default shall have occurred and be continuing immediately
after such merger or consolidation, (iv) the Trust has been advised that the
rating of the Notes and the Certificates then in effect would not be reduced or
withdrawn by the Rating Agencies as a result of such merger or consolidation,
(v) any action necessary to maintain the security interest created under the
Indenture shall have been taken and (vi) the Trust has received an opinion of
counsel to the effect that all conditions precedent to such consolidation or
merger required under the Indenture have been satisfied.
The Trust will not, among other things, (i) except as expressly
permitted by the Indenture, the applicable Transfer and Servicing Agreements or
certain related documents with respect to such Trust (collectively, the "Related
Documents"),
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sell, transfer, exchange or otherwise dispose of any of the assets of the Trust,
(ii) claim any credit on or make any deduction from the principal and interest
payable in respect of the Notes (other than amounts withheld under the Code or
applicable state law) or assert any claim against any present or former holder
of the Notes because of the payment of taxes levied or assessed upon the Trust,
(iii) except as contemplated by the Related Documents, dissolve or liquidate in
whole or in part, (iv) permit the validity or effectiveness of the Indenture to
be impaired or permit any person to be released from any covenants or
obligations with respect to the Notes under the Indenture except as may be
expressly permitted thereby or (v) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the assets of the Trust or any part thereof,
or any interest therein or the proceeds thereof.
The Trust may not engage in any activity other than as specified under
"Prospectus Summery -- the Trust". The Trust will not incur, assume or guarantee
any indebtedness other than indebtedness incurred pursuant to the Notes and the
Indenture or otherwise in accordance with the Related Documents.
Annual Compliance Statement. The Trust will be required to file
annually with the Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for the Trust
will be required to mail each year to all related Noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the Indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by the Trust to
the Indenture Trustee in its individual capacity, the property and funds
physically held by the Indenture Trustee as such and any action taken by it that
materially affects the Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. The Indenture will be
discharged with respect to the collateral securing the Notes upon the delivery
to the Indenture Trustee for cancellation of all Notes or, with certain
limitations, upon deposit with the Indenture Trustee of funds sufficient for the
payment in full of all Notes.
The Indenture Trustee. Norwest Bank Minnesota, National Association,
will be the Indenture Trustee under the Indenture. Norwest Bank Minnesota,
National Association, is a national banking association and its corporate trust
offices are located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota
55479-0070. In the ordinary course of its business, the Indenture Trustee and
its affiliates have engaged and may in the future engage in commercial banking
or financial advisory transactions with ILC, the Transferor and their
affiliates.
The Indenture Trustee may resign at any time, in which event the Trust
will be obligated to appoint a successor indenture trustee. The Trust may also
remove the Indenture Trustee if the Indenture Trustee ceases to be eligible to
continue as such under the Indenture or if the Indenture Trustee becomes
insolvent. In such circumstances, the Trust, with the consent of the Holders of
at least 66 2/3% of the aggregate principal amount of the Notes, will be
obligated to appoint a successor indenture trustee. The Trust shall give notice
of any resignation or removal of an Indenture Trustee and the appointment of any
successor Indenture Trustee to the Holders. The Indenture Trustee may also be
removed by the written request of the Holders of a majority of the outstanding
principal amount of the Notes delivered to the Indenture Trustee and the Trust.
Any resignation or removal of the Indenture Trustee and appointment of a
successor indenture trustee for the Notes does not become effective until
acceptance of the appointment by the successor indenture trustee for the Notes.
Pursuant to the Trust Indenture Act of 1939, as amended, the Indenture
Trustee may be deemed to have a conflict of interest and be required to resign
as trustee for either the Class A Notes or the Class B Notes if a default occurs
under the Indenture. The Indenture will provide for a successor trustee to be
appointed for one or both Classes of Notes in these circumstances, so that there
will be separate trustees for the Class A Notes and the Class B Notes. In these
circumstances, the Class A Noteholders and Class B Noteholders will continue to
vote as a single group. So long as any amounts remain unpaid with respect to the
Class A Notes, only the trustee for the Class A Noteholders will have the right
to exercise remedies under the Indenture (but the Class B Noteholders will be
entitled to their share of any proceeds of enforcement, subject to the
subordination of the Class B Notes to the Class A Notes as described herein).
Upon repayment of the Class A Notes in full, all rights to exercise remedies
under the Indenture will transfer to the trustee for the Class B Notes. Any
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resignation of the original Indenture Trustee as described above with respect to
any class of Notes will become effective only upon the appointment of a
successor trustee for such class of Notes and such successor's acceptance of
such appointment.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Trust Agreement (the
"Trust Agreement") between the Trust and First Union Trust Company, National
Association, as trustee (the "Trustee"). The Certificates are not offered hereby
and will be offered in a private offering concurrently with the offering of the
Notes. The following statements with respect to the Certificates summarize the
material terms of the Trust Agreement, the form of which is filed as an exhibit
to the registration statement of which this Prospectus forms a part.
The Certificates represent beneficial interests in the Trust and do not
represent an interest in or recourse obligation of ILC, the Transferor or any of
their respective affiliates. Each Certificate will bear interest from the
Issuance Date at the rate of % per annum (the "Certificate Rate") calculated on
the basis of a year of 360 days comprised of twelve 30-day months, payable on
each Payment Date. No distributions of principal on the Certificates will be
made until the Class A-1 Notes have been paid in full. Thereafter on each
Payment Date, the Certificateholders will be entitled to receive payments of
principal in an amount equal to the Certificate Principal Payment after payment
of principal on the Notes. Such payment will be made only to the extent of funds
available therefor in accordance with the Priority of Payments.
CERTAIN INFORMATION REGARDING THE NOTES
Book-Entry Registration. Note Owners may hold their Notes through DTC
if they are participants of such system, or indirectly through organizations
which are participants in such system. Cede, as nominee for DTC, will hold the
global Class A Note or Notes and the global Class B Note or Notes.
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 securities. Participants include
the Underwriters, 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.
Note Owners 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, Note
Owners will receive all distributions of principal and interest on the Notes
through DTC and its Participants. Under a book-entry format, Note Owners may
receive payments after the related Payment Date 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 Note Owners. It is anticipated that
the only Class A Noteholder and Class B Noteholder will be Cede, as nominee of
DTC, and that Note Owners of the Class A Notes or Class B Notes, respectively,
will only be permitted to exercise the rights of Class A Noteholders or Class B
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 Note Owners have accounts
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of these respective holders.
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Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of Note Owners 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 Trust that it will take any action permitted to be
taken by a Class A Noteholder or Class B Noteholder under the Indenture only at
the direction of one or more Participants to whose account with DTC the Class A
Notes or Class B Notes, as applicable, are credited. Additionally, DTC has
advised the Trust that it may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of Notes among its participants, DTC is under no obligation
to perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Definitive Notes. The Notes will be issued in fully registered,
authenticated form to Note Owners or their nominees ("Definitive Notes"), rather
than to DTC or its nominee, only if (a) the Transferor advises the Indenture
Trustee in writing that DTC is no longer willing or able to discharge properly
its responsibilities as Depository with respect to the Notes, and the Indenture
Trustee or the Transferor is unable to locate a qualified successor, (b) the
Transferor at its option elects to terminate the book-entry system through DTC
or (c) after the occurrence of a Servicer Event of Default, Note Owners of any
class of Notes evidencing not less than a majority of the outstanding principal
amount of such class of Notes advise the Indenture Trustee and DTC that the
continuation of the book-entry system through DTC with respect to such class of
Notes is no longer in the best interests of the Note Owners of such class of
Notes.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Indenture Trustee is required to notify all applicable
Note Owners 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 Holders under the Indenture. 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 as of each Payment Date.
Additionally, upon the occurrence of any such event described above
with respect to any class of Notes, distribution of principal of and interest on
such Notes will be made by the Indenture Trustee directly to the related Holders
in accordance with the procedures set forth herein and in the Indenture.
Distributions will be made by wire transfer of federal funds to the account and
number specified in the register under the Indenture on the related Record Date,
or if no such account or number is so specified, then by check, mailed to the
address of such Holder as it appears on the register under the Indenture. Upon
at least 10 days' notice to such Holders, however, the final payment on any Note
(whether the Definitive Notes or the Notes registered in the name of Cede) 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 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. 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.
List of Noteholders. Three or more Holders of the Notes or one or more
Holders of the Notes evidencing at least 25% of the aggregate outstanding
principal balance of the Notes may, by written request to the Indenture Trustee,
obtain access to the list of all Noteholders maintained by the Indenture Trustee
for the purpose of communicating with other Noteholders with respect to their
rights under the Indenture or under the Notes. The Indenture Trustee may elect
not to afford the requesting Noteholders access to the list of Noteholders if it
agrees to mail the desired communication or proxy, on behalf of and at the
expense of the requesting Noteholders, to all Noteholders.
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Reports to Noteholders. On or prior to each Payment Date, the Servicer
will prepare and provide to the Indenture Trustee a statement to be delivered to
the Noteholders within five business days of such Payment Date. Each such
statement to be delivered to the Noteholders will include the following
information as to the Notes with respect to such Payment Date or the period
since the previous Payment Date, as applicable:
(i) the amount of the distribution allocable to principal of
each class of Securities;
(ii) the amount of the distribution allocable to interest on
or with respect to each class of Securities;
(iii) the Discounted Present Value of the Performing Leases as
of the close of business on the last day of the preceding Due Period;
(iv) the aggregate outstanding principal balance of each class
of Notes and the Certificate Balance, each after giving effect to all
payments reported under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer for
the related Due Period;
(vi) the amount of the aggregate Residual Realizations, if
any, for such Due Period;
(vii) the aggregate purchase amounts for Leases, if any, that
were repurchased in such Due Period; and
(viii) the balance of the Reserve Account (if any) and the
Residual Account (if any) on such Payment Date, after giving effect to
changes therein on such Payment Date.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (vi)
with respect to the Notes or the Certificates will be expressed as a dollar
amount per $1,000 of the initial principal balance of the Notes or the
Certificates, as applicable.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of the Trust, the Trustee will
mail to each person who at any time during such calendar year has been a
Noteholder with respect to the Trust and received any payment thereon, a
statement containing certain information for the purposes of such Noteholder's
preparation of Federal income tax returns. See "U.S. Federal Tax
Considerations".
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes the material terms of the Pooling and
Servicing Agreement, the Contribution Agreement, the Management Agreement, and
the Trust Agreement, collectively, the "Transfer and Servicing Agreements").
Forms of the Transfer and Servicing Agreements have been filed as exhibits to
the Registration Statement of which this Prospectus forms a part.
Transfer of Leases
On the Issuance Date, ILC will contribute to the Transferor its entire
interest in the Leases and its security or ownership interests in the Equipment,
pursuant to the Contribution Agreement. The Transferor will transfer and assign
to the Trust, without recourse, its entire interest in such Leases and security
and ownership interests in the Equipment, pursuant to the Pooling and Servicing
Agreement. The Trustee will, concurrently with such transfer and assignment,
execute and deliver the Notes and Certificates.
In the Contribution Agreement, ILC will represent and warrant to the
Transferor, and pursuant to the Pooling and Servicing Agreement, the Transferor
will represent and warrant to the Trust, among other things, that (i) upon
contribution, the Transferor, in the case of the Contribution Agreement, and
upon payment of the applicable consideration, the Trust, in the case of the
Pooling and Servicing Agreement, (A) will be the legal owner of the Leases
(including the right to receive
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all payments due or to become due thereunder), (B) will have good title to each
item of Equipment subject to any Lease other than a Nominal Buy-Out Lease and
other than software, and (c) will have a perfected security interest in each
item of Equipment other than software with a purchase price in excess of $10,000
subject to a Nominal Buy-Out Lease, (ii) on the Issuance Date, the Leases and
the interest in the Equipment transferred will be free and clear of all liens
other than the rights of each Lessee under its Lease and other than any lien
created by the Transfer and Servicing Agreements and, as to Equipment that is
classified as a "fixture under the UCC," any conflicting rights of an owner or
mortgagee of the real estate to which the fixture is attached, and there are no
delinquent taxes or other outstanding charges affecting the Equipment which are
or may give rise to liens prior to, or on parity with, the liens created by the
Transfer and Servicing Agreements and (iii) each Lease requires the Lessee
thereunder to maintain insurance on the Equipment subject thereto in an amount
at least equal to the fair market value thereof.
If (i) any of such representations and warranties made by the
Transferor or ILC proves at any time to have been inaccurate in any material
respect as of the Issuance Date, (ii) certain adjustments or modifications are
made to any Lease by the Servicer or (iii) any Lease is terminated in whole or
in part by a Lessee, or any amounts due with respect to any Lease shall be
reduced or impaired, as a result of any action or inaction by the Transferor or
ILC (other than any such action or inaction of ILC, when acting as Servicer, in
connection with the enforcement of any Lease (other than an Early Lease
Termination) in a manner consistent with the provisions of the Pooling and
Servicing Agreement) or any claim by any Lessee against the Transferor or ILC
and, in any case referred to in (i) or (iii), the event or condition causing
such inaccuracy, termination, reduction, impairment or claim shall not have been
cured or corrected within 30 days after the earlier of the date on which the
Transferor is given notice thereof by the Transferor or the Trustee or the date
on which the Transferor otherwise first has notice thereof, the Transferor (or
the Servicer, in the case of clause (ii)) will repurchase such Lease (a
"Predecessor Lease") and the Equipment subject thereto by depositing into the
Collection Account, not later than the Determination Date (A) next following the
expiration of such 30-day period, in the case of events referred to in (i) or
(iii), and (B) next following the date of such event with respect to events
referred to in (ii), an amount equal to the Discounted Present Value of such
Lease plus any amounts previously due and unpaid thereon. Any inaccuracy in any
representation or warranty with respect to (i) the priority of the lien of the
Indenture with respect to any Lease or (ii) the amount (if less than
represented) of the Lease Payments, Casualty Payments or Termination Payments
under any Lease is deemed to be material. The obligation of the Transferor to
repurchase any Leases under clause (a) relating to representations and
warranties made by ILC in the Contribution Agreement is subject to ILC's
repurchase of such Leases. The repurchase obligation constitutes the sole remedy
available to the Noteholders, the Indenture Trustee, the Certificateholders and
the Trustee in respect of the Trust for any such uncured breach.
If the Transferor or the Servicer is required to repurchase any
Predecessor Lease under clause (i) or (ii) of the preceding paragraph, in lieu
of such repurchase, the Transferor may substitute one or more leases originated
or acquired using the same credit criteria as the initial Leases and having
similar characteristics (each, a "Substitute Lease") for Leases subject to
repurchase in accordance with the preceding paragraph, so long as the following
conditions are met: (i) after giving effect to such substitution, the aggregate
Booked Residual Value (without duplication) of all Substitute Leases will not be
less than 90% of the aggregate Booked Residual Value of all Predecessor Leases
since the Issuance Date, (ii) after giving effect to such adjustment or
substitution, either the final payment on such Substitute Lease must be on or
prior to April, 2005 or, to the extent the final payment is due later, only
scheduled payments due on or prior to such date are included in the Discounted
Present Value of such Lease for the purpose of making any calculation under the
Pooling and Servicing Agreement, (iii) after giving effect to such substitution,
the aggregate amount of Lease Payments through the term of the Leases will not
be more than 5% less than the aggregate scheduled Lease Payments of the Leases
prior to such substitution, and (iv) after giving effect to such substitution,
the Discounted Present Value of the Performing Leases is not less than the
Discounted Present Value of the Performing Leases prior to such substitution.
No substitutions will be permitted if after giving effect to such
substitution, the aggregate Discounted Present Value of all Predecessor Leases
would exceed 10% of the Discounted Present Value of the Leases as of the Cut-Off
Date.
Although the limitations set forth above are intended to minimize the
probability that substitutions would result in losses or delays in payments to
the Noteholders, no assurances can be given to this effect. If and when the
aggregate Discounted Present Value of all Leases for which a Substitute Lease
has been substituted equals 10% of the Discounted
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Present Value of the Leases as of the Cut-Off Date, the Servicer, on behalf of
the Trust, will file an interim report on Form 8-K updating the distribution
tables set forth under "The Lease Pool" herein.
Pursuant to the Pooling and Servicing Agreement, to assure uniform
quality in servicing the Leases and to reduce administrative costs, the
Transferor and the Trust will designate the Servicer as custodian to maintain
possession, as the Trust's agent, of the Leases and any other documents relating
to the Leases. The Servicer's accounting records will reflect the transfer and
assignment of the Leases to the Trust, and Uniform Commercial Code ("UCC")
financing statements reflecting such transfer and assignment will be filed.
Pursuant to the Pooling and Servicing Agreement, the Servicer will have
the right (but no obligation) to purchase all of the remaining Leases held by
the Trust after the Discounted Present Value of the Performing Leases is less
than or equal to 5% of the Discounted Present Value of the Leases as of the
Cut-Off Date.
Accounts
Collection Account. The Servicer will establish and maintain for the
Indenture Trustee an account, in the name of the Indenture Trustee on behalf of
the Noteholders and Certificateholders, into which all Lease Payments, Casualty
Payments, Termination Payments, Residual Realizations, Payaheads and recoveries
from Non-Performing Leases, net of amounts retained by the Servicer, in each
case on or in respect of each Lease in the Lease Pool ("Trust Collections") will
be deposited (the "Collection Account"). "Payaheads" mean early payments by or
on behalf of Lessees that do not constitute scheduled payments, full prepayments
or partial prepayments, in any case in accordance with the Servicer's customary
practices. Until such time as all or a portion of any Payaheads fall due and are
released from the Collection Account, they will not constitute Available Funds
and will not be available for distribution to the Noteholders. The Servicer will
establish and maintain with the Indenture Trustee an account, in the name of the
Indenture Trustee on behalf of such Noteholders, into which amounts released
from the Collection Account for payment to the Noteholders will be deposited and
from which all distributions to the Noteholders will be made (the "Note
Distribution Account"). The Servicer will establish and maintain with the
Trustee an account, in the name of the Trustee on behalf of the
Certificateholders, into which amounts released from the Collection Account for
distribution to the Certificateholders will be deposited and from which all
distributions to the Certificateholders will be made (the "Certificate
Distribution Account").
On the business day preceding each Payment Date, the Indenture Trustee
will release Payaheads from the Collection Account (x) with respect to each
Lease for which the payments made by or on behalf of the Obligor for the related
Due Period are less than the scheduled payment for the related Due Period, the
amount of Payaheads, if any, made with respect to such Lease which, when added
to the amount of such payments, is equal to the amount of such scheduled
payment, (y) with respect to each Lease for which prepayments insufficient to
prepay the Lease in full have been made by or on behalf of the Obligor for the
related Due Period, the amount of Payaheads, if any, made with respect to such
Lease which, when added to the amount of such prepayments, is equal to an amount
sufficient to prepay such Lease in full, and (z) the amount of all Payaheads, if
any, made with respect to any Lease repurchased by Transferor or Servicer.
Reserve Account. The Servicer will establish and maintain for the
Indenture Trustee an Eligible Account (the "Reserve Account"). On the Closing
Date, the Trust will make an initial deposit in an amount equal to 1% of the
Discounted Present Value of the Leases as of the Cut-Off Date into the Reserve
Account. If Available Funds (exclusive of amounts on deposit in the Reserve
Account and the Residual Account) are insufficient to pay the amounts owing the
Servicer, Interest Payments on the Notes and the Class A Principal Payment, the
Class B Principal Payment and the Certificate Principal Payment (such payments,
the "Required Payments" and such shortfall, an "Available Funds Shortfall"), the
Indenture Trustee will withdraw from the Reserve Account an amount equal to the
lesser of the funds on deposit in the Reserve Account (the "Available Reserve
Amount") and such deficiency. In addition, on each Payment Date, Available Funds
remaining after the payment of the Required Payments will be deposited into the
Reserve Account to the extent that the Required Reserve Amount exceeds the
Available Reserve Amount. The "Required Reserve Amount" equals the lesser of (a)
1% of the Discounted Present Value of the Leases as of the Cut-Off Date and (b)
the Outstanding Principal Amount of the Notes and the Certificate Balance. Any
amounts on deposit in the Reserve Account in excess of the Required Reserve
Amount after giving effect to all other transactions on such Payment Date will
be released to the Transferor.
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Residual Account. The Servicer will establish and maintain for the
Indenture Trustee an Eligible Account (the "Residual Account"). Upon the
occurrence of a Residual Event, Residual Realizations will be deposited in the
Residual Account up to the Residual Amount Cap in accordance with the
application of funds described herein under "Distributions on the Notes". Funds
on deposit in the Residual Account will be available to cover shortfalls in the
amount available to pay the amounts owing the Servicer and to make interest and
principal payments on the Notes and Certificates. Following the termination of a
Residual Event, amounts on deposit in the Residual Account will be deposited
into the Reserve Account to the extent that the amount on deposit in the Reserve
Account is less than the Required Reserve Amount and thereafter will be
disbursed to the Transferor.
A "Residual Event" means the occurrence of one or more of the following
including but not limited to: (a) ILC is no longer the Servicer, (b) with
respect to the December, 1998 Due Period and each Due Period thereafter, the
Three-Month Servicer Realization Percentage calculated on any Determination Date
is less than 100%, (c) with respect to the December, 1998 Due Period and each
Due Period thereafter, the Three-Month Delinquency Percentage is greater than
8.0% (d) with respect to the December, 1998 Due Period and each Due Period
thereafter, the Three-Month Default Percentage is greater than 2.0%, (e) the
Cumulative Net Loss Ratio is greater than (i) 2.0%, for any Due Period occurring
on or before the August, 1999 Due Period, (ii) 3.0%, for any Due Period
occurring after the August, 1999 Due Period and on or before the August, 2000
Due Period and (iii) 4.0%, for any Due Period occurring after the August, 2000
Due Period or (f) such other events, if any, required by the Rating Agencies;
provided, that (i) the Residual Event referred to in clause (b) may be cured if
the Three-Month Servicer Realization Percentage is greater than or equal to 100%
for three consecutive Due Periods thereafter, (ii) the Residual Event referred
to in clause (c) may be cured if the Three-Month Delinquency Percentage for any
Due Period thereafter is less than or equal to 7.0%, (iii) the Residual Event
referred to in clause (d) may be cured if the Three-Month Default Percentage for
any Due Period thereafter is less than or equal to 2.0% and (iv) the Residual
Event referred to in clause (e) may be cured if the Cumulative Net Loss Ratio
for any Due Period thereafter is less than or equal to the ratio specified in
clause (e) for such Due Period.
The "Cumulative Net Loss Ratio" means, with respect to any Due Period,
the percentage equivalent of a fraction (a) the numerator of which is the
aggregate of net losses on the Leases from the Cut-Off Date through the last day
of such Due Period and (b) the denominator of which is the Discounted Present
Value of the Leases as of the Cut-Off Date.
A "Delinquent Lease" means, as of any Determination Date, any Lease
(other than a Lease which became a Non-Performing Lease prior to such
Determination Date) with respect to which the Servicer has determined the Lessee
is 31 days or more delinquent with respect to any Lease Payments then due.
The "Annualized Monthly Default Percentage" means, with respect to any
Due Period, twelve times the percentage equivalent of a fraction (a) the
numerator of which is the Discounted Present Value of all Leases that became
NonPerforming Leases during such Due Period, calculated as of the related
Determination Date, and (b) the denominator of which is the Discounted Present
Value of all Leases, calculated as of the Determination Date immediately
preceding the related Determination Date.
The "Monthly Delinquency Percentage" means, with respect to any Due
Period, the percentage equivalent of a fraction (a) the numerator of which is
the Discounted Present Value of the Leases which are Delinquent Leases
determined as of the related Determination Date and (b) the denominator of which
is the Discounted Present Value of the Performing Leases as of the related
Determination Date.
The "Monthly Servicer Realization Percentage" means, with respect to
any Due Period, the percentage equivalent of a fraction (a) the numerator of
which is the aggregate amount of Servicer Residual Realizations collected during
such Due Period and (b) the denominator of which is equal to the aggregate
Servicer Booked Residual Values with respect to the Leases for which Servicer
Residual Realizations have been collected in respect of such Due Period.
The "Servicer Residual Realizations" means the aggregate cash flows
realized by ILC from the sale (including pursuant to a Lessee's purchase option)
or lease of any Equipment or extension of the related Lease following the
termination of such Lease.
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The "Servicer Booked Residual Value" means the estimated residual value
of the Equipment recorded on the books of ILC.
The "Three-Month Default Percentage" means, with respect to any Due
Period, the percentage equivalent of a fraction, (a) the numerator of which is
the sum of the Annualized Monthly Default Percentage for such Due Period and the
two immediately preceding Due Periods and (b) the denominator of which is three.
The "Three-Month Delinquency Percentage" means, with respect to any Due
Period, the percentage equivalent of a fraction, (a) the numerator of which is
the sum of the Monthly Delinquency Percentage for such Due Period and the two
immediately preceding Due Periods and (b) the denominator of which is three.
The "Three-Month Servicer Realization Percentage" means, with respect
to any Due Period, the percentage equivalent of a fraction, (a) the numerator of
which is the sum of the Monthly Servicer Realization Percentage for such Due
Period and the two immediately preceding Due Periods and (b) the denominator of
which is three.
Funds in the Collection Account, the Reserve Account, and the Residual
Account (collectively, the "Trust Accounts") will be invested as provided in the
Pooling and Servicing Agreement in Eligible Investments. "Eligible Investments"
are limited to the following types of investments: (a) direct obligations of,
obligations fully guaranteed as to timely payment by, the United States of
America; (b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, however, at the time of
the investment or contractual commitment to invest therein, the commercial paper
or other short-term senior unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) thereof will have a credit rating
from each of the Rating Agencies in the highest investment category granted
thereby; (c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the Rating
Agencies in the highest investment category granted thereby; (d) to the extent
described below, investments in money market funds having a rating from each of
the Rating Agencies in the highest investment category granted thereby
(including funds for which the Indenture Trustee, the Trustee, Transferor or any
of their respective affiliates is investment manager or advisor); (e) bankers'
acceptances issued by any depository institution or trust company referred to in
clause (b) above; (f) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed as to timely payment 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 (b); and (g) any other
investment permitted by each of the Rating Agencies as set forth in writing
delivered to the Indenture Trustee; provided that in the case of clauses (d) and
(g) such investments will be made only so long as making such investments will
not require the Trust to register as an investment company, in accordance with
the Investment Company Act of 1940, as amended.
Eligible Investments are limited to obligations or securities that
mature on or before the business day preceding the date of the next
distribution. Investment earnings on funds deposited in the Trust Accounts, net
of losses and investment expenses (collectively, "Investment Earnings"), shall
be deposited in the applicable Collection Account on each Payment Date and shall
be treated as collections of interest on the Leases, except that Investment
Earnings attributable to security deposits of Lessees on deposit in the
Collection Account ("Security Deposit Earnings") shall be paid to ILC.
The Trust Accounts will be maintained as Eligible Accounts. "Eligible
Account" means either (a) a segregated account with an Eligible Institution or
any other segregated account the deposit of funds in which has been approved by
the Rating Agencies or (b) a segregated trust account with the corporate trust
department of 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), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
"Eligible Institution" means either (a) the corporate trust department of the
Indenture Trustee or the Trustee, as applicable, or (b) a depository institution
organized under the laws of the United States
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of America or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank) (i) which has either (A) a long-term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies or (B) a short-term unsecured debt rating or certificate of deposit
rating acceptable to the Rating Agencies and (ii) whose deposits are insured by
the FDIC.
Servicing Procedures. The Servicer will take, or cause to be taken, all
actions as may be necessary or advisable to service, administer and collect each
Lease from time to time, all in accordance with (i) customary and prudent
servicing procedures for leases of a similar type, (ii) all applicable laws,
rules and regulations, and (iii) without limiting the foregoing, no less a
standard of care than that which it applies to leases and equipment of a similar
type it services for its own account.
The Servicer may enter into modifications, waivers and amendments to
the terms of any Lease except for modifications, waivers or amendments that (i)
are inconsistent with the standards set forth above, (ii) would reduce the
amount or extend the time for payment of any Lease Payment, Casualty Payment or
Termination Payment (other than to permit termination of a Lease which does not
otherwise provide for termination by requiring the payment, in lieu of all
future Lease Payments with respect to the Lease or the Equipment subject
thereto, of an amount which is at least equal to the Discounted Present Value of
the Lease as of the next following Payment Date plus any delinquent amounts) or
the Lessee's absolute and unconditional obligation to make payment of the same,
(iii) would reduce or adversely affect the Lessee's obligation to maintain,
service, insure and care for the Equipment or would permit the alteration of any
item of Equipment in any way which could adversely affect is present or future
value or (iv) otherwise, individually or in connection with all other
adjustments and modifications made pursuant to this sentence, could adversely
affect the interests of any of the Transferor, the Trustee, the Indenture
Trustee or the Securityholders.
Notwithstanding the foregoing, the Servicer may, without obtaining the
prior written consent of the Trust, the Indenture Trustee, or any Noteholder or
Certificateholder, enter into and grant modifications, waivers or amendments in
addition to those referred to in the preceding paragraph if such Lease is
repurchased by Servicer in accordance with the Pooling and Servicing Agreement.
See "--Transfer of Leases".
If ILC allows an Early Lease Termination or other modification of the
lease in connection with a partial buy-out, the amount prepaid by the lessor
must be at least equal to the Discounted Present Value of the terminated Lease
(or, in the case of a partial buy-out, the portion thereof related to such
buy-out), plus any delinquent payments. See "The Lease Pool--The Leases".
Substitute Leases will be originated or purchased using the same credit
criteria as the initial Leases. To the extent material, information with respect
to such Substitute Leases will be included in periodic reports filed with the
Commission as are required under the Exchange Act.
Servicing Compensation. The Servicer will be entitled to receive the
"Servicing Fee", which will be paid monthly on the Payment Date solely from
funds available therefor in accordance with the Priority of Payments and which
will accrue during each Interest Accrual Period at the rate of 0.75% per annum
(calculated on the basis of a year of 360 days comprised of twelve 30 day
months) on a balance equal to the lesser of (i) the sum of the aggregate of the
Outstanding Principal Amount of the Notes and the Certificate Balance, each
calculated as of the preceding Payment Date after giving effect to all payments
made on such Payment Date and (ii) the Discounted Present Value of the
Performing Leases calculated as of the related Determination Date. Unless a
Trust Acceleration Event has occurred and is continuing while ILC, the
Transferor or one of their affiliates is acting as Servicer, the Servicing Fee
will be paid prior to any payments on the Notes. The Servicing Fee in respect of
a Due Period (together with any portion of the Servicing Fee that remains unpaid
from prior Payment Dates) may be paid at the beginning of such Due Period out of
collections for such Due Period. The Servicing Fee will be paid to the Servicer
for servicing the Lease Pool and for certain administrative expenses in
connection with the Securities, including Trustee and Indenture Trustee fees and
expenses and payment of the Management Fee.
The Servicer will also collect and retain any late fees, prepayment
charges and certain non-sufficient funds charges and other administrative fees
or similar charges (the "Supplemental Servicing Fee") allowed by applicable law
with respect to the Leases.
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In addition to the Servicing Fee and the Supplemental Servicing Fee,
the Servicer is also entitled to retain, out of any amounts received by the
Servicer in connection with the sale or lease of any Equipment subject to a
Non-Performing Lease upon the early termination of such Lease or otherwise, (i)
the Servicer's actual out-of-pocket expenses reasonably incurred in connection
with such sale or release and (ii) if the Servicer has made any Servicer
Advances with respect to any Lease which thereafter became a Non-Performing
Lease and the Servicer has not otherwise been fully reimbursed for such Servicer
Advance, the unreimbursed portion thereof.
Distributions
Deposits to Collection Account. The Servicer will, within two business
days of receipt, deposit all Trust Collections received by it into the
Collection Account. However, at any time that and for so long as (i) ILC is the
Servicer, (ii) there exists no Servicer Event of Default and (iii) each other
condition to making deposits less frequently than daily as may be specified by
the Rating Agencies is satisfied, the Servicer will not be required to deposit
such amounts into the Collection Account until on or before the business day
preceding the applicable Payment Date. Pending deposit into the Collection
Account, collections may be invested by the Servicer at its own risk and for its
own benefit and will not be segregated from its own funds.
On the business day following the Determination Date, the Servicer will
provide the Indenture Trustee with certain information, including the total
amount of all Lease Payments, Casualty Payments, Termination Payments and
NonPerforming Lease Payments received by the Servicer and deposited in the
Collection Account prior to such Determination Date and on or after the
preceding Determination Date, and the calculation of the amount of Available
Funds for application on the related Payment Date.
With respect to any Payment Date, "Available Funds" means the following
payments and deposits made on or with respect to the Leases with respect to the
immediately preceding Due Period received on or prior to a Determination
Date:(i) Lease Payments due during the prior Due Period (net of any Third Party
Amounts), (ii) Residual Realizations up to the Residual Amount Cap, (iii)
recoveries from Non-Performing Leases (net of amounts retained by the Servicer),
(iv) proceeds from repurchases by Transferor or Servicer of Predecessor Leases
if Transferor has not substituted Substitute Leases for such Leases, (v)
proceeds from investment of funds in the Collection Account (other than Security
Deposit Earnings), the Reserve Account and the Residual Account, if any, (vi)
Casualty Payments, (vii) Servicer Advances, (viii) Termination Payments, (ix)
funds, if any, on deposit in the Reserve Account, and (x) funds, if any, on
deposit in the Residual Account to the limited extent provided in the Pooling
and Servicing Agreement.
A "Casualty Payment" is any payment pursuant to a Lease on account of
the loss, theft, condemnation, governmental taking, destruction, or damage
beyond repair (each, a "Casualty") of any item of Equipment subject thereto
which results, in accordance with the terms of the Lease, in a reduction in the
number or amount of any future Lease Payments due thereunder or in the
termination of the Lessee's obligation to make future Lease Payments thereunder.
A "Lease Payment" is each periodic installment of rent payable by a
Lessee under a Lease; provided that (a) prepayments of rent required pursuant to
the terms of a Lease, at or before the commencement of the Lease, (b) payments
(other than Payaheads) collected on or before the Cut-Off Date, (c) Payaheads,
until such time as such Payaheads are released from the Collection Account, (d)
any security deposit, unless and until such security deposit is permitted to be
treated as a payment on a Lease in accordance with the terms of such Lease, and
(e) supplemental or additional payments required by the terms of a Lease with
respect to taxes, insurance, maintenance, or other specific charges, including
charges included in an invoice but payable to vendors (such supplemental or
additional payments and special charges, "Third Party Amounts"), shall not be
Lease Payments hereunder.
On any Determination Date, the Servicer (x) if ILC or one of its
affiliates, will be required, and (y) if any other person, will have the option,
to advance (each, a "Servicer Advance") to the Trustee for distribution as
Available Funds on the related Payment Date, an amount sufficient to cover
delinquencies on any scheduled payment under Leases in the Trust Property due
during the related Due Period; provided that the Servicer will not be required
to make any Servicer Advance if it determines that such Servicer Advance may not
ultimately be recoverable by it from recoveries from the applicable
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Leases. The Servicer will be reimbursed for Servicer Advances not recovered from
late payments or proceeds from the sale or release of the Equipment under a
Lease with respect to which the Servicer has made a Servicer Advance to the
extent that funds are available therefor in accordance with the Priority of
Payments on the second Payment Date following the Determination Date on which
the Servicer made such Servicer Advance.
A "Termination Payment" is a payment payable by a Lessee under a Lease
upon the early termination of such lease (but not on account of a Casualty or a
Lease default) which may be agreed upon by the Servicer, acting in the name of
the Trust, and the Lessee.
Net Deposits. As an administrative convenience, unless the Servicer is
required to remit collections daily, the Servicer will be permitted to make the
deposit of collections and purchase price amounts for any Leases purchased by
the Servicer for the Trust for or with respect to the related Due Period net of
distributions to be made to the Servicer for the Trust with respect to such Due
Period. The Servicer, however, will account to the Indenture Trustee, the
Trustee, the Noteholders and the Certificateholders with respect to the Trust as
if all deposits, distributions and transfers were made individually.
Distributions on Securities. Payments on the Notes will commence on
November 25, 1998. So long as no Trust Acceleration Event shall be continuing,
shall be paid out of Available Funds in the following priority:
(a) to pay the then accrued and unpaid Servicing Fee;
(b) to reimburse unreimbursed Servicer Advances in respect of a
prior Payment Date;
(c) to make Interest Payments, owing on the Class A Notes, pro
rata based on the respective amounts due under this priority,
to the Class A-1 Noteholders, Class A-2 Noteholders, Class A-3
Noteholders and Class A-4 Noteholders;
(d) to make Interest Payments owing on the Class B Notes;
(e) to make Interest Payments owing on the Certificates;
(f) to make the Class A Principal Payment (i) to the Class A-1
Noteholders only, until the Outstanding Principal Amount on
the Class A-1 Notes is reduced to zero, then (ii) to the Class
A-2 Noteholders only, until the Outstanding Principal Amount
on the Class A-2 Notes is reduced to zero, then (iii) to the
Class A-3 Noteholders only, until the Outstanding Principal
Amount on the Class A-3 Notes is reduced to zero, then (iv) to
the Class A-4 Noteholders only, until the Outstanding
Principal Amount on the Class A-4 Notes is reduced to zero;
(g) to make the Class B Principal Payment;
(h) to make the Certificate Principal Payment;
(i) to pay the Additional Principal, if any, to the Class A
Noteholders then receiving the Class A Principal Payment as
provided in clause (f) above until the Outstanding Principal
Amount on all of the Class A Notes has been reduced to zero,
then to the Class B Noteholders until the Outstanding
Principal Amount on the Class B Notes has been reduced to zero
and thereafter to the Certificateholders until the Certificate
Balance on the Certificates has been reduced to zero;
(j) to the Reserve Account, an amount equal to the excess of the
Required Reserve Amount over the Available Reserve Amount;
(k) following a Residual Event, to the Residual Account an amount
equal to Residual Realizations up to the Residual Amount Cap;
and
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(l) to the Transferor, the balance, if any.
Upon the occurrence of an Event of Default and the acceleration of the
Notes (a "Trust Acceleration Event") and until such Trust Acceleration Event has
been rescinded, distributions will be made on each Payment Date from Available
Funds in the following priority:
(a) to pay all costs and expenses of collection incurred by the
Indenture Trustee and the Noteholders (including the
reasonable fees and expenses of counsel to such persons);
(b) if the person then acting as Servicer under the Pooling and
Servicing Agreement is not ILC or an affiliate of ILC, to pay
the Servicing Fee;
(c) first, to pay all accrued and unpaid Interest Payments on each
class of Class A Notes plus (to the extent permitted by
applicable law) interest on any overdue interest and principal
payments on each class of Class A Notes at a rate per annum
equal to the applicable Interest Rate for such class of Notes
concurrently to the Class A-1 Noteholders, Class A-2
Noteholders, Class A-3 Noteholders and Class A-4 Noteholders,
second, to pay all accrued and unpaid Interest Payments on the
Class B Notes plus (to the extent permitted by applicable law)
interest on any overdue interest and principal payments on the
Class B Notes at a rate per annum equal to the Class B
Interest Rate, third, to pay all accrued and unpaid Interest
Payments on the Certificates plus (to the extent permitted by
applicable law) interest on any overdue interest and principal
payments on the Certificates at a rate per annum equal to the
Certificate Rate, fourth, to the payment of the Outstanding
Principal Amount of the Class A-1 Notes, fifth, to the payment
of the Outstanding Principal Amount of the Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes to the date of payment
thereof, sixth, to the payment of the Outstanding Principal
Amount of the Class B Notes to the date of payment thereof,
and seventh, to the payment of the Certificate Balance;
provided, that the Noteholders may internally allocate such
payments for interest, principal and premium at their own
discretion, except that no such allocation shall affect the
allocation of such amounts pursuant to this priority or future
payments received by any other Noteholder;
(d) to pay amounts then due the Trustee under the Trust Agreement
and the Indenture Trustee under the Indenture;
(e) if ILC or an affiliate of ILC is the Servicer, to pay the
Servicing Fee; and
(f) to the Transferor or any other person legally entitled
thereto, the balance, if any.
"Additional Principal" with respect to each Payment Date is an amount
equal to (a) the difference between (i) the Discounted Present Value of the
Performing Leases as of the previous Determination Date and (ii) the Discounted
Present Value of the Performing Leases as of the related Determination Date,
less (b) the Class A Principal Payment, the Class B Principal Payment and the
Certificate Principal Payment to be paid on such Payment Date.
The "Certificate Floor" with respect to each Payment Date means (a)
1.5% of the initial Discounted Present Value of the Leases as of the Cut-Off
Date, plus (b) the Cumulative Loss Amount with respect to such Payment Date,
minus (c) the sum of the Overcollateralization Amount as of such Payment Date
plus the amount on deposit in the Reserve Account after giving effect to
withdrawals to be made on such Payment Date.
The "Certificate Principal Payment" means (a) while the Class A-1 Notes
are outstanding, zero and (b) after the Outstanding Principal Amount on the
Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Certificate Balance to the greater of the Certificate Target Investor Principal
Amount and the Certificate Floor.
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The "Certificate Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Certificate Percentage
and (b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
The "Class A Principal Payment" means (a) while the Class A-1 Notes are
outstanding, (i) on all Payment Dates prior to the October, 1999 Payment Date,
the lesser of (1) the amount necessary to reduce the Outstanding Principal
Amount on the Class A-1 Notes to zero and (2) the difference between (A) the
Discounted Present Value of the Performing Leases as of the Determination Date
for the preceding Payment Date and (B) the Discounted Present Value of the
Performing Leases as of the related Determination Date, and (ii) on the October,
1999 Payment Date and thereafter until the Class A-1 Notes have been paid in
full, the entire Outstanding Principal Amount on the Class A-1 Notes and (b)
after the Class A-1 Notes have been paid in full, the amount necessary to reduce
the aggregate Outstanding Principal Amount on the Class A Notes to the Class A
Target Investor Principal Amount.
The "Class A Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) Class A Percentage and (b)
the Discounted Present Value of the Performing Leases as of the related
Determination Date.
The "Class B Principal Payment" means (a) while the Class A-1 Notes are
outstanding, zero and (b) after the Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class B Notes to the greater of the Class B
Target Investor Principal Amount and the Class B Floor.
The "Class B Floor" with respect to each Payment Date (the "subject
Payment Date") means (a) 2.5% of the initial Discounted Present Value of the
Leases as of the Cut-Off Date, plus (b) the Cumulative Loss Amount with respect
to the subject Payment Date, minus (c) the sum of the Certificate Balance as of
the preceding Payment Date after giving effect to all payments made on such
Payment Date plus the Overcollateralization Amount as of the subject Payment
Date plus the amount on deposit in the Reserve Account after giving effect to
withdrawals to be made on the subject Payment Date.
The "Class B Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class B Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
The "Cumulative Loss Amount" with respect to each Payment Date (the
"subject Payment Date") is an amount equal to the excess, if any, of (a) the
difference of (i) the sum of the Outstanding Principal Amount of the Notes and
the Certificate Balance as of the immediately preceding Payment Date after
giving effect to all payments made on the subject Payment Date, minus (ii) the
lesser of (A) the Discounted Present Value of the Performing Leases as of the
Determination Date relating to the immediately preceding Payment Date minus the
Discounted Present Value of the Performing Leases as of the Determination Date
related to the subject Payment Date and (B) Available Funds remaining after the
payment of amounts owing to the Servicer and in respect of interest on the
Securities on the subject Payment Date over (b) the Discounted Present Value of
Performing Leases as of the Determination Date related to the subject Payment
Date.
The "Discounted Present Value of the Leases", with respect to the Trust
Property at any given time, means the future remaining scheduled payments
(including Payaheads but excluding Third Party Amounts and, after the Closing
Date, delinquent amounts) from the related Leases (including Non-Performing
Leases), discounted at the Discount Rate. The "Discount Rate" will be equal to
the sum of (a) the weighted average Interest Rate of the Class A Notes
(utilizing the Class A-4 Interest Rate), the Class B Notes and the Certificates
on the Issuance Date and (b) the Servicing Fee Rate.
The "Discounted Present Value of the Performing Leases", with respect
to the Trust Property at any given time equals the Discounted Present Value of
the Leases, including any Substitute Leases, reduced by the Discounted Present
Value of the Non-Performing Leases.
50
<PAGE>
"Non-Performing Leases" are (a) Leases that the Servicer has determined
to be more than 90 days delinquent or (b) Leases that have been accelerated by
the Servicer. See "The Lease Pool--The Leases".
The "Overcollateralization Amount" with respect to each Payment Date is
an amount equal to (a) the Discounted Present Value of the Performing Leases as
of the related Determination Date minus (b) the Outstanding Principal Amount of
the Notes and the Certificate Balance (after giving effect to payments of
principal (other than Additional Principal) on such Payment Date); provided,
that such amount will never be less than zero.
Evidence as to Compliance. The Pooling and Servicing Agreement provides
for delivery to the Trust and Indenture Trustee of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
under the Pooling and Servicing Agreement throughout the preceding twelve months
(or, in the case of the first such certificate, from the Issuance Date) or, if
there has been a default in the fulfillment of any such obligation, describing
each such default. The Servicer will agree to give the Indenture Trustee and the
Trustee notice of certain Servicer Defaults under the Pooling and Servicing
Agreement.
Copies of such certificates may be obtained by Noteholders by written
request addressed to the Indenture Trustee.
Certain Matters Regarding the Servicer. The Pooling and Servicing
Agreement provides that ILC may not resign from its obligations and duties as
Servicer thereunder, except upon determination that ILC's performance of such
duties is no longer permissible under applicable law. No such resignation will
become effective until the Indenture Trustee or a successor servicer has assumed
ILC's servicing obligations and duties under the Pooling and Servicing
Agreement.
The Pooling and Servicing Agreement will further provide that neither
the Servicer nor any of its directors, officers, employees and agents will be
under any liability to the Trust or the Noteholders for any action taken or not
taken in good faith pursuant to the Pooling and Servicing Agreement with respect
to any Lease (including any Non-Performing Lease) or the Equipment subject
thereto, except that neither the Servicer nor any such person will be protected
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance or nonperformance of the
Servicer's duties thereunder nor shall the Servicer nor any such person be
protected against any breach of warranties, representations or covenants made by
it pursuant to the Pooling and Servicing Agreement or any certificate delivered
in conjunction with the issuance of the Notes.
Under the circumstances specified in the Pooling and Servicing
Agreement, any entity into which the Servicer may be merged or consolidated, or
any entity resulting from any merger or consolidation to which the Servicer is a
party, or any entity succeeding to the business of the Servicer, which
corporation or other entity in each of the foregoing cases assumes the
obligations of the Servicer, will be the successor of the Servicer under the
Pooling and Servicing Agreement.
Servicer Events of Default. The following events and conditions shall
be defined in the Pooling and Servicing Agreement as "Servicer Events of
Default": (i) failure on the part of the Servicer to deposit into the Collection
Account or other applicable account within three business days following the
receipt thereof any monies received by the Servicer required to be remitted to
the Indenture Trustee under the Pooling and Servicing Agreement; (ii) so long as
ILC is the Servicer, failure on the part of ILC to pay to the Trustee on the
date when due, any payment required to be made by ILC pursuant to the Pooling
and Servicing Agreement; (iii) default on the part of either the Servicer in its
observance or performance in any material respect of certain covenants or
agreements in the Pooling and Servicing Agreement which failure continues
unremedied for a period of 30 days after the earlier of (A) the date it first
becomes known to any officer of Transferor or Servicer, as the case may be, and
(B) the date on which written notice thereof requiring the same to be remedied
shall have been given to Transferor or Servicer, as the case may be by Indenture
Trustee or Trustee, or to Transferor or Servicer by any Holder of the Notes or
the Certificates; (iv) if any representation or warranty of ILC made in the
Pooling and Servicing Agreement shall prove to be incorrect in any material
respect as of the time made; provided, that the breach of any representation or
warranty made by ILC in such Pooling and Servicing Agreement will be deemed to
be "material" only if it affects the Noteholders or the Certificateholders, the
enforceability of the Indenture or of the Notes or the enforceability of the
Trust Agreement or the Certificates; and provided, further, that such material
breach of any representation or warranty made by ILC in such Pooling and
Servicing Agreement with respect to any of the Leases or the
51
<PAGE>
Equipment subject thereto will not constitute a Servicer Event of Default if ILC
repurchases such Lease and Equipment in accordance with the Pooling and
Servicing Agreement to the extent provided therein; (v) certain insolvency or
bankruptcy events relating to the Servicer; (vi) the Servicer defaulting in the
payment of any debt or other obligations exceeding $1,000,000, or the occurrence
of any event the effect of which is to cause (or permit one or more persons to
cause) such obligations exceeding $1,000,000, to be accelerated, if the effect
of such event is not waived by the person or persons entitled to performance;
and (vii) a final judgment or judgments for the payment of money aggregating in
excess of $1,000,000 shall have remained unsatisfied and in effect for 60
consecutive days without a stay of execution.
Servicer Termination. So long as a Servicer Event of Default under the
Pooling and Servicing Agreement is continuing, the Indenture Trustee shall, upon
the instructions of the Holders of 662/3% in principal amount of the Notes (or,
if no Notes are Outstanding, Holders of Certificates representing at least
662/3% of the Certificate Balance), by notice in writing to the Servicer
terminate all of the rights and obligations of the Servicer under the Pooling
and Servicing Agreement. On the receipt by the Servicer of such written notice,
all authority and power of the Servicer under the Pooling and Servicing
Agreement to take any action with respect to any Lease or Equipment will cease
and the same will pass to and be vested in the Indenture Trustee pursuant to and
under the Pooling and Servicing Agreement and the Indenture.
Waiver of Past Defaults. The Holders of Notes evidencing at least 66
2/3% of the principal amount of the then outstanding Notes of the related series
(or the Holders of the Certificates evidencing at least a majority of the
outstanding Certificate Balance, in the case of any Servicer Event of Default
that does not adversely affect the Indenture Trustee or the Noteholders) may, on
behalf of all such Noteholders and Certificateholders, waive any default by the
Servicer in the performance of its obligations under the Pooling and Servicing
Agreement and its consequences, except a default in making any required deposits
to or payments from any of the Trust Accounts in accordance with the Pooling and
Servicing Agreement. Therefore, the Noteholders have the ability, as limited
above, to waive defaults by the Servicer which could materially adversely affect
the Certificateholders. No such waiver will impair such Noteholders' rights with
respect to subsequent defaults.
Amendment
The Transfer and Servicing Agreements may be amended by the parties
thereto, without the consent of the related Noteholders or Certificateholders,
to cure any ambiguity, to correct or supplement any provision of any Transfer
and Servicing Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Transfer and
Servicing Agreements or of modifying in any manner the rights of the Noteholders
or Certificateholders; provided that such action will not, in the opinion of
counsel satisfactory to the Indenture Trustee and the Trustee, materially and
adversely affect the interest of any the Noteholders or Certificateholders. In
addition, the Transfer and Servicing Agreements may be amended by the parties
thereto, without the consent of the Noteholders or Certificateholders, to
substitute or add credit enhancement for any class of Securities provided the
Rating Agencies confirm in writing that such substitution or addition will not
result in a reduction or withdrawal of the rating of such class of Securities or
any other class of Securities. The Transfer and Servicing Agreements may also be
amended by the Transferor, the Servicer and the Trustee with the consent of the
Indenture Trustee, the Holders of Notes evidencing at least 66 2/3% of the
principal amount of then outstanding Notes and the Holders of Certificates of
such series evidencing at least 66 2/3% of the Certificate Balance, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of such Transfer and Servicing Agreements or of modifying in
any manner the rights of the Noteholders or 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
related Leases or distributions that are required to be made for the benefit of
the Noteholders or Certificateholders or (ii) reduce the aforesaid percentage of
the Notes or Certificates that are required to consent to any such amendment,
without the consent of the Holders of all the outstanding Notes and
Certificates.
Termination
The obligations of the Servicer, the Transferor, the Trustee and the
Indenture Trustee pursuant to the Transfer and Servicing Agreements will
terminate upon (i) the maturity or other liquidation of the last related Leases
and the disposition
52
<PAGE>
of any amounts received upon liquidation of any such remaining Leases and (ii)
the payment to Noteholders and Certificateholders of all amounts required to be
paid to them pursuant to the Transfer and Servicing Agreements.
In order to avoid excessive administrative expense, the Servicer will
be permitted at its option to purchase from the Trust, on any Payment Date after
the Payment Date on which the Discounted Present Value of the Performing Leases
is less than or equal 5% of the Discounted Present Value of the Leases as of the
Cut-Off Date, and any outstanding Notes will be redeemed concurrently therewith.
Management Agreement
ILC, in its capacity as manager (the "Manager"), will enter into an
agreement (as amended and supplemented from time to time, the "Management
Agreement") with the Issuer and the Indenture Trustee pursuant to which the
Manager will agree, to the extent provided in the Management Agreement, to
perform on behalf of the Issuer certain administrative obligations required by
the Indenture. As compensation for the performance of the Manager's obligations
under the Management Agreement and as reimbursement for its expenses related
thereto, the Manager will be entitled to a quarterly management fee in an amount
equal to $500 (the "Management Fee"). The Management Fee shall be paid to the
Manager by the Servicer from the Servicing Fee.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate amount of
each interest payment on such Notes and the yield to maturity of such Notes are
directly related to the rate of payments on the underlying Leases. The payments
on such Leases may be in the form of scheduled payments, Lease 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 Leases. 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 of the underlying Leases by ILC pursuant to the Pooling and
Servicing Agreement. In such event, the repurchase price will decrease the
Discounted Present Value of the Performing Leases, causing the corresponding
weighted average life of the Notes to decrease. See "Risk Factors--Prepayments".
If a Lease becomes a Predecessor Lease, ILC will have the option to
substitute a Substitute Lease for such Predecessor Lease. The Substitute Leases
will have a Discounted Present Value of the Predecessor Leases equal to or
greater than that of the Predecessor Leases being replaced and the monthly
payments on the Substitute Leases will be at least equal to those of the
Predecessor Leases through the term of such Predecessor Leases. In the event
that an Early Lease Termination or other modification of the lease terms in
connection with a partial buy-out is allowed by ILC, the amount prepaid will be
equal to at least the Discounted Present Value of the terminated Lease (or, in
the case of a partial buy-out, the portion thereof related to such buy-out),
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 and Class B Notes which would be outstanding on the
Payment Dates set forth below assuming a Conditional Payment Rate ("CPR") of
5.0%, 10.0%, 15.0% and 20.0%, respectively and were calculated using the
Statistical Discount Rate. Such information is hypothetical and is set forth for
illustrative purposes only. The CPR assumes that a fraction of the outstanding
Lease Pool is prepaid on each Distribution Date, which implies that each Lease
in the Lease Pool is equally likely to prepay. This fraction, expressed as a
percentage, is annualized to arrive at the CPR for the Contract Pool. The CPR
measures prepayments based on the outstanding Discounted Present Value of the
Leases, after the payment of all Scheduled Payments on the Leases during such
Due Period. The CPR further assumes that all Leases are the same size and
amortize at the same rate and that each Lease will be either paid as scheduled
or prepaid in full. The amounts set forth below are based upon the timely
receipt
54
<PAGE>
of scheduled monthly Lease payments as of the Cut-Off Date, assumes that the
Trust does not exercise its option to redeem the Notes and assumes the Issuance
Date is September 30, 1998 and the first Payment Date is November 25, 1998.
The information included in the following tables represents
forward-looking statements and involves risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. The actual characteristics and performance of the Leases will differ
from the assumptions used in constructing the following tables. The assumptions
used are hypothetical and have been provided only to give a general sense of how
the principal cash flows might behave under varying prepayment scenarios. For
example, it is highly unlikely that the Leases will prepay at a constant CPR
until maturity or that all of the Leases will prepay at the same CPR. Moreover,
the diverse terms of the Leases could produce slower or faster principal
distributions than indicated in the table at the various CPRs specified. Any
difference between such assumptions and the actual characteristics and
performance of the Leases, or actual prepayment experience, will affect the
percentages of initial balances outstanding over time and the weighted average
lives of the Notes.
55
<PAGE>
PERCENTAGE OF THE INITIAL CLASS A-1, A-2, A-3 AND A-4 PRINCIPAL
AMOUNTS AND THE INITIAL CLASS B PRINCIPAL AMOUNT
AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
5% CPR
------------------------------------------------------------
Month Date Class A-1 Class A-2 Class A-3 Class A-4 Class B
<S> <C> <C> <C> <C> <C> <C>
0 9/30/98 100% 100% 100% 100% 100%
1 11/25/98 83 100 100 100 100
2 12/25/98 74 100 100 100 100
3 1/25/99 65 100 100 100 100
4 2/25/98 54 100 100 100 100
5 3/25/99 45 100 100 100 100
6 4/25/99 36 100 100 100 100
7 5/25/99 26 100 100 100 100
8 6/25/99 17 100 100 100 100
9 7/25/99 9 100 100 100 100
10 8/25/99 0 97 100 100 100
11 9/25/99 0 69 100 100 95
12 10/25/99 0 42 100 100 91
13 11/25/99 0 11 100 100 87
14 12/25/99 0 0 97 100 83
15 1/25/00 0 0 92 100 79
16 2/25/00 0 0 85 100 75
17 3/25/00 0 0 80 100 71
18 4/25/00 0 0 75 100 67
19 5/25/00 0 0 69 100 63
20 6/25/00 0 0 64 100 60
21 7/25/00 0 0 60 100 57
22 8/25/00 0 0 55 100 53
23 9/25/00 0 0 51 100 50
24 10/25/00 0 0 47 100 47
25 11/25/00 0 0 42 100 44
26 12/25/00 0 0 38 100 42
27 1/25/01 0 0 35 100 39
28 2/25/01 0 0 31 100 37
29 3/25/01 0 0 28 100 34
30 4/25/01 0 0 25 100 32
31 5/25/01 0 0 22 100 30
32 6/25/01 0 0 19 100 28
33 7/25/01 0 0 17 100 26
34 8/25/01 0 0 14 100 24
35 9/25/01 0 0 11 100 22
36 10/25/01 0 0 9 100 21
37 11/25/01 0 0 6 100 19
38 12/25/01 0 0 4 100 18
39 1/25/02 0 0 2 100 18
40 2/25/02 0 0 0 100 18
41 3/25/02 0 0 0 90 18
42 4/25/02 0 0 0 81 18
43 5/25/02 0 0 0 71 18
44 6/25/02 0 0 0 62 18
45 7/25/02 0 0 0 54 18
46 8/25/02 0 0 0 45 18
47 9/25/02 0 0 0 38 18
48 10/25/02 0 0 0 30 18
49 11/25/02 0 0 0 23 18
50 12/25/02 0 0 0 16 18
51 1/25/03 0 0 0 10 18
52 2/25/03 0 0 0 4 18
53 3/25/03 0 0 0 0 17
54 4/25/03 0 0 0 0 6
55 5/25/03 0 0 0 0 0
56 6/25/03 0 0 0 0 0
57 7/25/03 0 0 0 0 0
58 8/25/03 0 0 0 0 0
Avg. Life 0.495 1.086 2.136 3.923 2.383
<CAPTION>
10% CPR
------------------------------------------------------------
Month Date Class A-1 Class A-2 Class A-3 Class A-4 Class B
<S> <C> <C> <C> <C> <C> <C>
0 9/30/98 100% 100% 100% 100% 100%
1 11/25/98 82 100 100 100 100
2 12/25/98 72 100 100 100 100
3 1/25/99 61 100 100 100 100
4 2/25/98 50 100 100 100 100
5 3/25/99 40 100 100 100 100
6 4/25/99 30 100 100 100 100
7 5/25/99 19 100 100 100 100
8 6/25/99 10 100 100 100 100
9 7/25/99 1 100 100 100 100
10 8/25/99 0 68 100 100 95
11 9/25/99 0 38 100 100 91
12 10/25/99 0 10 100 100 87
13 11/25/99 0 0 95 100 82
14 12/25/99 0 0 90 100 78
15 1/25/00 0 0 84 100 74
16 2/25/00 0 0 78 100 70
17 3/25/00 0 0 73 100 66
18 4/25/00 0 0 68 100 62
19 5/25/00 0 0 62 100 58
20 6/25/00 0 0 57 100 55
21 7/25/00 0 0 53 100 52
22 8/25/00 0 0 48 100 48
23 9/25/00 0 0 44 100 45
24 10/25/00 0 0 40 100 43
25 11/25/00 0 0 35 100 39
26 12/25/00 0 0 32 100 37
27 1/25/01 0 0 29 100 35
28 2/25/01 0 0 25 100 32
29 3/25/01 0 0 22 100 30
30 4/25/01 0 0 19 100 28
31 5/25/01 0 0 16 100 26
32 6/25/01 0 0 14 100 24
33 7/25/01 0 0 11 100 23
34 8/25/01 0 0 9 100 21
35 9/25/01 0 0 7 100 19
36 10/25/01 0 0 5 100 18
37 11/25/01 0 0 2 100 18
38 12/25/01 0 0 0 99 18
39 1/25/02 0 0 0 90 18
40 2/25/02 0 0 0 81 18
41 3/25/02 0 0 0 72 18
42 4/25/02 0 0 0 64 18
43 5/25/02 0 0 0 56 18
44 6/25/02 0 0 0 48 18
45 7/25/02 0 0 0 41 18
46 8/25/02 0 0 0 34 18
47 9/25/02 0 0 0 27 18
48 10/25/02 0 0 0 21 18
49 11/25/02 0 0 0 15 18
50 12/25/02 0 0 0 10 18
51 1/25/03 0 0 0 4 18
52 2/25/03 0 0 0 0 17
53 3/25/03 0 0 0 0 8
54 4/25/03 0 0 0 0 0
55 5/25/03 0 0 0 0 0
56 6/25/03 0 0 0 0 0
57 7/25/03 0 0 0 0 0
58 8/25/03 0 0 0 0 0
Avg. Life 0.456 1.000 2.000 3.786 2.266
</TABLE>
56
<PAGE>
(1) The weighted average life of a Class A Note or Class B Note is
determined by (a) multiplying the amount of cash distributions in
reduction of the Outstanding Principal Amount of the respective Note by
the number of years from the Issuance Date to such Payment Date, (b)
adding the results, and (c) dividing the sum by the respective Initial
Principal Amount of such Note.
For the 5% CPR and 10% CPR scenarios, if the Trust exercises its option to
redeem the Notes, the average life of the Class A-1 Notes; Class A-2 Notes;
Class A-3 Notes; Class A-4 Notes; and Class B Notes would be 0.50 years and 0.46
years; 1.09 years and 1.00 years; 2.14 years and 2.00 years; 3.82 years and 3.66
years; and 2.27 years and 2.14 years, respectively.
57
<PAGE>
PERCENTAGE OF THE INITIAL CLASS A-1, A-2, A-3 AND A-4 PRINCIPAL
AMOUNTS AND THE INITIAL CLASS B PRINCIPAL AMOUNT
AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
15% CPR
------------------------------------------------------------
Month Date Class A-1 Class A-2 Class A-3 Class A-4 Class B
- ----- ----------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
0 9/30/98 100% 100% 100% 100% 100%
1 11/25/98 81 100 100 100 100
2 12/25/98 69 100 100 100 100
3 1/25/99 58 100 100 100 100
4 2/25/98 45 100 100 100 100
5 3/25/99 34 100 100 100 100
6 4/25/99 24 100 100 100 100
7 5/25/99 12 100 100 100 100
8 6/25/99 2 100 100 100 100
9 7/25/99 0 74 100 100 96
10 8/25/99 0 38 100 100 91
11 9/25/99 0 7 100 100 86
12 10/25/99 0 0 95 100 82
13 11/25/99 0 0 88 100 77
14 12/25/99 0 0 83 100 73
15 1/25/00 0 0 77 100 69
16 2/25/00 0 0 71 100 64
17 3/25/00 0 0 65 100 61
18 4/25/00 0 0 60 100 57
19 5/25/00 0 0 55 100 53
20 6/25/00 0 0 50 100 50
21 7/25/00 0 0 46 100 47
22 8/25/00 0 0 41 100 43
23 9/25/00 0 0 37 100 41
24 10/25/00 0 0 33 100 38
25 11/25/00 0 0 29 100 35
26 12/25/00 0 0 26 100 33
27 1/25/01 0 0 23 100 31
28 2/25/01 0 0 19 100 28
29 3/25/01 0 0 17 100 26
30 4/25/01 0 0 14 100 24
31 5/25/01 0 0 11 100 22
32 6/25/01 0 0 9 100 21
33 7/25/01 0 0 7 100 19
34 8/25/01 0 0 4 100 18
35 9/25/01 0 0 2 100 18
36 10/25/01 0 0 0 100 18
37 11/25/01 0 0 0 88 18
38 12/25/01 0 0 0 80 18
39 1/25/02 0 0 0 71 18
40 2/25/02 0 0 0 64 18
41 3/25/02 0 0 0 56 18
42 4/25/02 0 0 0 49 18
43 5/25/02 0 0 0 42 18
44 6/25/02 0 0 0 35 18
45 7/25/02 0 0 0 29 18
46 8/25/02 0 0 0 24 18
47 9/25/02 0 0 0 18 18
48 10/25/02 0 0 0 13 18
49 11/25/02 0 0 0 8 18
50 12/25/02 0 0 0 4 18
51 1/25/03 0 0 0 0 17
52 2/25/03 0 0 0 0 8
53 3/25/03 0 0 0 0 0
54 4/25/03 0 0 0 0 0
55 5/25/03 0 0 0 0 0
56 6/25/03 0 0 0 0 0
57 7/25/03 0 0 0 0 0
58 8/25/03 0 0 0 0 0
Avg. Life 0.423 0.920 1.872 3.637 2.152
<CAPTION>
20% CPR
----------------------------------------------------------
Month Date Class A-1 Class A-2 Class A-3 Class A-4 Class B
- ----- ----------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
0 9/30/98 100% 100% 100% 100% 100%
1 11/25/98 79 100 100 100 100
2 12/25/98 66 100 100 100 100
3 1/25/99 54 100 100 100 100
4 2/25/98 40 100 100 100 100
5 3/25/99 28 100 100 100 100
6 4/25/99 17 100 100 100 100
7 5/25/99 5 100 100 100 100
8 6/25/99 0 80 100 100 97
9 7/25/99 0 46 100 100 92
10 8/25/99 0 8 100 100 86
11 9/25/99 0 0 95 100 82
12 10/25/99 0 0 89 100 77
13 11/25/99 0 0 81 100 72
14 12/25/99 0 0 76 100 68
15 1/25/00 0 0 70 100 64
16 2/25/00 0 0 64 100 59
17 3/25/00 0 0 58 100 56
18 4/25/00 0 0 53 100 52
19 5/25/00 0 0 48 100 48
20 6/25/00 0 0 43 100 45
21 7/25/00 0 0 39 100 42
22 8/25/00 0 0 35 100 39
23 9/25/00 0 0 31 100 36
24 10/25/00 0 0 27 100 34
25 11/25/00 0 0 23 100 31
26 12/25/00 0 0 20 100 29
27 1/25/01 0 0 17 100 27
28 2/25/01 0 0 14 100 24
29 3/25/01 0 0 12 100 23
30 4/25/01 0 0 9 100 21
31 5/25/01 0 0 7 100 19
32 6/25/01 0 0 4 100 18
33 7/25/01 0 0 2 100 18
34 8/25/01 0 0 0 99 18
35 9/25/01 0 0 0 89 18
36 10/25/01 0 0 0 81 18
37 11/25/01 0 0 0 70 18
38 12/25/01 0 0 0 63 18
39 1/25/02 0 0 0 56 18
40 2/25/02 0 0 0 49 18
41 3/25/02 0 0 0 42 18
42 4/25/02 0 0 0 36 18
43 5/25/02 0 0 0 30 18
44 6/25/02 0 0 0 25 18
45 7/25/02 0 0 0 20 18
46 8/25/02 0 0 0 15 18
47 9/25/02 0 0 0 11 18
48 10/25/02 0 0 0 6 18
49 11/25/02 0 0 0 2 18
50 12/25/02 0 0 0 0 16
51 1/25/03 0 0 0 0 8
52 2/25/03 0 0 0 0 1
53 3/25/03 0 0 0 0 0
54 4/25/03 0 0 0 0 0
55 5/25/03 0 0 0 0 0
56 6/25/03 0 0 0 0 0
57 7/25/03 0 0 0 0 0
58 8/25/03 0 0 0 0 0
Avg. Life 0.394 0.848 1.750 3.481 2.049
</TABLE>
(1) The weighted average life of a Class A Note or Class B Note is determined
by (a) multiplying the amount of cash distributions in reduction of the
Outstanding Principal Amount of the respective Note by the number of years
from the Issuance Date to such Payment Date, (b) adding the results, and
(c) dividing the sum by the respective Initial Principal Amount of such
Note.
For the 15% CPR and 20% CPR scenarios, if the Trust exercises its option to
redeem the Notes, the average life of the Class A-1 Notes; Class A-2 Notes;
Class A-3 Notes; Class A-4 Notes; and Class B Notes would be 0.42 years and 0.39
years; 0.92 years and 0.85 years; 1.87 years and 1.75 years; 3.53 years and 3.36
years; and 2.03 years and 1.91 years, respectively.
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<PAGE>
CERTAIN LEGAL MATTERS AFFECTING A LESSEE'S
RIGHTS AND OBLIGATIONS
General. The Leases are triple-net leases, requiring the Lessees to pay
all taxes, maintenance and insurance associated with the Equipment, and are
primarily non-cancelable by the Lessees.
The Leases are "hell or high water" leases, under which the obligations
of the Lessee are absolute and unconditional, regardless of any defense, setoff
or abatement which the Lessee may have against ILC, as Transferor or Servicer,
the Trust, or any other person or entity whatsoever.
Events of default under the Leases are generally the result of failure
to pay amounts when due, failure to observe other covenants in the Lease,
misrepresentations by, or the insolvency, bankruptcy or appointment of a trustee
or receiver for the Lessee under a Lease. The remedies of the lessor (and the
Trust as assignee) following a notice and cure period are generally to seek to
enforce the performance by the Lessee of the terms and covenants of the Lease
(including the Lessee's obligation to make scheduled payments) or recover
damages for the breach thereof, to accelerate the balance of the remaining
scheduled payments paid to terminate the rights of the Lessee under such Lease.
Although the Leases permit the lessor to repossess and dispose of the related
Equipment in the event of a lease default, and to credit such proceeds against
the Lessee's liabilities thereunder, such remedies may be limited where the
Lessee thereunder is subject to bankruptcy, or other insolvency proceedings.
UCC and Bankruptcy Considerations. Prior to the Cut-Off Date, ILC will
have filed Uniform Commercial Code ("UCC") financing statements in its favor
against Lessees in respect of Equipment, including Equipment subject to
Nominal-Buy-Out Leases, with an original Equipment cost in excess of $10,000,
which make up approximately 95.61% of the Statistical Discounted Present Value
of the Leases. Consistent with ILC's policies with respect to all Leases
originated or acquired by it, no action will be taken to perfect the interest of
ILC in any Equipment to the extent the original Equipment cost of the related
Equipment is less than $10,000. As a result, ILC does not have a perfected
security interest in Equipment with an original Equipment cost of less than or
equal to $10,000.
Also, Leases representing approximately 4.36% of the Statistical
Discounted Present Value of the Leases relate to leasehold improvements and
other equipment types that may be classified as "fixtures" under the UCC. ILC's
(and therefore the Trust's) security interests in fixtures are junior to the
claims of persons (other than the related lessee) with recorded ownership or
mortgage interests in the real estate to which the fixtures are attached, unless
ILC has obtained waivers from such persons. Due to various factors (including
creditworthiness of the lessee or ILC policies at the time a particular lease
was originated), such waivers have not been obtained with respect to most of the
Equipment that may constitute fixtures. As a result, the interests of the Trust
and the Noteholders in Equipment constituting fixtures may be junior to the
rights of owners and mortgagees of the related real estate.
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<PAGE>
In addition to the filings referred to in the second preceding
paragraph, the Pooling and Servicing Agreement, the Trust Agreement and the
Indenture will require UCC financing statements covering the Equipment to be
filed in favor of the Transferor, the Trust and the Indenture Trustee,
respectively, in states in which as of the Closing Date (i) Equipment relating
to not less than 75% of the original cost of the Equipment under the Leases as
of the Cut-Off Date is located and (ii) Equipment relating to not less than 75%
of the Booked Residual Value of such Equipment as of the Cut-Off Date is located
(the "Filing Locations"). In the event of the repossession and resale of
Equipment subject to a superior lien, the senior lienholder would be entitled to
be paid the full amount of the indebtedness owed to it out of the sale proceeds
before such proceeds could be applied to the payment of claims by the Servicer
on behalf of the Trust. Certain statutory provisions, including federal and
state bankruptcy and insolvency laws, may limit the ability of the Servicer to
repossess and resell collateral or obtain a deficiency judgment in the event of
a Lessee default. In the event of the bankruptcy or reorganization of a Lessee,
or ILC, as Servicer, or the Transferor, various provisions of the Bankruptcy
Code of 1978, 11 U.S.C. ss.ss. 101-1330 (the "Bankruptcy Code"), and related
laws may interfere with, delay or eliminate the ability of ILC or the Trust to
enforce its rights under the Leases.
In the case of operating leases, the Bankruptcy Code grants to the
bankruptcy trustee or the debtor-in-possession a right to elect to assume or
reject any executory contract or unexpired lease. Any rejection of such a lease
or contract constitutes a breach of such lease or contract, entitling the
nonbreaching party to a claim for damages for breach of contract. The net
proceeds from any resulting judgment would be deposited by the Servicer into the
Collection Account and allocated to the Noteholders as more fully described
herein. Upon the bankruptcy of a Lessee, if the bankruptcy trustee or
debtor-in-possession elected to reject a Lease, the flow of scheduled payments
to Noteholders would cease. If, as a result of the bankruptcy of a Lessee, the
Servicer is prevented from collecting scheduled payments with respect to Leases
and such Leases become Non-Performing Leases, no recourse would be available
against ILC (except for misrepresentation or breach of warranty or covenant) and
the Noteholders could suffer a loss with respect to the Notes. Similarly, upon
the bankruptcy of the Transferor, if the bankruptcy trustee or
debtor-in-possession elected to reject a Lease, the flow of Lease payments to
the Trust and the Noteholders would cease. As noted above, however, the
Transferor has been structured so that the filing of a bankruptcy petition with
respect to it is unlikely. See "The Transferor".
These UCC and bankruptcy provisions, in addition to the possible
decrease in value of a repossessed item of Equipment, may limit the amount
realized on the sale of Equipment to less than the amount due on the related
Lease.
No Rights in Software Subject to Certain Leases. Leases representing
approximately 2.04% of the Statistical Present Value of the Leases relate
exclusively to computer software that is not owned by ILC. As a result, no
interest in such software will be transferred to the Trust. Accordingly, if the
Lessee under such a Lease defaults, the Trust will not realize any proceeds from
the related software. Also, because software is generally eligible for
protection under the Federal copyright laws, a security interest in software
generally cannot be perfected without a filing at the
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<PAGE>
U.S. Copyright Office. Some legal authority indicates that this filing
requirement could also extend to a lease of software. Since no filings at the
U.S. Copyright Office will be made with respect to the Leases, this could mean
that the Trust may not have a perfected ownership interest in software-only
Leases. Also, certain case law authority indicates that in Ohio and certain
other states a sale of a "general intangible" (such as a software-only Lease)
cannot be perfected without notice to the obligor (i.e., the Lessee). For
reasons of administrative convenience, no such notices will be given with
respect to software-only Leases transferred to the Trust. As a result of the
foregoing, the interests of the Trust and the Noteholders in software-only
Leases may be junior to the rights of other creditors of ILC or the Transferor.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion, summarizing the material Federal income tax
consequences of the purchase, ownership and disposition of the Notes, is based
upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), proposed, temporary and final Treasury regulations thereunder, and
published rulings and court decisions in effect as of the date hereof, all of
which are subject to change, possibly retroactively. Mayer, Brown & Platt,
special federal tax counsel ("Federal Tax Counsel") for the Trust, has prepared
or reviewed the statements in the following discussion. This discussion does not
address every aspect of the Federal income tax laws that may be relevant to
Noteholders in light of their personal investment circumstances or their special
treatment under the Federal income tax laws (for example, banks and life
insurance companies). Prospective investors are advised to consult their own tax
advisers in determining the Federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes.
An opinion of Federal Tax Counsel regarding the Federal income tax
matters identified as opinions of Federal Tax Counsel below has been filed as an
exhibit to the registration statement relating to the Notes. Only those matters
identified as opinions of Federal Tax Counsel below are opinions of Federal Tax
Counsel. An opinion of Federal Tax Counsel, however, is not binding on the
Internal Revenue Service (the "IRS") or the courts. Moreover, there are no cases
or IRS rulings on similar transactions involving debt issued by a trust with
terms similar to those of the Notes. As a result, the IRS may disagree with all
or a part of the discussion below. No ruling on any of the issues discussed
below will be sought from the IRS.
Tax Characterization of the Trust
In the opinion of Federal Tax Counsel, the Trust will not be an
association (or publicly traded partnership) taxable as a corporation for
Federal income tax purposes. This opinion is based upon the assumption of
compliance by all parties with the terms of the Trust Agreement and related
documents.
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<PAGE>
If the Trust were taxable as a corporation for Federal income tax
purposes, the Trust would be subject to corporate income tax on its taxable
income. The Trust's taxable income would include all its income on the Leases,
possibly reduced by its interest expense on the Notes. Any such corporate income
tax could materially reduce cash available to make payments on the Notes.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. The Transferor will agree, and
the Noteholders will agree by the purchase of Notes, to treat the Notes as debt
for Federal, State and local income and franchise tax purposes. In the opinion
of Federal Tax Counsel, the Notes will be classified as debt for Federal income
tax purposes.
The discussion below assumes this characterization of the Notes is
correct. Moreover, the discussion assumes that the interest formula for the
Notes meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID Regulations") relating to any original issue discount
("OID"), and that any OID on the Notes (i.e., any excess of the principal amount
of the Notes over their issue price) is a de minimis amount (i.e., less than
1/4% of their principal amount multiplied by the number of full years included
in their term), all within the meaning of the OID Regulations.
Interest Income on the Notes. Based upon the above assumptions, except
as discussed below, the Notes will not be considered issued with OID. The stated
interest thereon will be taxable to a Noteholder as ordinary interest income
when received or accrued in accordance with such Noteholder's method of tax
accounting. Under the OID Regulations, a holder of a Note issued with a de
minimis amount of OID must include such OID in income, on a pro rata basis, as
principal payments are made on the Note. A purchaser who buys a Note for more or
less than its principal amount will generally be subject, respectively, to the
premium amortization or market discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one
year from the issue date of such Note (a "Short-Term Note") may be subject to
special rules. Under the OID Regulations, all stated interest will be treated as
OID. An accrual basis holder of a Short-Term Note (and certain cash basis
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally would be required to report interest income as OID
accrues on a straight-line basis over the term of each interest period. Other
cash basis holders of a Short-Term Note would, in general, be required to report
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include OID on the Short-Term
Note in income as it accrues, but would not be subject to the interest expense
deferral rule referred to in the preceding sentence.
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<PAGE>
Certain special rules apply if a Short-Term Note is purchased for more or less
than its principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, OID and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of premium (if any) previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Any such gain or loss will be capital gain or loss, except for gain
representing accrued interest and accrued market discount not previously
included in income. Capital losses 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. In the case of an individual
taxpayer, any capital gain on the sale of a Note will be taxed at a maximum rate
of 39.6% if the Note is held for not more than 12 months and at 20% if the Note
is held for more than 12 months.
Foreign Holders. Interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest," and
generally will not be subject to United States Federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Transferor (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Transferor is a "related person" within the meaning of the Code and
(ii) satisfies the statement requirement set forth in section 871(h) and section
881(c) of the Code and the regulations thereunder. To satisfy this requirement,
the foreign person, or a financial institution holding the Note on behalf of
such foreign person, must provide, in accordance with specified procedures, a
paying agent of the Trust with a statement to the effect that the foreign person
is not a United States person. Currently these requirements will be met if (x)
the foreign person provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an IRS Form W-8) or (y) a financial institution holding the Note on
behalf of the foreign person certifies, under penalties of perjury, that such
statement has been received by it and furnishes a paying agent with a copy
thereof. On October 14, 1997, final Treasury Regulations (the "1997 Final
Regulations") were issued regarding the withholding and information reporting
rules discussed above. In general, the 1997 Final Regulations do not
significantly alter the substantive withholding and information reporting
requirements but unify current certification procedures and forms and clarify
reliance standards. Special rules apply which permit the shifting of primary
responsibility for withholding to certain financial intermediaries acting on
behalf of beneficial owners. The 1997 Final Regulations are generally effective
for payments made after December 31, 1999, regardless of the issue date of the
instrument with respect to which such payments are made and subject to certain
transition rules. Foreign persons are advised to consult their own tax advisors
with respect to 1997 Final Regulations.
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<PAGE>
If such interest is not "portfolio interest," then it will be subject
to a 30% withholding tax unless the foreign person provides the Trust or its
paying agent, as the case may be, with a properly executed (i) IRS Form 1001 (or
successor form) claiming an exemption from withholding tax or a reduction in
withholding tax under the benefit of a tax treaty or (ii) IRS Form 4224 (or
successor form) stating that interest paid on the Note is not subject to
withholding tax because it is effectively connected with the foreign person's
conduct of a trade or business in the United States. Under the Final
Regulations, a foreign person will generally be required to provide IRS Form W-8
in lieu of IRS Form 1001 and IRS Form 4224, although alternative documentation
may be applicable in certain situations.
If a foreign person is engaged in a trade or business and interest on
the Note is effectively connected with the conduct of such trade or business in
the United States, the foreign person, although exempt from the withholding tax
discussed above, will be subject to United States federal income tax on such
interest on a net income basis in the same manner as if it were a United States
person. In addition, if such foreign person is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or lower treaty rate) of its
effectively connected earnings and profits for the taxable year, subject to
adjustments.
Any capital gain realized on the sale, redemption, retirement 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) such 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.
Backup Withholding. Each holder of a Note (other than an exempt holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate 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 nonexempt Noteholder fail
to provide the required certification, the Trust will be required to withhold
31% of the amount otherwise payable to the holder, and remit the withheld amount
to the IRS as a credit against the holder's Federal income tax liability. The
Final Regulations make certain modifications to the backup withholding and
information reporting rules. Prospective investors are advised to consult their
own tax advisors regarding the Final Regulations.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of Federal Tax Counsel, the IRS 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. In such a case, the Trust
would be treated as a publicly traded partnership taxable as a corporation for
Federal income tax purposes, and would be subject to corporate income tax on its
taxable income. Any such corporate income tax could materially reduce cash
available to make payments on the Notes.
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<PAGE>
OHIO STATE TAX CONSIDERATIONS
The following is a summary of the material Ohio tax consequences of the
purchase, ownership and disposition of the Notes. This discussion does not
address every aspect of the Ohio tax laws that may be relevant to Noteholders in
light of their personal investment circumstances or their special treatment
under the Ohio tax laws (for example, banks and life insurance companies).
The following summary is based upon existing provisions of the Ohio
Revised Code pertaining to Ohio taxation, the administrative rules promulgated
thereunder, and relevant judicial rulings and administrative decisions and
pronouncements, all of which are subject to change, which change may be
retroactive. There are no Ohio authorities addressing similar transactions or
involving a trust that issues interests with terms similar to those of the
Notes, and no ruling addressing the matters discussed herein will be sought from
Ohio tax officials. Accordingly, there can be no assurance that such officials
will agree with this summary.
In the opinion of Keating, Muething and Klekamp, P.L.L., Special Ohio
Tax Counsel ("Ohio Tax Counsel"), unless the Noteholders are Ohio residents or
are otherwise subject to the Ohio personal income tax, the Ohio corporate
franchise tax or the Ohio tax on dealers in intangibles, the Noteholders will
not be subject to the foregoing taxes solely as a result of purchasing and
owning the Notes.
For purposes of determining Ohio taxable income, Ohio has adopted the
federal Code and the regulations thereunder. Therefore, the Ohio tax
consequences to the Noteholders who are Ohio residents or otherwise subject to
the Ohio personal income tax, corporate franchise tax or tax on dealers in
intangibles will be the same as the tax consequences to the Noteholders for
federal income tax purposes. Accordingly, the stated interest on the Notes will
be taxable as ordinary interest income and the gain or loss on the sale or
disposition of the Notes will be capital gain or loss. See "U.S.
Federal Income Tax Consequences."
Effective generally for tax years beginning on or after January 1,
1998, an Ohio tax may be levied on a "qualifying investor's" distributive share
of the Ohio apportioned income of a "qualifying pass-through entity." Ohio Tax
Counsel believes the Trust may be considered a qualifying pass-through entity
for purposes of this tax. However, because Federal Tax Counsel will opine that
the Notes constitute debt instruments for federal income tax purposes, payments
on the Notes represent interest payments on debt rather than a distributive
share of the income of the Trust. Therefore, the Noteholders should not be
subject to this tax since they are not receiving a distributive share of the
Trust's income.
LEGAL INVESTMENT
The Class A-1 Notes will be an "eligible security" within the meaning
of Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended.
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<PAGE>
ERISA CONSIDERATIONS
Subject to the following discussion the Notes may be acquired by
pension, profit-sharing or other employee benefit plans, as well as individual
retirement accounts and Keogh plans (each a "Benefit Plan"). Section 406 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the Code prohibit a Benefit Plan from engaging in certain
transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons or the
fiduciaries of the Benefit Plan. In addition, Title I of ERISA also requires
fiduciaries of a Benefit Plan subject to ERISA to make investments that are
prudent, diversified and in accordance with the governing plan documents.
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes if assets of the Trust were deemed to be assets of the
Benefit Plan. Under a regulation issued by the United States Department of Labor
(the "Regulation"), the assets of the Trust would be treated as plan assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquired an "equity interest" in the Trust and none of the exceptions to plan
assets contained in the Regulation was applicable. An equity interest is defined
under the Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. Although there is little guidance on the subject, assuming the Notes
are treated as debt for local law purposes, the Transferor believes that, at the
time of their issuance, the Notes should not be treated as an equity interest in
the Trust for purposes of the Regulation. This determination is based in part
upon the traditional debt features of the Notes, including the reasonable
expectation of purchasers of Notes that the Notes will be repaid when due, as
well as the absence of conversion rights, warrants and other typical equity
features. The debt treatment of the Notes for ERISA purposes could change if the
Trust incurred losses. This risk of recharacterization is enhanced for Notes
that are subordinated to other securities.
However, without regard to whether the Notes are treated as an equity
interest for purposes of the Regulation, the acquisition or holding of Notes by
or on behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Trust, the Transferor, the Indenture Trustee or the Trustee
is or becomes a party in interest or a disqualified person with respect to such
Benefit Plan. Certain exemptions from the prohibited transaction rules could be
applicable to the purchase and holding of Notes by a Benefit Plan depending on
the type and circumstances of the plan fiduciary making the decision to acquire
such Notes. Included among these exemptions are: Prohibited Transaction Class
Exemption ("PTCE") 96-23, regarding transactions effected by "in-house asset
managers"; PTCE 95-60, regarding investments by insurance company general
accounts; PTCE 91-38, regarding investments by bank collective investment funds;
PTCE 90-1, regarding investments by insurance company pooled separate accounts;
and PTCE 84-14, regarding transactions effected by "qualified professional asset
managers." By acquiring a Note, each purchaser will be deemed to
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<PAGE>
represent that either (i) it is not acquiring the Notes with the assets of a
Benefit Plan; or (ii) the acquisition and holding of the Notes will not give
rise to a nonexempt prohibited transaction under Section 406(a) of ERISA or
Section 4975 of the Code.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements, however governmental plans may be
subject to comparable state law restrictions.
A plan fiduciary considering the purchase of Notes should consult its
legal advisors regarding whether the assets of the Trust would be considered
plan assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
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UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement (the "Underwriting Agreement") for the sale of the Notes,
the Trust has agreed to sell and Lehman Brothers Inc. and Prudential Securities
Incorporated (the "Underwriters") have agreed to purchase the principal amount
of the Notes set forth opposite their names:
<TABLE>
<CAPTION>
Underwriters of the Class A Notes Principal Amount of Principal Amount of Principal Amount of Principal Amount of
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes
<S> <C> <C> <C> <C>
Lehman Brothers Inc.
Prudential Securities Incorporated
Underwriter of the Class B Notes Principal Amount of Class B Notes
Lehman Brothers Inc.
</TABLE>
The Trust has been advised by Lehman Brothers Inc., as representative
of the Underwriters, that the Underwriters propose initially to offer the Notes
to the public at the respective public offering prices set forth on the cover
page of this Prospectus, and to certain dealers at such price, less a concession
not in excess of % per Class A-1 Note, % per Class A-2 Note, % per Class A-3
Note, % per Class A-4 Note and % per Class B Note. The Underwriters may allow
and such dealers may reallow to other dealers a discount not in excess of % per
Class A-1 Note, % per Class A-2 Note, % per Class A-3 Note, % per Class A-4 Note
and % per Class B Note. After the initial public offering, the public offering
price may be changed.
The Transferor and ILC have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
The Trust has been advised by the Underwriters that the Underwriters
presently intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market making may be discontinued at any time at the
sole discretion of either Underwriter. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Notes.
In connection with the offering of the Notes, the Underwriters and
selling group members and their respective affiliates may engage in transactions
that stabilize, maintain or otherwise affect the market price of the Notes. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M, pursuant to which such person may bid for or purchase
the Notes for the purpose of stabilizing its market price. In addition, Lehman
Brothers Inc., on behalf of the Underwriters, may impose "penalty bids" under
contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in the offering) for the account of the
other Underwriters, the selling concession with respect to the Notes that it
distributed in the offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Notes at a level
above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are taken,
may be discontinued at any time without notice.
RATING OF THE NOTES
It is a condition to the issuance of any of the Notes that the Class
A-1 Notes be rated at least "P-1" and "F1+/AAA", that the Class A-2 Notes be
rated at least "Aaa" and "AAA", that the Class A-3 Notes be rated at least "Aaa"
and "AAA",
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that the Class A-4 Notes be rated at least "Aaa" and "AAA" and that the Class B
Notes be rated at least "Aa3" and "A" by Moody's and Fitch IBCA, respectively.
The ratings assess the likelihood of timely payment of interest and the ultimate
payment of principal to the Noteholders by the Stated Maturity date. There is no
assurance that any rating will not be lowered or withdrawn if, in the judgement
of any Rating Agency, circumstances in the future so warrant.
Such rating will reflect only the views of each Rating Agency and will
be based primarily on the amount of subordination, the availability of funds on
deposit in the Reserve Account and the value of the Leases and Equipment. The
ratings are not a recommendation to purchase, hold or sell the related Notes,
inasmuch as such ratings do not comment as to market price or suitability for a
particular investor. 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 a
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 by the Stated
Maturity date. The rating does not address the rate of Lease Prepayments that
may be experienced on the Leases and, therefore, does not address the effect of
the rate of Lease Prepayments on the return of principal to the Noteholders.
LEGAL OPINIONS
Certain legal matters relating to the Notes and certain federal income
tax and other matters will be passed upon for the Trust by Mayer, Brown & Platt,
Chicago, Illinois and certain Ohio tax matters will be passed upon by Keating,
Muething and Klekamp, P.L.L., Cincinnati, Ohio. Each of Keating, Muething and
Klekamp, P.L.L. and Mayer, Brown & Platt may from time to time render legal
services to the Transferor, the Servicer and their affiliates. Certain legal
matters will be passed upon for the Underwriters by Mayer, Brown & Platt,
Chicago, Illinois.
69
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Term(s) Page(s)
<S> <C>
Additional Principal......................................................................................8, 46, 58
Annualized Monthly Default Percentage............................................................................40
Available Funds ...........................................................................................13, 43
Available Funds Shortfall........................................................................................40
Available Reserve Amount.....................................................................................16, 40
Bankruptcy Code ...............................................................................................55
Booked Residual Value............................................................................................15
Casualty ...............................................................................................43
Casualty Payment ...............................................................................................43
Cede ................................................................................................4
Certificate Distribution Account.................................................................................39
Certificate Floor ............................................................................................8, 46
Certificate Percentage............................................................................................8
Certificate Principal Payment.................................................................................8, 46
Certificate Rate ...............................................................................................35
Certificate Target Investor Principal Amount..................................................................8, 46
Certificates .............................................................................................3, 9
Class A Initial Amount............................................................................................6
Class A Noteholders...............................................................................................4
Class A Notes ................................................................................................3
Class A Percentage................................................................................................8
Class A Principal Payment.....................................................................................8, 46
Class A Target Investor Principal Amount......................................................................8, 46
Class A-1 Initial Principal Amount................................................................................5
Class A-1 Interest Rate...........................................................................................7
Class A-1 Notes .............................................................................................3, 5
Class A-2 Initial Principal Amount................................................................................5
Class A-2 Interest Rate...........................................................................................7
Class A-2 Notes .............................................................................................3, 5
Class A-3 Initial Principal Amount................................................................................5
Class A-3 Interest Rate...........................................................................................7
Class A-3 Notes .............................................................................................3, 5
Class A-4 Interest Rate...........................................................................................7
Class A-4 Notes .............................................................................................3, 6
Class B Floor ............................................................................................9, 46
Class B Initial Principal Amount..................................................................................6
Class B Interest Rate.............................................................................................7
Class B Noteholders...............................................................................................4
Class B Notes .............................................................................................3, 6
Class B Percentage................................................................................................9
Class B Principal Payment.....................................................................................9, 46
Class B Target Investor Principal Amount......................................................................9, 46
Code ...............................................................................................56
Collection Account...............................................................................................39
Commission ................................................................................................4
Contribution Agreement.........................................................................................3, 5
CPR ...............................................................................................50
Cumulative Loss Amount........................................................................................9, 46
</TABLE>
70
<PAGE>
<TABLE>
<S> <C>
Cumulative Net Loss Ratio........................................................................................40
Cut-Off Date ................................................................................................6
Definitive Notes ...............................................................................................36
Delinquent Lease ...............................................................................................40
Determination Date...............................................................................................10
Discount Rate ............................................................................................6, 47
Discounted Present Value of the Leases........................................................................6, 47
Discounted Present Value of the Performing Leases.............................................................6, 47
DTC ................................................................................................4
Due Period ...............................................................................................10
Early Lease Termination..........................................................................................11
Eligible Account ...............................................................................................42
Eligible Institution.............................................................................................42
Eligible Investments.............................................................................................41
Equipment ...........................................................................................10, 21
ERISA ...............................................................................................16
Events of Default ...............................................................................................32
Exchange Act ................................................................................................4
Federal Tax Counsel..............................................................................................56
Filing Locations ...........................................................................................18, 55
Fitch IBCA ...............................................................................................17
Holders ............................................................................................4, 10
ILC ................................................................................................3
Indenture ............................................................................................5, 31
Indenture Trustee .........................................................................................3, 5, 31
Indirect Participants............................................................................................35
Information Leasing...............................................................................................5
Initial Principal Amount..........................................................................................6
Interest Accrual Period...........................................................................................7
Interest Rate ................................................................................................7
Investment Earnings..............................................................................................42
IRS ...............................................................................................56
Lease Contracts ...........................................................................................10, 21
Lease Payment ...............................................................................................44
Lease Pool ...........................................................................................10, 21
Lease Prepayment ...............................................................................................18
Lease Receivables ...........................................................................................10, 21
Leases ...........................................................................................10, 21
Lessee ...............................................................................................11
Lessees ...............................................................................................11
Management Agreement.............................................................................................49
Management Fee ...............................................................................................49
Manager ...............................................................................................49
Monthly Delinquency Percentage...................................................................................41
Monthly Servicer Realization Percentage..........................................................................41
Moody's ...............................................................................................17
Nominal Buy-Out Leases...........................................................................................18
Non-Performing Leases.........................................................................................6, 47
Note Distribution Account........................................................................................39
Note Owners ................................................................................................4
Noteholders ................................................................................................4
Notes .............................................................................................3, 6
</TABLE>
71
<PAGE>
<TABLE>
<S> <C>
OID ...............................................................................................57
OID Regulations ...............................................................................................57
Outstanding Principal Amount......................................................................................7
Overcollateralization Amount......................................................................................9
Participants ...............................................................................................35
Payaheads ...............................................................................................39
Payment Date ........................................................................................4, 10, 31
Predecessor Lease ...........................................................................................11, 38
Priority of Payments.............................................................................................14
Provident ...............................................................................................22
Provident Financial..............................................................................................23
Record Date ...............................................................................................10
Registration Statement............................................................................................4
Related Documents ...............................................................................................34
Required Payments ...............................................................................................40
Required Reserve Amount......................................................................................16, 40
Reserve Account ...........................................................................................16, 40
Residual Account ...............................................................................................40
Residual Amount Cap..............................................................................................15
Residual Event ...........................................................................................15, 40
Residual Realizations............................................................................................15
Sales and Servicing Agreement..................................................................................3, 5
Securities .............................................................................................3, 9
Securities Act ................................................................................................4
Security Deposit Earnings........................................................................................42
Securityholders ...............................................................................................15
Seller .............................................................................................3, 5
Servicer ................................................................................................5
Servicer Advance ...........................................................................................12, 44
Servicer Booked Residual Value...................................................................................41
Servicer Events of Default.......................................................................................48
Servicer Residual Realizations...................................................................................41
Servicing Fee ...........................................................................................13, 43
Short-Term Note ...............................................................................................57
Subject Payment Date..............................................................................................9
Substitute Lease .......................................................................................11, 38, 49
Termination Payment..............................................................................................44
Third Party Amounts..............................................................................................44
Three-Month Default Percentage...................................................................................41
Three-Month Delinquency Percentage...............................................................................41
Three-Month Servicer Realization Percentage......................................................................41
Transfer and Servicing Agreements................................................................................37
Trust .............................................................................................3, 5
Trust Acceleration Event.........................................................................................45
Trust Accounts ...............................................................................................41
Trust Agreement ............................................................................................5, 35
Trust Collections ...............................................................................................39
Trust Property ...........................................................................................10, 21
Trustee .........................................................................................3, 5, 35
UCC .......................................................................................18, 39, 55
Underwriters ...............................................................................................61
Underwriting Agreement...........................................................................................61
</TABLE>
72
<PAGE>
================================================================================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create an implication that there has been no change in the affairs
of the Transferor or the Trust or any affiliate thereof or the Leases since the
date hereof. This Prospectus does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so to
anyone to whom it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information...........................................................(ii)
Reports to Noteholders..........................................................(ii)
Prospectus Summary.................................................................1
Risk Factors......................................................................12
Use of Proceeds...................................................................14
The Trust.........................................................................14
The Transferor....................................................................15
The Servicer......................................................................15
The Lease Pool....................................................................17
ILC's Underwriting and
Servicing Practices.............................................................22
Description of the Notes..........................................................23
Description of the Certificates...................................................26
Certain Information Regarding the Notes...........................................27
Description of the Transfer and Servicing
Agreements.......................................................................28
Prepayment and Yield Considerations ..............................................38
Certain Legal Matters Affecting a Lessee's Rights
and Obligations.................................................................42
U.S. Federal Tax
Considerations..................................................................43
Ohio State Tax Considerations.....................................................45
Legal Investment..................................................................46
ERISA Considerations..............................................................46
Underwriting......................................................................47
Rating of the Notes...............................................................47
Legal Opinions....................................................................48
Index of Terms....................................................................49
</TABLE>
Until December , 1998 (90 days after the date of this Prospectus), all dealers
effecting transactions in the Notes, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
================================================================================
approximately $209,218,000
approximately $73,048,000 % Class A-1
Lease-Backed Notes
approximately $19,204,000 % Class A-2
Lease-Backed Notes
approximately $90,724,000 % Class A-3
Lease-Backed Notes
approximately $18,574,000 % Class A-4
Lease-Backed Notes
approximately $7,668,000 % Class B
Lease-Backed Notes
PROSPECTUS
LEHMAN BROTHERS
PRUDENTIAL SECURITIES
INCORPORATED
(with respect to Class A Notes only)
Dated September , 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Expenses in connection with the offering of the Notes being registered
herein are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee $ 62,245
Legal fees and expenses 150,000
Accounting fees and expenses 30,000
Blue sky fees and expenses 10,000
Rating agency fees 170,000
Trustee fees and expenses 10,000
Printing 40,000
Miscellaneous 25,000
-------------
Total $497,245
</TABLE>
Item 14. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware provides as follows:
145. Indemnification of officers, directors, employees and
agents; insurance
(a) A corporation may indemnify any person who was or
is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation,
73
<PAGE>
and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or
is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a present or former director
or officer of a corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding
referred to in subsections (a) and (b) of this section, or in
defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under subsections (a) and (b)
of this section (unless ordered by a court) shall be made by
the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former
director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section.
Such determination shall be made, with respect to a person who
is a director officer at the time of such determination, (1)
by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a
quorum, or(2) by a committee of such directors designated by
majority vote of such directors, even though less than a
quorum, (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written
opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by
an officer or director in defending a civil, criminal,
administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or
74
<PAGE>
officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors or
officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems
appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of
this section shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him
against such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is
or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request
of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or
surviving corporation as he would have with respect to such
constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to
"other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed
on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or
agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee or agent with
respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the
best interests of the corporation" as referred to in this
section.
75
<PAGE>
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall,
unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with
exclusive jurisdiction to hear and determine all actions for
advancement of expenses or indemnification brought under this
section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery
may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
Article XI of the Bylaws of Provident Lease Receivables Corporation (referred to
as the "Corporation" therein) provides as follows:
Section 1. Coverage. Each person who was or is made a party or
is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative ("proceeding"), by reason of the fact that he or she is
or was a director, officer or agent of the Corporation (which term
shall include any predecessor corporation of the Corporation) or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plan ("indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expenses, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes
or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith and such
indemnification shall continue as to an indemnitee who has ceased to be
a director, officer, employee or agent and shall inure to the benefit
of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in Section 2 of this Article XI with
respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors.
The right to indemnification conferred in this Article XI shall be a
contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the
Delaware General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director
or officer (and not in any other capacity in which service was or is
76
<PAGE>
rendered by such indemnitee, including, without limitation, service to
an employee benefit plan) shall be made in advance of the final
disposition of a proceeding only upon delivery to the Corporation of an
undertaking, by or on behalf of such indemnitee, to repay all amounts
so advanced if it ultimately be determined by final judicial decision
from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses under this Article XI
or otherwise. Expenses incurred by agents in defending in any action,
suit or proceeding, whether civil, criminal, administrative or
investigative may be paid by the Corporation upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
Section 2. Claims. If a claim under Section 1 of this Article
XI is not paid in full by the Corporation within sixty (60) days after
a written claim has been received by the Corporation, except in the
case of a claim for expenses incurred in defending a proceeding in
advance of its final disposition, in which case the applicable period
shall be thirty (30) days, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the
claim. If successful in whole or in part in any such suit or in a suit
brought by the Corporation to recover payments by the Corporation or
expenses incurred by an indemnitee in defending in his or her capacity
as a director or officer, a proceeding in advance of its final
disposition, the indemnitee shall be entitled to be paid also for the
expense of prosecuting or defending such claim. In any action brought
by the indemnitee to enforce a right to indemnification hereunder
(other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where
the required undertaking, if any, has been tendered to the Corporation)
or by the Corporation to recover payments by the Corporation of
expenses incurred by an indemnitee in defending, in his or her capacity
as a director or officer, a proceeding in advance of its final
disposition, the burden of proving that the indemnitee is not entitled
to be indemnified under this Article XI or otherwise shall be on the
Corporation. Neither the failure of the Corporation (including the
Board of Directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including the Board of Directors,
independent legal counsel or its stockholders) that the indemnitee has
not met such applicable standard of conduct, shall be a presumption
that the indemnitee has not met the applicable standard of conduct, or
in the case of such an action brought by the indemnitee, be a defense
to the action.
Section 3. Rights Not Exclusive. The rights conferred on any
person by Sections 1 and 2 of this Article XI shall not be exclusive of
any other right which such person may have or hereafter acquire under
any statute, the Certificate of Incorporation of the Corporation, these
By-laws, any agreement, a vote of stockholders or disinterested
directors or otherwise.
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<PAGE>
Section 4. Employees. Persons who are not included as
indemnities under Section 1 of this Article XI but are employees of the
Corporation or any subsidiary may be indemnified to the extent
authorized at any time or from time to time by the Board of Directors.
Article XII of the Certificate of Incorporation of Provident Lease Receivables
Corporation (referred to as the "Corporation" therein provides as follows:
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as it now exists or may hereafter be amended, no director of
the Company shall be personally liable to the Company or its stockholders for
monetary damages arising from a breach of fiduciary duty owed to the Company or
its stockholders, except for liability (i) for any breach of the director's duty
of loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) pursuant to section 174 of the General Corporation Law of Delaware;
or (iv) for any transaction from which the director derived an improper personal
benefit.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Company shall not adversely affect any right or protection
of a director of the Company existing at the time of such repeal or
modification.
Item 15. Recent Sales of Unregistered Securities.
Not applicable.
Item 16. Exhibits and Financial Statement Schedules.
a. A list of exhibits filed herewith is contained in the Exhibit Index, which is
incorporated herein by reference.
b. Financial Statement Schedules:
Not applicable.
Item 17. Undertakings.
The undersigned registrants hereby undertake as follows:
(a) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
78
<PAGE>
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by a 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) For purposes of determining any liability under the Act, 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 Act will be deemed to be part of this registration statement as of the
time it was declared effective.
(c) For purposes of determining any liability under the Act, 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.
79
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 2 to Registration Statement on
Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati and State of Ohio, on the 21st day of
September, 1998.
PROVIDENT LEASE RECEIVABLES
CORPORATION,
By: /s/ John R. Farrenkopf
----------------------
Name: John R. Farrenkopf
----------------------
Title: Treasurer
--------------------------------------
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to Registration Statement on Form S-1 has been signed below
by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* Robert L. Hoverson Director and Principal September 21, 1998
- ------------------------ Executive Officer
Robert L. Hoverson
* John R. Farrenkopf Director September 21, 1998
- ------------------------
John R. Farrenkopf
/s/ Mark E. Magee Director September 21, 1998
- ------------------------
Mark E. Magee
*By: /s/ Mark E. Magee Attorney-in-fact September 21, 1998
- ------------------------
Mark E. Magee
</TABLE>
80
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
<S> <C> <C>
1.1 -- Form of Underwriting Agreement(1)
3.1 -- Certificate of Incorporation of Provident Lease Receivables
Corporation(1)
3.2 -- Bylaws of Provident Lease Receivables Corporation(1)
4.1 -- Form of Indenture between Provident Equipment Lease Trust 1998-A and the
Indenture Trustee
4.2 -- Form of Class A-1 Lease-Backed Note (included in Exhibit 4.1)
4.3 -- Form of Class A-2 Lease-Backed Note (included in Exhibit 4.1)
4.4 -- Form of Class B Lease-Backed Note (included in Exhibit 4.1)
4.5 -- Form of Class A-3 Lease-Backed Note (included in Exhibit 4.1)
4.6 -- Form of Class A-4 Lease-Backed Note (included in Exhibit 4.1)
5.1 -- Opinion of Mayer, Brown & Platt with respect to the validity
of the securities being offered(1)
8.1 -- Opinion of Mayer, Brown & Platt with respect to federal
income tax matters
8.2 -- Opinion of Ohio tax counsel with respect to certain Ohio tax
matters
10.1 -- Form of Trust Agreement between Provident Lease Receivables
Corporation and the Trustee(1)
10.2 -- Form of Pooling and Servicing Agreement between Provident
Equipment Lease Trust 1998-A, Provident Lease Receivables
Corporation and Information Leasing Corporation(1)
10.3 -- Form of Contribution Agreement between Information Leasing
Corporation and Provident Lease Receivables Corporation
10.4 -- Form of Management Agreement among Provident Equipment Lease Trust
1998-A, The Indenture Trustee and the Trustee(1)
</TABLE>
81
<PAGE>
<TABLE>
<S> <C> <C>
23.1 -- Consent of Mayer, Brown & Platt (included in Exhibit 5.1)
23.2 -- Consent of Ohio tax counsel (included in Exhibit 8.2)
24 -- Powers of attorney (contained on the signature page to Amendment No. 1 to
this Registration Statement)
25 -- Form T-1 Statement of eligibility and qualification of Indenture Trustee(1)
</TABLE>
- ---------------
(1) Previously filed with Amendment No. 1 to this Registration Statement.
<PAGE>
EXHIBIT 4.1
================================================================================
FORM OF
PROVIDENT EQUIPMENT LEASE TRUST 1998-A,
Issuer
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Indenture Trustee
INDENTURE
Dated as of September 1, 1998
$[ ] of [ ]% Class A-1 Lease-Backed Notes
$[ ] of [ ]% Class A-2 Lease-Backed Notes
$[ ] of [ ]% Class A-3 Lease-Backed Notes
$[ ] of [ ]% Class A-4 Lease-Backed Notes
$[ ] of [ ]% Class B Lease-Backed Notes
================================================================================
<PAGE>
PROVIDENT EQUIPMENT LEASE TRUST 1998-A
Reconciliation and Tie between the Indenture dated as of September 1,
1998 and the Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
310(a)(1) Section 7.8
(a)(2) 7.8
(a)(3) 7.8
(a)(4) Not Applicable
(b) 7.8; 7.9; 6.7; 1.5; 1.6
(c) Not Applicable
311(a) 7.14
(b) 7.14
312(a) 2.11
(b) 11.2
(c) 11.2
313(a) 7.15
(b)(1) 7.15
(b)(2) 7.15
(c) 7.15; 1.6
(d) 7.15
314(a) 8.12; 8.9; 1.6
(b) Not Applicable
(c)(1) 11.3
(c)(2) 11.3
(c)(3) 11.1
(d) 11.1
(e) 11.4
(f) Not Applicable
315(a) 7.1(a)
(b) 7.2; 1.6
(c) 7.1(b)
(d) 7.1(c)
(e) 6.14
316(a)(last sentence) 2.12
(a)(1)(A) 6.12
(a)(1)(B) 6.13
(a)(2) Not Applicable
317(a)(1) 6.3(c)
(a)(2) 6.4
(b) 8.3(b)
318(a) 11.1
(c) 11.1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
<S> <C> <C>
SECTION 1.1. Definitions; Interpretive Provisions...................................3
SECTION 1.2. Compliance Certificates and Opinions...................................3
SECTION 1.3. Form of Documents Delivered to Indenture Trustee.......................3
SECTION 1.4. Acts of Noteholders, etc...............................................5
SECTION 1.5. Notices, etc., to Indenture Trustee, Servicer, Issuer and
Rating Agencies........................................................6
SECTION 1.6. Notice to Noteholders; Waiver..........................................6
SECTION 1.7. Effect of Headings and Table of Contents...............................7
SECTION 1.8. Successors and Assigns.................................................7
SECTION 1.9. GOVERNING LAW..........................................................7
SECTION 1.10. Legal Holidays.........................................................8
SECTION 1.11. Execution in Counterparts..............................................8
SECTION 1.12. Survival of Representations and Warranties.............................8
ARTICLE 2.
THE NOTES
SECTION 2.1. General Provisions.....................................................8
SECTION 2.2. Execution, Authentication, Delivery, and Dating.......................10
SECTION 2.3. Transfer and Exchange.................................................10
SECTION 2.4. Mutilated, Destroyed, Lost and Stolen Notes...........................11
SECTION 2.5. Book-Entry Registration of Class A Notes and Class B
Notes.................................................................12
SECTION 2.6. Notice to Clearing Agency.............................................13
SECTION 2.7. Definitive Class A Notes and Definitive Class B Notes.................14
SECTION 2.8. Payment of Interest and Principal; Rights Preserved...................15
SECTION 2.9. Persons Deemed Owners.................................................15
SECTION 2.10. Cancellation..........................................................15
SECTION 2.11. Noteholder Lists......................................................16
SECTION 2.12. Treasury Securities...................................................16
</TABLE>
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1
<PAGE>
ARTICLE 3.
ACCOUNTS; INVESTMENT OF MONEYS;
COLLECTION AND APPLICATION OF MONEYS; REPORTS
<TABLE>
<S> <C> <C>
SECTION 3.1. Trust Accounts; Investments by Indenture Trustee......................17
SECTION 3.2. Collection of Moneys..................................................18
SECTION 3.3. Collection Account; Payments..........................................18
SECTION 3.4. Reports by Indenture Trustee; Notices of Certain Payments.............19
SECTION 3.5. Indenture Trustee May Rely on Certain Information from
Servicer..............................................................20
ARTICLE 4.
RELEASE OF LEASES AND EQUIPMENT
SECTION 4.1. Release of Equipment..................................................20
SECTION 4.2. Release of Leases Upon Final Lease Payment............................21
SECTION 4.3. Execution of Documents................................................21
ARTICLE 5.
SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER
SECTION 5.1. Servicer Events of Default............................................21
SECTION 5.2. Substitute Servicer...................................................22
ARTICLE 6.
EVENTS OF DEFAULT; REMEDIES
SECTION 6.1. Events of Default.....................................................22
SECTION 6.2. Acceleration of Maturity; Rescission and Annulment....................23
SECTION 6.3. Remedies..............................................................24
SECTION 6.4. Indenture Trustee Shall File Proofs of Claim..........................25
SECTION 6.5. Indenture Trustee May Enforce Claims Without Possession
of Notes..............................................................26
SECTION 6.6. Application of Money Collected........................................26
SECTION 6.7. Limitation on Suits...................................................28
SECTION 6.8. Unconditional Right of Noteholders to Receive Principal and
Interest..............................................................28
SECTION 6.9. Restoration of Rights and Remedies....................................29
SECTION 6.10. Rights and Remedies Cumulative........................................29
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.11. Delay or Omission Not Waiver..........................................29
SECTION 6.12. Control by Noteholders................................................29
SECTION 6.13. Waiver of Events of Default...........................................30
SECTION 6.14. Undertaking for Costs.................................................30
SECTION 6.15. Waiver of Stay or Extension Laws......................................31
SECTION 6.16. Sale of Trust Estate..................................................31
ARTICLE 7.
THE TRUSTEE
SECTION 7.1. Certain Duties and Responsibilities...................................33
SECTION 7.2. Notice of Defaults or Events of Default...............................34
SECTION 7.3. Certain Rights of Indenture Trustee...................................34
SECTION 7.4. Not Responsible for Recitals or Issuance of Notes.....................35
SECTION 7.5. May Hold Notes........................................................35
SECTION 7.6. Money Held in Trust...................................................36
SECTION 7.7. Compensation, Reimbursement, etc......................................36
SECTION 7.8. Corporate Indenture Trustee Required; Eligibility.....................36
SECTION 7.9. Resignation and Removal; Appointment of Successor.....................38
SECTION 7.10. Acceptance of Appointment by Successor................................39
SECTION 7.11. Merger, Conversion, Consolidation or Succession to
Business..............................................................39
SECTION 7.12. Co-trustees and Separate Indenture Trustees...........................40
SECTION 7.13. Acceptance by Indenture Trustee.......................................41
SECTION 7.14. Preferential Collection of Claims Against Issuer......................41
SECTION 7.15. Reports by Indenture Trustee to Noteholders...........................42
SECTION 7.16. No Proceedings........................................................42
ARTICLE 8.
COVENANTS
SECTION 8.1. Payment of Principal and Interest.....................................42
SECTION 8.2. Maintenance of Office or Agency; Chief Executive
Office................................................................42
SECTION 8.3. Money for Payments to Noteholders to be Held in Trust.................43
SECTION 8.4. Corporate Existence; Merger; Consolidation, etc.......................44
SECTION 8.5. Protection of Trust Estate; Further Assurances........................46
SECTION 8.6. [Reserved]............................................................47
SECTION 8.7. Performance of Obligations; Pooling and Servicing
Agreement.............................................................47
SECTION 8.8. Negative Covenants....................................................47
SECTION 8.9. Notice of Events of Default...........................................49
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 8.10. Taxes.................................................................49
SECTION 8.11. Indemnification.......................................................49
SECTION 8.12. Commission Reports; Reports to Indenture Trustee; Reports
to Noteholders........................................................49
ARTICLE 9.
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of
Noteholders...........................................................50
SECTION 9.2. Supplemental Indentures with Consent of Noteholders...................51
SECTION 9.3. Execution of Supplemental Indentures..................................52
SECTION 9.4. Effect of Supplemental Indentures.....................................52
SECTION 9.5. Reference in Notes to Supplemental Indentures.........................52
SECTION 9.6. Compliance with Trust Indenture Act...................................53
ARTICLE 10.
SATISFACTION AND DISCHARGE
SECTION 10.1. Satisfaction and Discharge of Indenture...............................53
SECTION 10.2. Application of Trust Money............................................54
ARTICLE 11.
MISCELLANEOUS
SECTION 11.1. Trust Indenture Act Controls..........................................54
SECTION 11.2. Communication by Noteholders with Other Noteholders...................55
SECTION 11.3. Officers' Certificate and Opinion of Counsel as to Conditions
Precedent.............................................................55
SECTION 11.4. Statements Required in Certificate or Opinion.........................55
SECTION 11.5. Nonpetition...........................................................56
SCHEDULES
SCHEDULE 1 Leases
EXHIBITS
EXHIBIT A Forms of Notes and Form of Indenture Trustee's
Certificate of Authentication
</TABLE>
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<PAGE>
APPENDIX
APPENDIX X Definitions
-v-
<PAGE>
INDENTURE
This INDENTURE dated as of September 1, 1998, is between PROVIDENT
EQUIPMENT LEASE TRUST 1998-A, a Delaware business trust (herein called the
"Issuer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association, as indenture trustee (the "Indenture Trustee").
RECITALS OF THE COMPANY
Issuer has duly authorized the issuance of $________ in aggregate
principal amount of its Lease-Backed Notes, Series 1998-A, consisting of
$___________ aggregate principal amount of ___% Class A-1 Lease-Backed Notes
(the "Class A-1 Notes"), $_______ aggregate principal amount of _____% Class A-2
Lease-Backed Notes (the "Class A-2 Notes"), $_______ aggregate principal amount
of ___% Class A-3 Lease-Backed Notes (the "Class A-3 Notes"), $_______ aggregate
principal amount of ____% Class A-4 Lease-Backed Notes (the "Class A-4 Notes",
together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes,
the "Class A Notes") and $________ aggregate principal amount of ____% Class B
Lease-Backed Notes (the "Class B Notes", the Class A Notes and the Class B Notes
are referred to collectively as the "Notes"), of substantially the tenor
hereinafter set forth, and to provide therefor Issuer has duly authorized the
execution and delivery of this Indenture. The Class A Notes and the Class B
Notes shall be entitled to payments of interest and principal as set forth
herein.
All things necessary to make the Notes, when executed by Issuer and
authenticated and delivered hereunder, the valid obligations of Issuer, and to
make this Indenture a valid agreement of Issuer, in accordance with its terms,
have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the holders thereof, it is mutually covenanted and agreed, for the benefit of
all Noteholders, as follows:
GRANTING CLAUSE
Issuer hereby Grants to Indenture Trustee on the Issuance Date, for the
benefit and security of the Noteholders, all of Issuer's right, title and
interest in and to:
(a) all Leases, including all instruments, documents, books and other
records relating thereto,
<PAGE>
(b) all Lease Payments, Casualty Payments, Termination Payments and
other amounts not collected with respect thereto on or prior to the Cut-Off Date
(other than any prepayments of rent required pursuant to the terms of any Lease
at or before the commencement of the Lease), all Payaheads relating to payments
on the Leases due or becoming due after the Cut-Off Date and all Substitute
Leases and all Lease Payments, Casualty Payments, Termination Payments and other
amounts not collected with respect thereto prior to the effective date of their
respective substitution (other than any prepayments of rent required by the
terms of any Lease at or before the commencement of the Lease) and all Payaheads
relating to payments on the Substitute Leases due or becoming due after the
effective date of their respective substitution,
(c) all rights of Issuer to or under any guarantees of or collateral
(including all rights of Issuer in any security deposits) for the Lessee's
obligations under any Lease and all UCC financing statements relating to such
collateral,
(d) all interests of Issuer in the Equipment at any time subject to any
Lease, including any security interest of Issuer in the Equipment,
(e) any proceeds with respect to the Leases from claims on insurance
policies covering the Equipment or Lessees,
(f) all moneys from time to time on deposit in any of the Trust
Accounts, including all investments and income from the investment of such
moneys,
(g) all rights of Issuer under the Pooling and Servicing Agreement and
the Contribution Agreement, including the right of Issuer to cause Transferor
and ILC to repurchase Leases under the Pooling and Servicing Agreement and
Contribution Agreement respectively; and
(h) all proceeds of the foregoing, whether by voluntary or involuntary
conversion thereof (collectively, the "Granted Assets"). Such Grant is made in
trust to secure (i) the payment of all amounts due on the Class A Notes and the
Class B Notes, in accordance with their terms, equally and ratably without
prejudice, priority, or distinction among any of the Class A Notes and the Class
B Notes, respectively, by reason of differences in time of issuance or
otherwise, (ii) the payment of all other sums payable under this Indenture with
respect to the Notes and (iii) compliance with the provisions of this Indenture
with respect to the Notes.
Indenture Trustee acknowledges such Grant, accepts the trusts hereunder
in accordance with the provisions hereof, and agrees to perform the duties
herein required to the best of its ability and to the end that the interests of
the Noteholders may be adequately and effectively protected as hereinafter
provided.
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<PAGE>
ARTICLE 1.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions; Interpretive Provisions. (a) Capitalized
terms used and not otherwise defined herein shall have the meanings ascribed to
such terms in Appendix X to this Indenture.
(b) The other interpretive provisions specified in Appendix X to the
Indenture shall apply to this Agreement.
(c) It is understood and agreed that all transfers of Leases made
pursuant to the Contribution Agreement shall be made as contributions by ILC to
the capital of Transferor. Each reference herein to any "purchase" of leases by
Transferor from ILC, or "sale" of leases by ILC to Transferor or similar terms
shall be deemed to refer to such capital contributions. Each reference to Leases
"sold" by ILC or "purchased" by Transferor shall be deemed to refer to Leases
that are contributed by ILC to the capital of Transferor. All other terms of
this Indenture shall be construed in a manner consistent with the foregoing.
SECTION 1.2. Compliance Certificates and Opinions.
Upon any written application or request (or oral application with
prompt written or telecopied confirmation) by Issuer to Indenture Trustee to
take any action under any provision of this Indenture, other than any request
that (a) Indenture Trustee authenticate the Notes specified in such request, (b)
Indenture Trustee invest moneys in any of the Trust Accounts pursuant to the
written directions specified in such request, or (c) Indenture Trustee pay
moneys due and payable to Issuer hereunder to the Issuer's assignee specified in
such request, Indenture Trustee shall require Issuer to furnish to Indenture
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and that the request otherwise is in accordance with the terms of
the Indenture, and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that, in the case of any such requested action as to which other evidence of
satisfaction of the conditions precedent thereto is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.
SECTION 1.3. 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
-3-
<PAGE>
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 Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of Issuer delivered
to Indenture Trustee 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 or opinion
and any 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 Servicer, Transferor, or the Manager as to such factual matters
unless such officer or 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. Any Opinion of Counsel may be based on the written
opinion of other counsel, in which event such Opinion of Counsel shall be
accompanied by a copy of such other counsel's opinion and shall include a
statement to the effect that such counsel believes that such counsel and
Indenture Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to Indenture Trustee, it is provided that Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of 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 Issuer to have such application granted or to the sufficiency of
such certificate or report. The foregoing shall not, however, be construed to
affect Indenture Trustee's right to rely upon the truth and accuracy of any
statement or opinion contained in any such document as provided in Section
7.1(a)(ii).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default or Servicer Event
of Default is a condition precedent to the taking of any action by Indenture
Trustee at the request or direction of Issuer, then, notwithstanding that the
satisfaction of such condition is a condition precedent to the Issuer's right to
make such request or direction, Indenture Trustee shall be protected in acting
in accordance with such request or
-4-
<PAGE>
direction if it does not have knowledge of the occurrence and continuation of
such Default or Event of Default or Servicer Event of Default. For all purposes
of this Indenture, Indenture Trustee shall not be deemed to have knowledge of
any Default or Event of Default nor shall Indenture Trustee have any duty to
monitor or investigate to determine whether a default has occurred (other than
an Event of Default of the kind described in Section 6.1(a)) or Servicer Event
of Default unless a Responsible Officer of Indenture Trustee shall have actual
knowledge thereof or shall have been notified in writing thereof by Issuer,
Servicer, Transferor, or any Noteholder.
SECTION 1.4. Acts of Noteholders, etc.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and, except as otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to Indenture Trustee and, where it is hereby expressly required, to Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are sometimes referred to as the "Act" of the Noteholders signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 7.1) conclusive in favor of Indenture Trustee
and Issuer, if made in the manner provided in this Section 1.4.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than such signer's
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of such signer's authority. The fact and date of the execution
of any such instrument or writing, or the authority of the Person executing the
same, may also be proved in any other manner which Indenture Trustee deems
sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of Holder of any Note shall bind every future Holder of the
same Note and the Holder of every Note issued upon the registration of transfer
thereof or in exchange therefore or in lieu thereof in respect of anything done,
omitted or suffered to be done by Indenture Trustee or Issuer in reliance
thereon, whether or not notation of such action is made upon such Note.
-5-
<PAGE>
(d) By accepting the Notes issued pursuant to this Indenture, each
Noteholder irrevocably appoints Indenture Trustee hereunder as the special
attorney-in-fact for such Noteholder vested with full power on behalf of such
Noteholder to effect and enforce the rights of such Noteholder and the revisions
pursuant hereto for the benefit of such Noteholder; provided that nothing
contained in this Section 1.4(d) shall be deemed to confer upon Indenture
Trustee any duty or power to vote on behalf of the Noteholders with respect to
any matter on which the Noteholders have a right to vote pursuant to the terms
of this Indenture.
SECTION 1.5. Notices, etc., to Indenture Trustee, Servicer, Issuer
and Rating Agencies.
Any request, demand, authorization, direction, notice, consent, waiver,
Act of Noteholders, or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with, Indenture Trustee, Issuer or
Servicer shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first-class postage prepaid
or certified mail return receipt requested, or sent by private courier or
confirmed telecopy. Unless otherwise specifically provided herein, no such
request, demand, authorization, direction, notice, consent, waiver, Act of
Noteholders or other document shall be effective until received and any
provision hereof requiring the making, giving, furnishing, or filing of the same
on any date shall be interpreted as requiring the same to be sent or delivered
in such fashion that it will be received on such date. Any such request, demand,
authorization, direction, notice, consent, waiver, Act of Noteholders, or other
document shall be sent or delivered to the following addresses:
(a) if to Indenture Trustee, at the Corporate Trust Office,
Attention: Corporate Trust Administration (Number for telecopy: ( )
______________), or at any other address previously furnished in
writing to Issuer and Servicer by Indenture Trustee; or
(b) if to Issuer, at Provident Equipment Lease Trust 1998-A,
in care of Indenture Trustee, Attention: (Number for telecopy: ( )
__________) with copies to Servicer at the address set forth in clause
(c), or at any other addresses previously furnished in writing to
Indenture Trustee and Servicer by Issuer; or
(c) if to Servicer, at 1023 West Eighth Street, Cincinnati,
Ohio 45203, Attention: [ ] (Number for telecopy: ( ) ____________, or
at any other address previously furnished in writing to Indenture
Trustee and Issuer by Servicer.
(d) if to the Rating Agencies: to [Name of Rating Agencies]
-6-
<PAGE>
SECTION 1.6. Notice to Noteholders; Waiver.
(a) Where this Indenture provides for notice to Noteholders of any
event, or the mailing of any report to Noteholders, such notice or report shall
be sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid or certified mail return receipt
requested, or sent by private courier or confirmed telecopy to each Noteholder
affected by such event or to whom such report is required to be mailed, at its
address as it appears in the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice or
the mailing of such report. In any case where a notice or report to Noteholders
is mailed, neither the failure to mail such notice or report, nor any defect in
any notice or report so mailed, to any particular Noteholder shall affect the
sufficiency of such notice or report with respect to other Noteholders. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the 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 Indenture Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
(b) In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to mail or send notice to
Noteholders, in accordance with Section 1.6(a), of any event or any report to
Noteholders when such notice or report is required to be delivered pursuant to
any provision of this Indenture, then such notification or delivery as shall be
made with the approval of Indenture Trustee shall constitute a sufficient
notification for every purpose hereunder.
SECTION 1.7. Effect of Headings and Table of Contents.
The Article and Section headings herein and in the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 1.8. Successors and Assigns.
All covenants and agreements in this Indenture by Issuer or Indenture
Trustee shall bind its respective successors and permitted assigns, whether so
expressed or not.
SECTION 1.9. GOVERNING LAW.
-7-
<PAGE>
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THIS INDENTURE IS SUBJECT TO
THE TRUST INDENTURE ACT OF 1939 AND SHALL BE GOVERNED THEREBY AND CONSTRUED IN
ACCORDANCE THEREWITH.
SECTION 1.10. Legal Holidays.
In any case where any Payment Date or the Stated Maturity or any other
date on which principal of or interest on any Note is proposed to be paid shall
not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Notes) such 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 such Payment Date, Stated Maturity, or other date on which principal of
or interest on any Note is proposed to be paid, provided that no interest shall
accrue for the period from and after such Payment Date, Stated Maturity, or any
other date on which principal of or interest on any Note is proposed to be paid,
as the case may be, until such next succeeding Business Day.
SECTION 1.11. Execution in Counterparts.
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 1.12. Survival of Representations and Warranties.
The representations, warranties and certifications of the Issuer made
in this Indenture or in any certificate or other writing delivered by Issuer
pursuant hereto shall survive the authentication and delivery of the Notes
hereunder.
ARTICLE 2.
THE NOTES
SECTION 2.1. General Provisions.
(a) The Notes shall consist of $_____________ principal amount of Class
A-1 Notes, $_____________ principal amount of Class A-2 Notes, $__________
principal amount of Class A-3 Notes, $_____________ principal amount of Class
A-4 Notes and $_____________ principal amount of Class B Notes, and the forms
thereof and of Indenture Trustee's certificate of authentication shall be in
substantially the forms set forth in Exhibit A hereto, with such appropriate
insertions,
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omissions, substitutions, and other variations as are required or permitted by
this Indenture.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $_____________, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 2.3, 2.4, or 9.5. The Notes
shall be issuable only in registered form and only in minimum denominations of
at least $1,000 with respect to the Class A Notes and the Class B Notes;
provided that the foregoing shall not restrict or prevent the transfer in
accordance with Section 2.3 of any Note having a remaining Outstanding Principal
Amount of other than an integral multiple of $1,000, or the issuance of a single
Class A Note and a single Class B Note with a denomination less than $1,000.
(b) For each Payment Date, payments of principal (the "Principal
Payments") on the Notes will be made in accordance with Sections 3.3(b) or 6.6,
as applicable; it being understood that unless the Notes are accelerated
pursuant to Section 6.2, prior to the Stated Maturity of any class of Notes,
principal payments shall be due on such class of Notes only to the extent of
Available Funds available to make payments on principal of such class in
accordance with the priorities set forth in Section 3.3(b). Except as otherwise
provided in Section 6.2, no part of the principal of any Note shall be paid
prior to the Payment Date on which such principal is due in accordance with the
preceding provisions of this Section 2.1(b), except that Issuer may redeem the
Notes in their entirety, without premium, as of any Payment Date on which the
Discounted Present Value of the Performing Leases (after giving effect to all
Principal Payments on such Payment Date) is less than or equal to five percent
(5%) of the aggregate Discounted Present Value of the Leases as of the Cut-Off
Date. Issuer will give notice of any such redemption to each Noteholder and
Indenture Trustee at least 30 days before the Payment Date fixed for such
prepayment by certified mail return receipt requested, hand delivery or
overnight courier. Notice of such prepayment having been so given, the remaining
unpaid principal as of the Payment Date fixed for prepayment together with all
interest accrued and unpaid to such Payment Date, shall become due and payable
on such Payment Date.
(c) For each Payment Date, the interest due and payable (the "Interest
Payments") with respect to the Notes will be the interest that has accrued on
the respective Notes since the last Payment Date or, in the case of the first
Payment Date, since the Closing Date, at the Class A-1 Interest Rate, Class A-2
Interest Rate, Class A-3 Interest Rate, Class A-4 Interest Rate and Class B
Interest Rate, respectively, applied to the then Outstanding Principal Amounts
of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and
Class B Notes, respectively, on the preceding Payment Date. Interest Payments
will be made in accordance with Sections 3.3(b) and 6.6, as applicable.
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(d) All payments made with respect to any Note shall be made 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 and shall be applied first
to the interest then due and payable on such Notes, then to the principal
thereof, and finally to premium, if any.
(e) All Class A-1 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-1 Notes shall be made pro rata
among all Outstanding Class A-1 Notes, without preference or priority of any
kind.
(f) All Class A-2 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-2 Notes shall be made pro rata
among all Outstanding Class A-2 Notes, without preference or priority of any
kind.
(g) All Class A-3 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-3 Notes shall be made pro rata
among all Outstanding Class A-3 Notes, without preference or priority of any
kind.
(h) All Class A-4 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-4 Notes shall be made pro rata
among all Outstanding Class A-4 Notes, without preference or priority of any
kind.
(i) The Class B Notes shall be subordinated to the Class A Notes to the
extent set forth herein. All Class B Notes issued under this Indenture shall be
in all respects equally and ratably entitled to the benefits hereof without
preference, priority or distinction on account of the actual time or times of
authentication and delivery, all in accordance with the terms and provisions of
this Indenture. Payments of principal and interest on the Class B Notes shall be
made pro rata among all Outstanding Class B Notes, without preference or
priority of any kind.
SECTION 2.2. Execution, Authentication, Delivery, and Dating.
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(a) The Notes shall be manually executed on behalf of Issuer by any of
its Authorized Officers. The signature of any such Authorized Officer on the
Notes may be manual or facsimile.
(b) Any Note bearing the signature of an individual who was at the time
of execution thereof an Authorized Officer of Issuer shall bind Issuer,
notwithstanding that such individual ceases to hold such office prior to the
authentication and delivery of such Note or did not hold such office at the date
of such Note.
(c) No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein,
executed by Indenture Trustee by manual signature, and such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder. Each Note shall be dated the
date of its authentication.
(d) The Notes may from time to time be executed by Issuer and delivered
to Indenture Trustee for authentication together with an Issuer Request to
Indenture Trustee directing the authentication and delivery of such Notes and
thereupon the same shall be authenticated and delivered by Indenture Trustee in
accordance with such Trust Request.
SECTION 2.3. Transfer and Exchange.
(a) Issuer shall cause to be kept at the Corporate Trust Office a
register (the "Note Register") in which, subject to such reasonable regulations
as Indenture Trustee may prescribe, Issuer shall provide for the registration of
Notes and of transfers of Notes. Indenture Trustee is hereby appointed "Note
Registrar" for the purpose of registering Notes and transfers of Notes as herein
provided. Upon any resignation of any Note Registrar, 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 Indenture Trustee is appointed by Issuer as Note
Registrar, Issuer will give Indenture Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of Note Register, and Indenture Trustee shall have the right to
inspect Note Register at all reasonable times, to obtain copies thereof and to
rely upon a certificate executed on behalf of Note Registrar by an executive
officer thereof as to the names and addresses of Holders of Notes and the
principal amounts and number of such Notes.
(b) Subject to Section 2.3(a), upon surrender for registration of
transfer of any Note at the office of Issuer designated pursuant to Section 8.2
for such
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purpose, Issuer shall execute and Indenture Trustee upon request shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
aggregate original principal amount. Indenture Trustee shall make a notation on
any such new Note of the amount of principal, if any, that has been paid on such
Note.
(c) All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of 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.
(d) Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by Issuer or Indenture Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to Issuer and Indenture Trustee duly executed, by the Holder
thereof or his attorney duly authorized in writing.
(e) No service charge shall be made for any registration of transfer or
exchange of Notes, but Issuer or Indenture Trustee may require payment by the
transferor 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 9.5 not involving any
transfer.
SECTION 2.4. Mutilated, Destroyed, Lost and Stolen Notes.
(a) If any mutilated Note is surrendered to Indenture Trustee, Issuer
shall execute and Indenture Trustee shall authenticate and deliver in exchange
therefore a replacement Note of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
(b) If there shall be delivered to Issuer and Indenture Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note and
(ii) such security or indemnity as may be required by them to save each of them
and any agent of either of them harmless, then, in the absence of actual notice
to Issuer or Indenture Trustee that such Note has been acquired by a bona fide
purchaser, Issuer shall execute and upon its request Indenture Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a
replacement Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
(c) In case the final installment of principal on any such mutilated,
destroyed, lost or stolen Note has become or will at the next Payment Date
become due and payable, Issuer in its discretion may, instead of issuing a
replacement Note, pay such Note.
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(d) Upon the issuance of any replacement Note under this Section,
Issuer or Indenture Trustee may require the payment by the Noteholder of a sum
sufficient to cover any tax or other governmental charge that may be imposed as
a result of the issuance of such replacement Note.
(e) Every replacement Note issued pursuant to this Section 2.4 in lieu
of any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of Issuer, whether or not the 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.
(f) The provisions of this Section 2.4 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 2.5. Book-Entry Registration of Class A Notes and Class
B Notes.
Each of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class
A-4 Notes and the Class B Notes, upon original issuance, shall be issued in the
form of one or more typewritten Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes and Class B Notes, respectively, (the "Book-Entry Class
A-1 Notes," "Book-Entry Class A-2 Notes," "Book-Entry Class A-3 Notes,"
"Book-Entry Class A-4 Notes" and "Book-Entry Class B Notes", respectively) to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, Issuer. Each of the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes , Class A-4 Notes and Class B Notes shall initially be registered on the
Note Register in the name of Cede & Co., the nominee of The Depository Trust
Company, as the initial Clearing Agency, and no Class A-1 Note Owner, Class A-2
Note Owner, Class A-3 Note Owner, Class A-4 Note Owner or Class B Note Owner
will receive a definitive note representing such Note Owner's interest in the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes or Class B
Notes, as the case may be, except as provided in Section 2.7. Unless and until
Definitive Class A-1 Notes, Definitive Class A-2 Notes, Definitive Class A-3
Notes, Definitive Class A-4 Notes and/or Definitive Class B Notes have been
issued to the applicable Note Owners pursuant to Section 2.7:
(a) the provisions of this Section 2.5 shall be in full force and
effect with respect to the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes or the Class B Notes, as the case may be;
(b) Issuer, Servicer and Indenture Trustee may deal with the Clearing
Agency and the Clearing Agency Participants for all purposes with respect to the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes or Class B
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Notes, as the case may be, (including the making of distributions on the Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and the Class B
Notes, as the case may be) as the authorized representatives of the respective
Note Owners;
(c) to the extent that the provisions of this Section 2.5 conflict with
any other provisions of this Indenture, the provisions of this Section 2.5 shall
control; and
(d) the rights of the respective Note Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and shall be
limited to those established by law and agreements between such respective Note
Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant
to the Depository Agreement, unless and until Definitive Class A-1 Notes,
Definitive Class A-2 Notes, Definitive Class A-3 Notes, Definitive Class A-4
Notes or Definitive Class B Notes, as the case may be, are issued pursuant to
Section 2.7, the initial Clearing Agency will make book-entry transfers among
the Clearing Agency Participants and receive and transmit distributions of
principal and interest on the related Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes and Class B Notes, as the case may be, to such
Clearing Agency Participants.
(e) 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 Principal Amount of the Notes (or a class of
Notes), the Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from Note Owners
and/or Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes (or class of Notes)
and has delivered such instructions to Indenture Trustee.
SECTION 2.6. Notice to Clearing Agency.
Whenever notice or other communication to the Class A-1 Noteholders,
Class A-2 Noteholders, Class A-3 Noteholders, Class A-4 Noteholders or Class B
Noteholders is required under this Agreement, unless and until Definitive Class
A-1 Notes, Definitive Class A-2 Notes, Definitive Class A-3 Notes, Definitive
Class A-4 Notes or Definitive Class B Notes shall have been issued to the
related Note Owners pursuant to Section 2.7, Indenture Trustee shall give all
such notices and communications specified herein to be given to such Noteholders
to the applicable Clearing Agency which shall give such notices and
communications to the related Class A-1 Note Owners, Class A-2 Note Owners,
Class A-3 Note Owners, Class A-4 Note Owners and Class B Note Owners in
accordance with its applicable rules, regulations and procedures.
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SECTION 2.7. Definitive Class A Notes and Definitive Class B
Notes.
If (a) (i) Manager advises Indenture Trustee in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities under the Depository Agreement with respect to the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and/or the Class B
Notes and (ii) Indenture Trustee or Manager is unable to locate a qualified
successor, (b) Manager, at its option, advises Indenture Trustee in writing that
it elects to terminate the book-entry system with respect to the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and/or the Class B
Notes through the Clearing Agency or (c) after the occurrence of a Servicer
Event of Default, Class A-1 Note Owners, Class A-2 Note Owners, Class A-3 Note
Owners, Class A-4 Note Owners and Class B Note Owners, with respect to the Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class B Notes
evidencing not less than a majority of the aggregate unpaid Outstanding
Principal Amount of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class
A-4 Notes and Class B Notes, respectively, advise Indenture Trustee and the
Clearing Agency through the Clearing Agency Participants in writing that the
continuation of a book-entry system with respect to the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes or the Class B Notes, respectively,
through the Clearing Agency is no longer in the best interests of the Class A-1
Note Owners, Class A-2 Note Owners, Class A-3 Note Owners, Class A-4 Note Owners
or Class B Note Owners, as the case may be, Indenture Trustee shall notify all
Class A-1 Note Owners, Class A-2 Note Owners, Class A-3 Note Owners, Class A-4
Note Owners and Class B Note Owners with respect to the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class B Notes, respectively,
through the Clearing Agency, of the occurrence of any such event and of the
availability of Definitive Class A-1 Notes, Definitive Class A-2 Notes,
Definitive Class A-3 Notes, Definitive Class A-4 Notes and Definitive Class B
Notes to Class A-1 Note Owners, Class A-2 Note Owners, Class A-3 Note Owners,
Class A-4 Note Owners and Class B Note Owners, respectively, requesting the
same. Upon surrender to Indenture Trustee of the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes or Class B Notes, as the case may be, by
the Clearing Agency, accompanied by registration instructions from the Clearing
Agency for registration, Issuer shall execute and Indenture Trustee shall
authenticate and deliver the Definitive Class A-1 Notes, Definitive Class A-2
Notes, Definitive Class A-3 Notes, Definitive Class A-4 Notes or Definitive
Class B Notes, as the case may be. Neither Manager nor 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 Class A-1 Notes, Definitive Class A-2 Notes, Definitive
Class A-3 Notes, Definitive Class A-4 Notes or Definitive Class B Notes, as the
case may be, all references herein to obligations imposed upon or to be
performed by the Clearing Agency shall be deemed to be imposed upon and
performed by Indenture Trustee, to the extent applicable with respect to such
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Definitive Class A-1 Notes, Definitive Class A-2 Notes, Definitive Class A-3
Notes, Definitive Class A-4 Notes or Definitive Class B Notes, respectively, and
Indenture Trustee shall recognize the Holders of the Definitive Class A-1 Notes
as Class A-1 Noteholders, Holders of the Definitive Class A-2 Notes as Class A-2
Noteholders, Holders of the Definitive Class A-3 Notes as Class A-3 Noteholders,
Holders of the Definitive Class A-4 Notes as Class A-4 Noteholders and/or the
Holders of the Definitive Class B Notes as Class B Noteholders hereunder.
SECTION 2.8. Payment of Interest and Principal; Rights Preserved.
(a) Any installment of interest or principal, payable on any Note that
is punctually paid or duly provided for by Issuer on the applicable Payment Date
shall be paid to the Person in whose name such Note was registered at the close
of business on the Record Date for such Payment Date by wire transfer of federal
funds to the account and number specified in the Note Register on such Record
Date for such Person or, if no such account or number is so specified, then by
check mailed to such Person's address as it appears in the Note Register on such
Record Date.
(b) All reductions in the principal amount of a Note effected by
payments of installments of principal made on any Payment Date shall be binding
upon all Holders of such Note and of any Note issued upon the registration of
transfer thereof or in exchange therefore or in lieu thereof, whether or not
such payment is noted on such Note. All payments on the Notes shall be paid
without any requirement of presentment but each Holder of any Note shall be
deemed to agree, by its acceptance of the same, upon at least ten (10) days
notice from Indenture Trustee to surrender such Note at the Corporate Trust
Office against payment of the final installment of principal of such Note.
SECTION 2.9. Persons Deemed Owners.
Prior to due presentment of a Note for registration of transfer,
Issuer, Indenture Trustee, and any agent of Issuer or Indenture Trustee may
treat the Noteholder as the owner of such Note for the purpose of receiving
payment of principal of and interest on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither Issuer, Indenture
Trustee, nor any agent of Issuer or Indenture Trustee shall be affected by
notice to the contrary.
SECTION 2.10. Cancellation.
All Notes surrendered for registration of transfer or exchange or
following final payment shall, if surrendered to any Person other than Indenture
Trustee, be delivered to Indenture Trustee and shall be promptly cancelled by
it. Issuer may at any time deliver to Indenture Trustee for cancellation any
Notes previously authenticated and delivered hereunder which Issuer may have
acquired in any
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manner whatsoever, and all Notes so delivered shall be promptly cancelled by
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 held by Indenture Trustee may be disposed
of in the normal course of its business or as directed by an Issuer Order.
SECTION 2.11. Noteholder Lists.
Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders and shall otherwise comply with Section 312(a) of the Trust
Indenture Act. In the event Indenture Trustee no longer serves as the Note
Registrar, Issuer (or any other obligor upon the Notes) shall furnish to
Indenture Trustee at least five Business Days before each interest payment date
(and in all events in intervals of not more than 6 months) and at such other
times as Indenture Trustee may request in writing a list in such form and as of
such date as Indenture Trustee may reasonably require of the names and addresses
of Noteholders, and Issuer shall otherwise comply with Section 312(a) of the
Trust Indenture Act. Three or more Holders or one or more Holders of the Notes
evidencing at least 25% of the Outstanding Principal Amount of the Notes may, by
written request to Indenture Trustee, obtain access to the list of all Holders
maintained by Indenture Trustee for the purpose of communicating with other
Holders with respect to their rights under the Indenture or under the Notes.
Indenture Trustee may elect not to afford the requesting Holders access to the
list of Holders if it agrees to mail the desired communication or proxy, on
behalf of and at the expense of the requesting Holders, to all Holders.
SECTION 2.12. Treasury Securities.
In determining whether the Noteholders of the required Outstanding
Principal Amount of the Notes have concurred in any direction, waiver or
consent, Notes owned by Issuer, Transferor, ILC, any other obligor upon the
Notes or an Affiliate of Transferor shall be considered as though not
outstanding, except that for the purposes of determining whether Indenture
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes which a Responsible Officer knows are so owned shall be so
disregarded.
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ARTICLE 3.
ACCOUNTS; INVESTMENT OF MONEYS;
COLLECTION AND APPLICATION OF MONEYS; REPORTS
SECTION 3.1. Trust Accounts; Investments by Indenture Trustee.
(a) On or before the Issuance Date, Issuer shall cause Servicer to
establish in the name of Indenture Trustee for the benefit of the Noteholders
and the Certificateholders, to the extent of their interests therein as provided
in this Indenture, the Pooling and Servicing Agreement and the Trust Agreement,
the Trust Accounts as provided in Section 6.1 of the Pooling and Servicing
Agreement.
(b) Indenture Trustee shall not have any right of set-off with respect
to any Trust Account or any investment therein. So long as no Event of Default
shall have occurred and be continuing, all or a portion of the amounts in the
Trust Account shall be invested and reinvested by the Indenture Trustee pursuant
to an Issuer Order or Servicer Order in one or more Eligible Investments in
accordance with Section 6.1 of the Pooling and Servicing Agreement.
(c) If either (i) Issuer or Servicer, as the case may be, shall have
failed to give investment directions to Indenture Trustee by 9:30 a.m., New York
City time on any Business Day on which there may be uninvested cash or (ii) an
Event of Default shall be continuing, Indenture Trustee shall promptly invest
and reinvest the funds then in the Trust Accounts to the fullest extent
practicable in one or more Eligible Investments. All investments made by
Indenture Trustee shall mature no later than the maturity date therefore
permitted by Section 3.1(d) unless Indenture Trustee shall have received written
confirmation from each Rating Agency, that the liquidation of such Eligible
Investments prior to their respective maturity dates has satisfied the Rating
Agency Condition.
(d) No investment of any amount held in any Trust Account shall mature
later than the Business Day immediately preceding the Payment Date which is
scheduled to occur immediately following the date of investment. All income or
other gains (net of losses) from the investment of moneys deposited in the Trust
Accounts shall be deposited by Indenture Trustee in such account immediately
upon receipt.
(e) If any amounts are needed for disbursement from any Trust Account
and sufficient uninvested funds are not collected and available therein to make
such disbursement, in the absence of an Issuer Order or Servicer Order for the
liquidation of investments held therein in an amount sufficient to provide the
required funds, Indenture Trustee shall select and cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such accounts.
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(f) Indenture Trustee shall not in any way be held liable by reason of
any insufficiency in the Collection Account, the Reserve Account, or the
Residual Account resulting from losses on investments made in accordance with
the provisions of this Section 3.1 and Section 6.1 of the Pooling and Servicing
Agreement (but the institution serving as Indenture Trustee shall at all times
remain liable for its own debt obligations, if any, constituting part of such
investments). Indenture Trustee shall not be liable for any investment made by
it in accordance with this Section 3.1 and Section 6.1 of the Pooling and
Servicing Agreement on the grounds that it could have made a more favorable
investment or a more favorable selection for sale of an investment.
SECTION 3.2. Collection of Moneys.
Indenture Trustee shall from time to time, in accordance with
instructions of Servicer, withdraw from the Collection Account and pay as
instructed by the Servicer any amounts in the Collection Account which Servicer
advises Indenture Trustee are Other Lease Payments or otherwise not part of the
Trust Estate. Prior to such payment, Indenture Trustee shall have rights to and
an interest in such amounts to the extent (but only to the extent) it is
determined that such amounts actually constitute Transaction Payment Amounts.
SECTION 3.3. Collection Account; Payments.
(a) Not later than the Required Deposit Date, Available Funds will be
deposited into the Collection Account as provided in Section 6.2 (c) of the
Pooling and Servicing Agreement. On or before each Payment Date, Available Funds
will be transferred to the Note Distribution Account as provided in Section 6.3
of the Pooling and Servicing Agreement.
(b) Unless the Notes have been declared due and payable pursuant to
Section 6.2 and moneys collected by Indenture Trustee are being applied in
accordance with Section 6.6, Available Funds on deposit in the Note Distribution
Account shall be distributed on each Payment Date to the extent of amount due
and unpaid on the Notes in the following amounts and in following order of
priority:
(i) concurrently: (A) to make Interest Payments on the Class
A-1 Notes, (B) to make Interest Payments on the Class A-2 Notes, (C) to
make Interest Payments on the Class A-3 Notes and (D) to make Interest
Payments on the Class A-4 Notes;
(ii) to make Interest Payments on the Class B Notes;
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(iii) to make the Class A Principal Payment (i) to the Class
A-1 Noteholders only, until the Outstanding Principal Amount of the
Class A-1 Notes is reduced to zero, then (ii) to the Class A-2
Noteholders only, until the Outstanding Principal Amount of the Class
A-2 Notes is reduced to zero, then (iii) to the Class A-3 Noteholders
only, until the Outstanding Principal Amount of the Class A-3 Notes is
reduced to zero, then (iv) to the Class A-4 Noteholders only, until the
Outstanding Principal Amount of the Class A-4 Notes is reduced to zero;
(iv) to pay the Class B Principal Payment to the Class B
Noteholders; and
(v) to pay the Additional Principal, if any, as an additional
reduction of principal, first to the Class A Noteholders receiving the
Class A Principal Payment as provided in clause (iii) until the
Outstanding Principal Amount of the Class A Notes has been reduced to
zero, second to the Class B Noteholders as an additional reduction of
principal until the Outstanding Principal Amount of the Class B Notes
has been reduced to zero.
SECTION 3.4. Reports by Indenture Trustee; Notices of Certain
Payments.
(a) Indenture Trustee shall within two Business Days after the request
of Issuer, Servicer or any Noteholder, deliver to the requesting person a
written report setting forth the amounts on deposit in the Collection Account,
the Reserve Account, and the Residual Account and identifying the investments
included therein.
(b) Within five Business Days following each Payment Date or as
promptly as possible thereafter but in no event later than two Business Days
following the receipt of the Monthly Status Report from Servicer pursuant to
Section 4.8 of the Pooling and Servicing Agreement, Indenture Trustee shall mail
to Transferor, each Rating Agency and Servicer and make available to each
Noteholder the following information:
(i) the principal amount of all Outstanding Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class B Notes,
respectively, and of the Outstanding Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes and Class B Notes respectively, held
by each Noteholder on the Record Date with respect to such Payment
Date;
(ii) the amount of Interest Payments and payments in reduction
of principal paid on such Payment Date with respect to all Class A-1
Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class B
Notes, respectively, and with respect to the Notes held by each
Noteholder;
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(iii) the amount of the Servicing Fee and unreimbursed
Servicer Advances paid on such Payment Date pursuant to Section
6.3(b)(i) of the Pooling and Servicing Agreement;
(iv) the Available Residual Amount and the Utilized Residual
Amounts as of the date of the most recent Monthly Status Report
delivered pursuant to Section 4.8 of the Pooling and Servicing
Agreement;
(v) the amounts, if any, paid to Servicer or Transferor
pursuant to Section 6.3(b)(xi) of the Pooling and Servicing Agreement;
and
(vi) the amount on deposit in the Collection Account, the
Reserve Account and the Residual Account, in each case after giving
effect to all of the withdrawals and applications or transfers required
on or before such Payment Date pursuant to Sections 3.2 and 3.3
With each report of Indenture Trustee furnished pursuant to this
Section 3.4(b) following any Payment Date, Indenture Trustee shall enclose a
copy of the Servicing Report and the report required to be furnished to
Indenture Trustee by Servicer following such Payment Date pursuant to Section
4.8 of the Pooling and Servicing Agreement or, if such reports have not been
received, a statement to such effect.
SECTION 3.5. Indenture Trustee May Rely on Certain Information
from Servicer.
Pursuant to the Pooling and Servicing Agreement and Section 3.2 hereof,
Servicer is required to furnish to Indenture Trustee from time to time certain
information and make various calculations which are relevant to the performance
of Indenture Trustee's duties in Article Three and in Article Four of this
Indenture. Indenture Trustee shall be entitled to rely in good faith on such
information or calculations in the performance of its duties hereunder (i)
unless and until a Responsible Officer of Indenture Trustee has actual
knowledge, or is advised by any Noteholder (either in writing or orally with
prompt written or telecopied confirmation), that such information or
calculations is or are incorrect, or (ii) unless there is a manifest error in
any such information.
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ARTICLE 4.
RELEASE OF COLLATERAL
SECTION 4.1. Release of Collateral.
(a) Except as otherwise provided below in this Article IV, the
Indenture Trustee shall release property from the Lien of this Indenture only
upon receipt of an Issuer Request accompanied by an Officers' Certificate, an
Opinion of Counsel and Independent Certificates in accordance with Trust
Indenture Act Sections 314(c) and 314(d)(l), or an Opinion of Counsel in lieu of
such Independent Certificates to the effect that the Trust Indenture Act does
not require any such Independent Certificates.
(b) Subject to the satisfaction of the provisions of Sections 4.2 and
4.4, Indenture Trustee shall release Equipment from the Lien of the Indenture
upon the occurrence of any of the following events: (a) the sale of such
Equipment pursuant to Section 3.3(b) of the Pooling and Servicing Agreement
(unless retained by Issuer for re-leasing), (b) the expiration of the related
Lease upon the payment of the final Lease Payment due and payable under such
Lease and the deposit of any Residual Realization in respect thereof subject to
the Residual Amount Cap, (c) the repurchase of the related Lease in accordance
with the provisions of Section 4 of the Pooling and Servicing Agreement and upon
the substitution of a Substitute Lease in accordance with the provisions of
Section 9 of the Pooling and Servicing Agreement. The proceeds of any such sale,
repurchase or releasing shall be deposited in the Collection Account for
disposition under this Indenture.
SECTION 4.2. Release of Leases Upon Final Lease Payment.
Subject to the satisfaction of the provisions of Section 4.4, if
Indenture Trustee shall have received notice (either in writing or orally with
prompt written or telecopied confirmation) from Servicer that Indenture Trustee
has received from amounts paid by the Lessee, from the Lease Repurchase Amount
or from the proceeds of the Equipment subject to any Lease (i) the final Lease
Payment due and payable under such Lease and the deposit of any Residual
Realization in respect thereof, (ii) a Termination Payment in respect of such
Lease, and the deposit of any Residual Realization in respect thereof, (iii) a
Casualty Payment under such Lease (and, following such final Lease Payment,
Casualty Payment or Termination Payment, no further payments on or in respect of
such Lease are or will be due and payable), or (iv) the full amount of any
Non-Performing Lease Pay-Through Amount with respect to such Lease, such Lease
shall be released from the lien of this Indenture.
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SECTION 4.3. Execution of Documents.
Indenture Trustee shall promptly execute and deliver such documents,
including without limitation partial releases and termination statements (which
shall be furnished to Indenture Trustee by the Servicer), and take such other
actions as Issuer, by Issuer Request, may reasonably request (including the
return of any Lease which has been released) to fully effectuate the release
from this Indenture of any Lease and interests in the related Equipment required
to be so released pursuant to Sections 4.1 or 4.2.
SECTION 4.4. Officer's Certificates.
The Issuer may, without compliance with the requirements of Section
4.1(a): (A) take all of the actions described in Sections 4.1(b) and 4.2; (B)
collect, liquidate, sell or otherwise dispose of Leases and Equipment as and to
the extent permitted or required by the Pooling and Servicing Agreement and (B)
make cash payments out of the Trust Accounts as and to the extent permitted or
required by the Pooling and Servicing Agreement, this Indenture and the Trust
Agreement so long as the Manager, on behalf of the Issuer, shall deliver to the
Indenture Trustee every six months, commencing [March 1], 1999, an Officers'
Certificate of the Issuer stating that all such dispositions of Granted Assets
that occurred since the execution of the previous such Officers' Certificate (or
for the first such Officers' Certificate, since the Closing Date) were in the
ordinary course of the Issuer's business and that the proceeds thereof were
applied in accordance with the Pooling and Servicing Agreement, this Indenture
and the Trust Agreement.
ARTICLE 5.
SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER
SECTION 5.1. Servicer Events of Default.
If a Servicer Event of Default shall have occurred and be continuing,
Indenture Trustee shall, upon the written request of the Holders of Notes
evidencing at least 66 2/3% of the then Outstanding Principal Amount of the
Notes, give notice in writing to Servicer of the termination of all of the
rights and obligations of Servicer under the Pooling and Servicing Agreement. On
and after the giving of such written notice, all rights and obligations of
Servicer under the Pooling and Servicing Agreement, including, Servicer's right
thereunder to receive the Servicing Fee and the Supplemental Servicing Fee,
shall pass to, be vested in, and be assumed by Indenture Trustee, and Indenture
Trustee shall be authorized to, and shall, execute and deliver, on behalf of
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such termination and of such
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passing, vesting, and assumption; provided that in performing the duties of
Servicer under the Pooling and Servicing Agreement Indenture Trustee shall at
all times be deemed to be acting as Indenture Trustee hereunder and shall be
entitled to the full benefit of all the protections, benefits, immunities and
indemnities provided in this Indenture for or with respect to Indenture Trustee,
including those set forth in Article Seven.
SECTION 5.2. Substitute Servicer.
Notwithstanding the provisions of Section 5.1, Indenture Trustee may,
if it shall be unwilling to continue to act as the successor to Servicer in
accordance with Section 5.1, or shall, if it is unable to continue to so act or
is so instructed in writing by the Holders of Notes evidencing at least 66 2/3%
of the then Outstanding Principal Amount of the Notes, appoint a successor to
Servicer in accordance with the provisions of Section 8.3 of the Pooling and
Servicing Agreement.
ARTICLE 6.
EVENTS OF DEFAULT; REMEDIES
SECTION 6.1. Events of Default.
"Event of Default," wherever used herein, means any one of the
following (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) default in making of Principal Payments or Interest Payments when
such become due and payable;
(b) default in the performance, or breach, of any covenant of Issuer in
this Indenture, and continuance of such default or breach for a period of 30
days after the earliest of (i) any officer of Issuer first acquiring knowledge
thereof, (ii) Indenture Trustee's giving written notice thereof to Issuer or
(iii) the Holders of Notes evidencing at least 25% of the then Outstanding
Principal Amount of the Notes giving written notice thereof to Issuer and
Indenture Trustee;
(c) if any representation or warranty of Issuer made in this Indenture
or any other writing provided to the Holders of the Notes shall prove to be
incorrect in any material respect as of the time when the same shall have been
made; and continuance of such default or breach for a period of 30 days after
the earliest of (i) any officer of Issuer first acquiring knowledge thereof,
(ii) Indenture Trustee's
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giving written notice thereof to Issuer or (iii) the Holders of Notes evidencing
at least 25% of the then Outstanding Principal Amount of the Notes giving
written notice thereof to Issuer and Indenture Trustee;
(d) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of Issuer in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (ii) a decree or order adjudging Issuer
a bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment, or composition of or in respect of
Issuer under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator, or other similar official
of Issuer or of any substantial part of its property, or ordering the winding up
or liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a period
of 60 consecutive days; or
(e) the commencement by Issuer of a voluntary case or proceeding under
any applicable federal or state bankruptcy, insolvency, reorganization, or other
similar law or of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order for relief in
respect of Issuer in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization, or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, or the
consent by it to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or similar official of Issuer or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors, or
Issuer's failure to pay its debts generally as they become due, or the taking of
corporate action by Issuer in furtherance of any such action.
SECTION 6.2. Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default of the kind specified in Section 6.1(d) or
Section 6.1(e) occurs, the unpaid principal amount of the Notes shall
automatically become due and payable at par together with all accrued and unpaid
interest thereon, without presentment, demand, protest or notice of any kind,
all of which are hereby waived by Issuer. If an Event of Default (other than an
Event of Default of the kind described in Section 6.1(d) and Section 6.1(e))
occurs and is continuing, then and in every such case Indenture Trustee may and
shall, if so directed by the Holders of Notes evidencing at least 66 2/3% of the
then Outstanding Principal Amount of Notes, declare the unpaid principal amount
of all the Notes to be due and payable immediately, by a notice in writing to
Issuer (and to Indenture Trustee if given by Noteholders), and upon any such
declaration such principal amount shall become
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immediately due and payable together with all accrued and unpaid interest
thereon, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by Issuer.
(b) At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by Indenture Trustee as hereinafter in this Article provided, the Holders of
Notes evidencing at least 66 2/3% of the then Outstanding Principal Amount of
Notes, by written notice to Issuer and Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(i) Issuer has paid or deposited with Indenture Trustee
a sum sufficient to pay:
(A) all Principal Payments on any Notes which have
become due otherwise than by such declaration of acceleration
and interest thereon from the date when the same first became
due until the date of payment or deposit at the appropriate
Note Interest Rate,
(B) all Interest Payments due with respect to any
Notes and, to the extent that payment of such interest is
lawful, interest upon overdue interest from the date when the
same first became due until the date of payment or deposit at
a rate per annum equal to the appropriate Note Interest Rates,
and
(C) all sums paid or advanced by Indenture Trustee
hereunder and the reasonable compensation, expenses,
disbursements, and advances of Indenture Trustee, its agents
and counsel; and
(ii) all Events of Default, other than the non-payment of the
Outstanding Principal Amount of the Notes which has become due solely
by such declaration of acceleration, have been cured or waived as
provided in Section 6.13.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 6.3. Remedies.
(a) If an Event of Default occurs and is continuing of which a
Responsible Officer has actual knowledge, Indenture Trustee shall immediately
give notice to each Noteholder as set forth in Section 7.2 and shall solicit the
Noteholders
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for advice. Indenture Trustee shall then take such action as so directed by the
Holders of Notes evidencing at least 66 2/3% of the then Outstanding Notes.
(b) Following any acceleration of the Notes, Indenture Trustee shall
have all of the rights, powers and remedies with respect to the Trust Estate as
are available to secured parties under the UCC or other applicable law. Such
rights, powers and remedies may be exercised by Indenture Trustee in its own
name as trustee of an express trust.
(c) If an Event of Default specified in Section 6.1(a) occurs and is
continuing, Indenture Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against Issuer for the whole amount of
principal and interest remaining unpaid.
(d) In exercising its rights and obligations under this Section 6.3,
Indenture Trustee may sell the Trust Estate; provided that if the Event of
Default involves other than non-payment for five days or more of principal or
interest on the Notes, Indenture Trustee may not sell the Trust Estate unless:
(A) all the Noteholders 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) Indenture Trustee determines that the Trust Estate 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 Indenture Trustee obtains the consent of Holders of Notes
evidencing at least 66 2/3% of the Outstanding Principal Amount of the Notes.
SECTION 6.4. Indenture Trustee Shall File Proofs of Claim.
(a) In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition,
or other judicial proceeding relative to Issuer or any other obligor upon the
Notes or the other obligations secured hereby or relating to the property of
Issuer or of such other obligor or their creditors, Indenture Trustee
(irrespective of whether the principal of the Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether Indenture Trustee shall have made any demand on Issuer for the payment
of overdue principal or interest or any such other obligation) shall by
intervention in such proceeding or otherwise,
(i) file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Notes and any other
obligation secured hereby and to file such other papers or documents as
may be necessary or advisable in order to have the claims of Indenture
Trustee (including any claim for the reasonable compensation, expenses,
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disbursements and advances of Indenture Trustee, its agents and
counsel) and of the Noteholders allowed in such judicial proceeding,
and
(ii) collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator, or
other similar official in any such judicial proceeding is hereby authorized by
each Noteholder to make such payments to Indenture Trustee and, in the event
that Indenture Trustee shall consent to the making of such payments directly to
the Noteholders to pay to Indenture Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of Indenture Trustee, its
agents and counsel, and any other amounts due Indenture Trustee under Section
7.7.
(b) Nothing herein contained shall be deemed to authorize Indenture
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize
Indenture Trustee to vote in respect of the claim of any Noteholder in any such
proceeding.
SECTION 6.5. Indenture Trustee May Enforce Claims Without
Possession of Notes.
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by Indenture Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by Indenture Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of Indenture Trustee, its agents and counsel, be for
the ratable benefit of the Holders of the Notes in respect of which such
judgment has been recovered.
SECTION 6.6. Application of Money Collected.
Any money collected by Indenture Trustee pursuant to this Article, and
any moneys that may then be held or thereafter received by Indenture Trustee
shall be applied in the following order, at the date or dates fixed by Indenture
Trustee and, in case of the distribution of the entire amount due on account of
principal or interest, upon presentation of the Notes and surrender thereof:
first: to the payment of all costs and expenses of
collection incurred by Indenture Trustee and the Noteholders
(including the reasonable fees and expenses of any counsel to
Indenture Trustee and the Noteholders);
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second: if the person then acting as Servicer under the
Pooling and Servicing Agreement is not ILC or an Affiliate of ILC, to
the payment of all Servicer's Fees then due to such person;
third: first, pro-rata to the payment of all accrued and
unpaid interest on the Outstanding Principal Amount of the Class A-1
Notes, the Outstanding Principal Amount of the Class A-2 Notes, the
Outstanding Principal Amount of the Class A-3 Notes, and the
Outstanding Principal Amount of the Class A-4 Notes, respectively, to
the date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of such installment to the date of payment
thereof at the rate per annum equal to the Class A-1 Note Interest
Rate, Class A-2 Note Interest Rate, Class A-3 Note Interest Rate and
Class A-4 Note Interest Rate, respectively, second, to the payment of
all accrued and unpaid interest on the Outstanding Principal Amount of
the Class B Notes to the date of payment thereof, including (to the
extent permitted by applicable law) interest on any overdue installment
of interest and principal from the maturity of such installment to the
date of payment thereof at the rate per annum equal to the Class B Note
Interest Rate, third, to the payment of all accrued and unpaid interest
on the Certificate Balance to the date of payment thereof, including
(to the extent permitted by applicable law) interest on any overdue
installment of interest and principal from the maturity of such
installment to the date of payment thereof at the rate per annum equal
to the Certificate Rate, fourth, to the payment of the Outstanding
Principal Amount of the Class A-1 Notes, fifth, to the payment of the
Outstanding Principal Amount of the Class A-2 Notes, Class A-3 Notes
and Class A-4 Notes, pro rata, sixth, to the payment of the Outstanding
Principal Amount of the Class B Notes, and seventh, to the payment of
the Certificate Balance; provided, that the Noteholders may allocate
such payments for interest, principal and premium at their own
discretion, except that no such allocation shall affect the allocation
of such amounts or future payments received by any other Noteholder;
fourth: to the payment of amounts then due Indenture Trustee
hereunder and the Trustee under the Trust Agreement;
fifth: if the person then acting as Servicer is ILC or an
Affiliate of ILC, to the payment of all Servicer's Fees then due to
such Person; and
sixth: to the payment of the remainder, if any, to Transferor
or any other Person legally entitled thereto.
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SECTION 6.7. Limitation on Suits.
None of the Noteholders 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 Noteholder has previously given written notice to
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the then Outstanding
Principal Amount of the Notes shall have made written request to
Indenture Trustee to institute proceedings in respect of such Event of
Default in its own name as Indenture Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to Indenture
Trustee adequate indemnity against the costs, expenses and liabilities
to be incurred in compliance with such request;
(iv) Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and
(v) so long as any of the Notes remain Outstanding, no
direction inconsistent with such written request has been given to
Indenture Trustee during such 60-day period by the Holders of Notes
evidencing at least 66 2/3% of the then Outstanding Principal Amount of
the Notes;
it being understood and intended that no one or more Noteholders 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
Noteholders, or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Noteholders. Nothing in this Section 6.7 shall be construed as limiting the
rights of otherwise qualified Noteholders to petition a court for the removal of
a Indenture Trustee pursuant to Section 7.9(h) hereof.
SECTION 6.8. Unconditional Right of Noteholders to Receive
Principal and Interest.
Notwithstanding any other provision in this Indenture, other than the
provisions hereof limiting the right to recover amounts due on the Notes to
recoveries from the property of Trust Estate, the Holder of any Note shall have
the absolute and unconditional right to receive payment of the principal of and
interest on such Note on the Maturities for such payments, including the Stated
Maturity, and
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to institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Noteholder.
SECTION 6.9. Restoration of Rights and Remedies.
If Indenture Trustee or any Noteholder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
Indenture Trustee or to such Noteholder, then and in every such case, subject to
any determination in such proceeding, Issuer, Indenture Trustee and the
Noteholders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of Indenture Trustee
and the Noteholders continue as though no such proceeding had been instituted.
SECTION 6.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost, or stolen Notes in Section 2.4(f), no right or
remedy herein conferred upon or reserved to 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 6.11. Delay or Omission Not Waiver.
No delay or omission of Indenture Trustee or of any Holder of any Note
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to Indenture Trustee or to the Noteholders may be exercised from time to time,
and as often as may be deemed expedient, by Indenture Trustee or by the
Noteholders, as the case may be.
SECTION 6.12. Control by Noteholders.
Except as may otherwise be provided in this Indenture, until such time
as the conditions specified in Sections 10.1(a)(i) and (ii) have been satisfied
in full, the Holders of Notes evidencing at least 66 2/3% of the then
Outstanding Principal Amount of the Notes shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
Indenture Trustee or
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exercising any trust or power conferred on Indenture Trustee. Notwithstanding
the foregoing,
(i) no such direction shall be in conflict with any rule of
law or with this Indenture;
(ii) Indenture Trustee shall not be required to follow any
such direction which Indenture Trustee reasonably believes might result
in any personal liability on the part of Indenture Trustee for which
Indenture Trustee is not adequately indemnified; and
(iii) Indenture Trustee may take any other action deemed
proper by Indenture Trustee which is not inconsistent with any such
direction; provided that Indenture Trustee shall give notice of any
such action to each Noteholder.
SECTION 6.13. Waiver of Events of Default.
(a) The Holders of Notes evidencing at least 66 2/3% of the then
Outstanding Principal Amount of the Notes may, by one or more instruments in
writing, waive any Event of Default hereunder and its consequences, except a
continuing Event of Default:
(i) in respect of the payment of the principal of or premium
or interest on any Note (which may only be waived by the Holder of such
Note), or
(ii) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected (which only may be waived by
the Holders of all Outstanding Notes affected).
(b) A copy of each waiver pursuant to Section 6.13(a) shall be
furnished by Issuer to Indenture Trustee. Upon any such waiver, such Event of
Default shall cease to exist and shall be deemed to have been cured, 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 thereon.
SECTION 6.14. Undertaking for Costs.
All parties to this Indenture agree (and each Holder of any Note by its
acceptance thereof shall be deemed to have agreed) that any court may in its
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discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against 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 any suit instituted by
Indenture Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate more than 10% of the then Outstanding
Principal Amount of the Notes, or to any suit instituted by any Noteholder for
the enforcement of the payment of the principal of or interest on any Note on or
after the Maturities for such payments, including the Stated Maturity as
applicable.
SECTION 6.15. Waiver of Stay or Extension Laws.
Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and Issuer (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to Indenture Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 6.16. Sale of Trust Estate.
(a) The power to effect any sale of any portion of the Trust Estate
pursuant to Section 6.3 shall not be exhausted by any one or more sales as to
any portion of the Trust Estate remaining unsold, but shall continue unimpaired
until the entire Trust Estate shall have been sold or all amounts payable on the
Notes shall have been paid. Indenture Trustee may from time to time, upon
directions in accordance with Section 6.12, postpone any public sale by public
announcement made at the time and place of such sale. For any public sale of the
Trust Estate, Indenture Trustee shall have provided each Noteholder with notice
of such sale at least two weeks in advance of such sale which notice shall
specify the date, time and location of such sale.
(b) To the extent permitted by applicable law, Indenture Trustee shall
not in any private sale sell to a third party the Trust Estate, or any portion
thereof unless,
(i) until such time as the conditions specified in Sections
10.1(a)(i) and (ii) have been satisfied in full, the Holders of Notes
evidencing
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at least 66 2/3% of the then Outstanding Principal Amount of each Class
of the Notes voting separately consent to or direct Indenture Trustee
in writing to make such sale; or
(ii) the proceeds of such sale would be not less than the sum
of all amounts due to Indenture Trustee hereunder and the entire unpaid
principal amount of the Notes and interest due or to become due thereon
in accordance with Section 6.6 on the Payment Date next succeeding the
date of such sale.
The foregoing provisions shall not preclude or limit the ability of Indenture
Trustee to purchase all or any portion of the Trust Estate at a private sale.
(c) In connection with a sale of all or any portion of Trust Estate:
(i) any one or more Noteholders may bid for and purchase the
property offered for sale, and upon compliance with the terms of sale
may hold, retain, and possess and dispose of such property, without
further accountability, and any Noteholder may, in paying the purchase
money therefore, deliver in lieu of cash any Outstanding Notes or
claims for interest thereon for credit in the amount that shall, upon
distribution of the net proceeds of such sale, be payable thereon, and
the Notes, in case the amounts so payable thereon shall be less than
the amount due thereon, shall be returned to the Noteholders after
being appropriately stamped to show such partial payment;
(ii) Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any
portion of Trust Estate in connection with a sale thereof;
(iii) Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of Issuer to transfer and convey its
interest in any portion of the Trust Estate in connection with a sale
thereof, and to take all action necessary to effect such sale; and
(iv) no purchaser or transferee at such a sale shall be bound
to ascertain Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of
any moneys.
(d) The method, manner, time, place and terms of any sale of all or any
portion of the Trust Estate shall be commercially reasonable.
(e) The provisions of this Section 6.16 shall not be construed to
restrict the ability of Indenture Trustee to exercise any rights and powers
against Issuer or the Trust Estate that are vested in Indenture Trustee by this
Indenture, including,
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without limitation, the power of Indenture Trustee to proceed against the
collateral subject to the lien of this Indenture and to institute judicial
proceedings for the collection of any deficiency remaining thereafter.
ARTICLE 7.
THE TRUSTEE
SECTION 7.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default known to
Indenture Trustee,
(i) 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 Indenture Trustee; and
(ii) in the absence of bad faith on its part, 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 Indenture Trustee and conforming to the
requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to Indenture Trustee, Indenture Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing to the
actual knowledge of a Responsible Officer of Indenture Trustee, Indenture
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use 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
his own affairs.
(c) No provision of this Indenture shall be construed to relieve
Indenture Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the effect
of subsection (a) of this Section;
(ii) Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall
be proved, subject to Section 7.3(f), that Indenture Trustee was
negligent in ascertaining the pertinent facts;
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(iii) Indenture Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Noteholders in accordance with
Section 6.12 relating to the time, method, and place of conducting any
proceeding for any remedy available to Indenture Trustee, or exercising
any trust or power conferred upon Indenture Trustee, under this
Indenture; and
(iv) no provision of this Indenture shall require Indenture
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to Indenture Trustee shall be subject to the provisions of
this Section.
SECTION 7.2. Notice of Defaults or Events of Default.
Within two Business Days after a Responsible Officer obtaining
knowledge of the occurrence of any Default or Event of Default hereunder,
Indenture Trustee shall transmit, by certified mail return receipt requested,
hand delivery or overnight courier, to all Noteholders, as their names and
addresses appear in the Note Register, Servicer, Transferor, and the Rating
Agencies notice of such Default or Event of Default hereunder known to Indenture
Trustee, unless such Default or Event of Default shall have been cured or
waived.
SECTION 7.3. Certain Rights of Indenture Trustee.
Subject to the provisions of Section 7.1:
(a) Indenture Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, note, debenture,
other evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties;
(b) any request or direction of Issuer mentioned herein shall be
sufficiently evidenced by an Issuer Request or Issuer Order and any action of
Issuer may be sufficiently evidenced by an Issuer Order;
(c) whenever in the administration of this Indenture Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or
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omitting any action hereunder, Indenture Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) Indenture Trustee may consult with counsel as to legal matters and
the written advice of any such counsel selected by Indenture Trustee with due
care shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) Indenture Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Noteholders pursuant to this Indenture, unless such Noteholders
shall have offered to Indenture Trustee reasonable security or indemnity against
the costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) Indenture Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, note,
debenture, other evidence of indebtedness, or other paper or document, but
Indenture Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if Indenture
Trustee shall determine to make such further inquiry or investigation, it shall
be entitled to examine the books, records and premises of Issuer, personally or
by agent or attorney; and
(g) Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and Indenture Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 7.4. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except Indenture
Trustee's certificates of authentication, shall be taken as the statements of
Issuer, and Indenture Trustee assumes no responsibility for their correctness.
Indenture Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Notes. Indenture Trustee shall not be accountable for
the use or application by Issuer of the proceeds of the Notes.
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SECTION 7.5. May Hold Notes.
Indenture Trustee, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with Issuer with the same
rights it would have if it were not Indenture Trustee.
SECTION 7.6. Money Held in Trust.
Money and investments held by Indenture Trustee shall be held in trust
in one or more trust accounts hereunder, but need not be segregated from other
funds except to the extent required by law.
SECTION 7.7. [Reserved.]
SECTION 7.8. Corporate Indenture Trustee Required; Eligibility.
There shall at all times be an Indenture Trustee hereunder which shall
(a) be a corporation organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia, authorized
under such laws to exercise corporate trust powers; (b) have a combined capital
and surplus of at least $100,000,000; (c) be subject to supervision or
examination by federal or state authority; and (d) at the time of appointment,
shall have long-term debt obligations (or, if Indenture Trustee does not have
outstanding long-term debt obligations and is a subsidiary of a holding company,
which holding company shall have long-term obligations) having a credit rating
of at least "[___]" or its equivalent from each of the Rating Agencies.
If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time Indenture Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
This Indenture shall always have a Indenture Trustee who satisfies the
requirements of Section 310(a)(1) of Trust Indenture Act. Indenture Trustee is
subject to the provisions of Section 310(b) of Trust Indenture Act regarding
disqualification of a trustee upon acquiring any conflicting interest.
If a default occurs under this Indenture, and Indenture Trustee is
deemed to have a conflicting interest as a result of acting as trustee for both
the Class A Notes and the Class B Notes, a successor Indenture Trustee shall be
appointed for one or
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both of such Classes, so that there will be separate Indenture Trustees for the
Class A Notes and the Class B Notes. No such event shall alter the voting rights
of the Class A Noteholders or Class B Noteholders under this Indenture. However,
so long as any amounts remain unpaid with respect to the Class A Notes, only
Indenture Trustee for the Class A Noteholders will have the right to exercise
remedies under this Indenture (but subject to the express provisions of Section
6.2 and to the right of the Class B Noteholders to receive their share of any
proceeds of enforcement, subject to the subordination of the Class B Notes to
the Class A Notes as described herein). Upon repayment of the Class A Notes in
full, all rights to exercise remedies under the Indenture will transfer to
Indenture Trustee for the Class B Notes.
In the case of the appointment hereunder of a successor Indenture
Trustee with respect to any Class of Notes, the Issuer, retiring Indenture
Trustee and successor Indenture Trustee with respect to such Class of Notes
shall execute and deliver an indenture supplemental hereto wherein each
successor Indenture Trustee shall accept such appointment and which (i) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, successor Indenture Trustee all the rights, powers,
trusts and duties of retiring Indenture Trustee with respect to the Notes of the
Class to which the appointment of such successor Indenture Trustee relates, (ii)
if retiring Indenture Trustee is not retiring with respect to all Classes of
Notes, shall contain such provisions as shall be deemed necessary or desirable
to confirm that all the rights, powers, trusts and duties of retiring Indenture
Trustee with respect to the Notes of each Class as to which retiring Indenture
Trustee is not retiring shall continue to be vested in retiring Indenture
Trustee, and (iii) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Indenture Trustee, it being understood
that nothing herein or in such supplemental indenture shall constitute such
Indenture Trustees as co-trustees of the same trust and that each such Indenture
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Indenture Trustee;
and upon the execution and delivery of such supplemental indenture the
resignation or removal of the retiring Indenture Trustee shall become effective
to the extent provided therein.
SECTION 7.9. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of Indenture Trustee and no appointment
of a successor Indenture Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Indenture Trustee under
Section 7.10.
(b) Indenture Trustee may resign at any time by giving written notice
thereof to Issuer and by mailing notice of resignation by first-class mail,
postage prepaid, to Noteholders at their addresses appearing on the Note
Register.
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(c) Indenture Trustee may be removed at any time by Act of the Holders
of Notes evidencing not less than a majority of the then Outstanding Principal
Amount of the Notes, delivered to Indenture Trustee and Issuer.
(d) If Indenture Trustee shall resign, be removed, or become incapable
of acting, or if a vacancy shall occur in the office of Indenture Trustee for
any cause, Issuer, with the consent of the Holders of Notes evidencing at least
66 2/3% of the Outstanding Principal Amount of the Notes, by an act of Issuer,
shall promptly appoint a successor Indenture Trustee.
(e) If no successor Indenture Trustee shall have been so appointed by
Issuer or the Noteholders as hereinbefore provided and accepted appointment in
the manner hereinafter provided within 30 days after any such resignation or
removal, existence of incapability, or occurrence of such vacancy, Indenture
Trustee or any Noteholder may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee.
(f) Issuer shall give notice of each resignation and each removal of
Indenture Trustee and each appointment of a successor Indenture Trustee by
mailing written notice of such event by first-class mail, postage prepaid, to
all Noteholders, as their names and addresses appear in the Note Register and
each Rating Agency. Each notice shall include the name of the successor
Indenture Trustee and the address of its Corporate Trust Office.
(g) Issuer may remove Indenture Trustee if Indenture Trustee fails to
comply with Section 7.8 of this Indenture.
(h) If Indenture Trustee after written request by any Noteholder who
has been a Noteholder for at least six months fails to comply with Section
310(b) of the Trust Indenture Act, such Noteholder may petition any court of
competent jurisdiction, for the removal of Indenture Trustee and the appointment
of a successor Indenture Trustee.
SECTION 7.10. Acceptance of Appointment by Successor.
(a) Every successor Indenture Trustee appointed hereunder shall
execute, acknowledge and deliver to Issuer and to the retiring Indenture Trustee
an instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Indenture Trustee shall become effective and such
successor Indenture Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Indenture Trustee; but, on request of Issuer or the successor Indenture Trustee,
such retiring Indenture Trustee shall, upon payment of its charges and expenses,
execute and deliver an instrument transferring to such successor Indenture
Trustee all the rights, powers and trusts of the retiring
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Indenture Trustee and shall duly assign, transfer and deliver to such successor
Indenture Trustee all property and money held by such retiring Indenture Trustee
hereunder. Upon request of any such successor Indenture Trustee, Issuer shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Indenture Trustee all such rights, powers and
trusts.
(b) No successor Indenture Trustee shall accept its appointment unless
at the time of such acceptance such successor Indenture Trustee shall be
qualified and eligible under this Article.
SECTION 7.11. Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which Indenture Trustee may be merged or converted or
with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which Indenture Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
Indenture Trustee, shall be the successor of Indenture Trustee hereunder,
provided such Person shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by Indenture Trustee then in office, any
successor by merger, conversion, or consolidation to such authenticating
Indenture Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Indenture Trustee had
itself authenticated such Notes. Indenture Trustee shall provide prompt written
notice to each Rating Agency of any event referenced in this Section 7.11.
SECTION 7.12. Co-trustees and Separate Indenture Trustees.
(a) At any time or times, if Issuer, Indenture Trustee or any
Noteholder determines that it is necessary for the purpose of meeting the legal
requirements of any jurisdiction in which any of Trust Estate may at the time be
located, Issuer and Indenture Trustee shall have power to appoint, and, upon the
written request of Indenture Trustee or the Holders of Notes evidencing at least
a majority of the then Outstanding Principal Amount of the Notes, Issuer shall
for such purpose join with Indenture Trustee in the execution, delivery, and
performance of all instruments and agreements necessary or proper to appoint one
or more Persons approved by Indenture Trustee either to act as co-trustee,
jointly with Indenture Trustee, of all or any part of such Trust Estate, or to
act as separate trustee of any such property, in either case with such powers as
may be provided in the instrument of appointment, and to vest in such Person or
Persons in the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section. If
Issuer does not join in such appointment within 15 days after the receipt by it
of a request so to do, or in case an Event of Default has occurred and is
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continuing, Indenture Trustee, or the Holders of Notes evidencing a majority of
the then Outstanding Principal Amount of the Notes, alone shall have power to
make such appointment.
(b) Should any written instrument from Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by Issuer.
(c) Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following terms:
(i) The Notes shall be authenticated and delivered and all
rights, powers, duties, and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, Indenture Trustee hereunder,
shall be exercised, solely by Indenture Trustee.
(ii) The rights, powers, duties, and obligations hereby
conferred or imposed upon Indenture Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and
exercised or performed by Indenture Trustee or by Indenture Trustee and
such co-trustee or separate trustee jointly, as shall be provided in
the instrument appointing such co-trustee or separate trustee, except
to the extent that, under any law of any jurisdiction in which any
particular act is to be performed, Indenture Trustee shall be
incompetent or unqualified to perform such act, in which event such
rights, powers, duties and obligations shall be exercised and performed
by such co-trustee or separate trustee.
(iii) Indenture Trustee at any time, by an instrument in
writing executed by it, with the concurrence of Issuer evidenced by a
Trust Order, may accept the resignation of or remove any co-trustee or
separate trustee appointed under this Section, and, in case an Event of
Default has occurred and is continuing, Indenture Trustee shall have
power to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of Issuer. Upon the written
request of Indenture Trustee, Issuer shall join with Indenture Trustee
in the execution, delivery and performance of all instruments and
agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-trustee or separate trustee so resigned
or removed may be appointed in the manner provided in this Section.
(iv) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of Indenture Trustee
or any other such
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trustee hereunder and Indenture Trustee shall not be personally liable
by reason of any act or omission of any co-trustee or other such
separate trustee hereunder selected by Indenture Trustee with due care
or appointed in accordance with directions to Indenture Trustee
pursuant to Section 6.12.
(v) Any Act of Noteholders delivered to Indenture Trustee
shall be deemed to have been delivered to each such co-trustee and
separate trustee.
SECTION 7.13. Acceptance by Indenture Trustee.
Indenture Trustee hereby acknowledges the conveyance of the Granted
Assets and the receipt of the Leases and the other Granted Assets granted by
Issuer hereunder and declares that Indenture Trustee, through a custodian, will
hold such Leases and other Granted Assets conveyed by Issuer in trust, for the
use and benefit of all Noteholders subject to the terms and provisions hereof.
SECTION 7.14. Preferential Collection of Claims Against Issuer.
Indenture Trustee is subject to Trust Indenture Act Section 311(a),
excluding any creditor relationship listed in Trust Indenture Act Section
311(b). A Indenture Trustee who has resigned or been removed shall be subject to
Trust Indenture Act Section 311(a) to the extent indicated therein.
SECTION 7.15. Reports by Indenture Trustee to Noteholders.
To the extent required by the Trust Indenture Act, within 60 days after
each May 15, following the date of this Indenture, Indenture Trustee shall mail
to Noteholders a brief report dated as of such reporting date that complies with
Trust Indenture Act Section 313(a), if such a report is required pursuant to
Trust Indenture Act Section 313(a), except with respect Section 313(a)(6) of the
Trust Indenture Act and transactions described in Section 4.4. Indenture Trustee
also shall comply with Trust Indenture Act Section 313(b). Indenture Trustee
shall also transmit by mail all reports as required by Trust Indenture Act
Section 313(c).
A copy of each such report required under Trust Indenture Act Section
313 shall, at the time of such transmission to Noteholders be filed with the
Commission and with each stock exchange or other market system on which the
Notes are listed. Issuer or any other obligor upon the Notes shall notify
Indenture Trustee if the Notes become listed on any stock exchange or market
trading system.
SECTION 7.16. No Proceedings.
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Indenture Trustee hereby agrees that it will not, with respect to its
fees and expenses, directly or indirectly institute, or cause to be instituted,
against Issuer or Transferor any proceeding of the type referred to in Section
6.1(e) or (f) so long as there shall not have elapsed one year plus one day
since the latest maturing Notes have been paid in full in cash.
ARTICLE 8.
COVENANTS
SECTION 8.1. Payment of Principal and Interest.
Issuer will duly and punctually pay the principal of and interest on
the Notes in accordance with the terms of the Notes and this Indenture.
SECTION 8.2. Maintenance of Office or Agency; Chief Executive
Office.
Issuer will maintain at the Corporate Trust Office an office
or agency where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon Issuer in respect of the Notes
and this Indenture may be served. Issuer hereby appoints Indenture Trustee as
its agent to receive all such presentations, surrenders, notices and demands.
SECTION 8.3. Money for Payments to Noteholders to be Held in
Trust.
(a) All payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Collection Account pursuant
to Section 3.3(b) or Section 6.6 shall be made on behalf of Issuer by Indenture
Trustee, and no amounts so withdrawn from the Collection Account for payments of
Notes shall be paid over to Issuer under any circumstances except as provided in
this Section 8.3 or in Section 3.3(b) or Section 6.6.
(b) In making payments hereunder, Indenture Trustee will:
(i) allocate all sums received for payment to the Noteholders
on each Payment Date among such Noteholders, first to the Class A
Noteholders on a pro rata basis and then to the Class B Noteholders on
a pro rata basis basis in accordance with the information known to
Indenture Trustee;
(ii) 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
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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; and
(iii) comply with all requirements of the Internal Revenue
Code of 1986, as amended (or any successor statutes), and all
regulations thereunder, 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.
Whenever Issuer shall have one or more Paying Agents, it will, prior to
each due date of the principal of or interest on any Notes, deposit with a
Paying Agent a sum sufficient to pay the principal or interest so becoming due,
such sum to be held in trust for the benefit of the Noteholders entitled to such
principal or interest, and (unless such Paying Agent is Indenture Trustee)
Issuer will promptly notify Indenture Trustee of its action or failure so to
act.
Issuer will cause each Paying Agent other than Indenture Trustee to
execute and deliver to Indenture Trustee an instrument in which such Paying
Agent shall agree with Indenture Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of or interest on 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
(2) give Indenture Trustee notice of any default by Issuer (or
any other obligor upon the Securities) in the making of any payment of
principal or interest.
(c) Except as required by applicable law, any money held by Indenture Trustee in
trust for the payment of any amount due with respect to any Note and remaining
unclaimed for three years after such amount has become due and payable to the
Noteholder shall be discharged from such trust and, subject to applicable
escheat laws, paid to Issuer upon request; and such Noteholder shall thereafter,
as an unsecured general creditor, look only to Issuer for payment thereof (but
only to the extent of the amounts so paid to the Trust), and all liability of
Indenture Trustee with respect to such trust money shall thereupon cease.
SECTION 8.4. Corporate Existence; Merger; Consolidation, etc.
(a) Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware, and will
obtain and preserve its qualification to do business as a foreign entity in each
jurisdiction in which such
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qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes or any of the Leases.
(b) 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 of America or any State
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to Indenture Trustee, in form satisfactory to
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 on the part of 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;
(iv) Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to Indenture Trustee) to the effect
that such transaction will not have any material adverse tax
consequence to Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the Lien and
security interest created by this Indenture shall have been taken; and
(vi) Issuer shall have delivered to Indenture Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with
this Article VIII and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
(c) Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of Issuer the conveyance or transfer of which is
hereby restricted shall: (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America
or any State, (B) expressly assumes, by an indenture supplemental
hereto, executed and delivered to Indenture
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Trustee, in form satisfactory to 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 on the part of Issuer to be performed or observed, all as
provided herein, (C) expressly agrees 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,
(D) unless otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless Issuer against and from
any loss, liability or expense arising under or related to this
Indenture and the Notes and (E) expressly agrees by means of such
supplemental indenture that such Person (or if a group of Persons, then
one specified Person) shall make all filings with the Commission (and
any other appropriate Person) required by the Exchange Act in
connection with 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) Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to Indenture Trustee) to the effect
that such transaction will not have any material adverse tax
consequence to Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the Lien and
security interest created by this Indenture shall have been taken; and
(vi) Issuer shall have delivered to Indenture Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article and that all conditions precedent herein provided for relating
to such transaction have been complied with (including any filing
required by the Exchange Act).
SECTION 8.5. Protection of Trust Estate; Further Assurances.
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, and will
take such other action as may be necessary or advisable to:
(i) Grant more effectively all or any portion of Trust Estate;
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(ii) maintain or preserve the Lien of this Indenture or carry
out more effectively the purposes hereof;
(iii) publish notice of, or protect the validity of, any Grant
made or to be made by this Indenture and perfect the security interest
contemplated hereby in favor of Indenture Trustee in each of the
Leases, in the Equipment and all other property included in Trust
Estate; provided, that Issuer shall not be required to file Financing
Statements with respect to the interests in the Equipment in addition
to those contemplated by Section 4.3(d) of the Pooling and Servicing
Agreement;
(iv) enforce or cause Servicer to enforce any of the Leases;
or
(v) preserve and defend title to the Leases (including the
right to receive all payments due or to become due thereunder), the
interests in the Equipment, or other property included in Trust Estate
and preserve and defend the rights of Indenture Trustee and the
Noteholders in such Leases (including the right to receive all payments
due or to become due thereunder), interests in the Equipment and other
property against the claims of all Persons and parties.
Issuer, upon Issuer's failure to do so, hereby designates Indenture Trustee its
agent and attorney-in-fact to execute any Financing Statement or continuation
statement required pursuant to this Section 8.5; provided, that such designation
shall not be deemed to create a duty in Indenture Trustee to monitor the
compliance of Issuer with the foregoing covenants; and provided, further, that
the duty of Indenture Trustee to execute any instrument required pursuant to
this Section 8.5 shall arise only if a Responsible Officer of Indenture Trustee
has actual knowledge of any failure of Issuer to comply with the provisions of
this Section 8.5.
SECTION 8.6. [Reserved].
SECTION 8.7. Performance of Obligations; Pooling and Servicing
Agreement.
(a) Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Notes and the Trust Agreement.
(b) Issuer will not take any action or permit any action to be taken by
others which would release any Person from any of such Person's covenants or
obligations under any Lease or any other instrument included in Trust Estate, or
which would result in the amendment, hypothecation, subordination, termination,
or discharge of, or impair the validity or effectiveness of, any Lease or such
other
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instrument, except as expressly provided in this Indenture or the Pooling and
Servicing Agreement.
(c) If any Authorized Officer shall have knowledge of the occurrence of
a default under the Pooling and Servicing Agreement, Issuer shall promptly
notify Indenture Trustee and the Noteholders thereof, and shall specify in such
notice the action, if any, Issuers taking in respect of such default. Except as
otherwise provided therein, Issuer may not waive any default under or amend the
Pooling and Servicing Agreement.
SECTION 8.8. Negative Covenants.
Issuer will not:
(a) sell, transfer, exchange or otherwise dispose of any portion of the
Trust Estate except as expressly permitted by this Indenture, the Pooling and
Servicing Agreement, and the Trust Agreement;
(b) claim any credit on, or make any deduction from, the principal of,
or interest on, any of the Notes by reason of the payment of any taxes levied or
assessed upon any portion of the Trust Estate;
(c) engage in any business or activity other than in connection with,
or relating to the ownership of, the Leases and the interests in the Equipment,
the issuance of the Notes, and the specific transactions contemplated hereby;
(d) become liable for, issue, incur, assume, or allow to remain
outstanding any indebtedness, or guaranty any indebtedness of any Person, other
than the Notes, except as contemplated by this Indenture, the registration
statement filed with respect to the Class A Notes and Class B Notes (and any
registration statement for similar securities), and the Pooling and Servicing
Agreement;
(e) seek dissolution or liquidation in whole or in part or
reorganization of its business or affairs;
(f) (i) permit the validity or effectiveness of this Indenture or any
Grant hereby to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations under this Indenture, except as may
be expressly permitted hereby, (ii) permit any lien, charge, security interest,
mortgage or other encumbrance to be created on or to extend to or otherwise
arise upon or burden Trust Estate or any part thereof or any interest therein or
the proceeds thereof
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other than the lien of this Indenture, or (iii) subject to Section 3.1(c) of the
Pooling and Servicing Agreement, permit the lien of this Indenture not to
constitute a valid first priority security interest in Trust Estate; or
(g) Issuer shall not make any expenditure (by long-term or operating
lease or otherwise) for capital assets (either realty or personalty).
(h) So long as any Notes are Outstanding, Issuer shall not remove the
Manager without cause unless the Rating Agency Condition shall have been
satisfied in connection with such removal.
(i) Issuer shall not, directly or indirectly: (i) pay any dividend or
make any distribution (by reduction of capital or otherwise), whether in cash,
property, securities or a combination thereof, to Trustee or any owner of a
beneficial interest in Issuer or otherwise with respect to any ownership or
equity interest or security in or of Issuer or to Servicer or Manager, (ii)
redeem, purchase, retire or otherwise acquire for value any such ownership or
equity interest or security or (iii) set aside or otherwise segregate any
amounts for any such purpose; provided, however, that Issuer may make, or cause
to be made, distributions to Servicer, Trustee, Noteholders, Certificateholders
and Manager as contemplated by, and to the extent funds are available for such
purpose under, the Pooling and Servicing Agreement. Issuer will not, directly or
indirectly, make payments to or distributions from the Collection Account except
in accordance with this Indenture and the other Basic Documents.
SECTION 8.9. Notice of Events of Default.
Issuer shall give the Indenture Trustee and the Rating Agencies prompt
written notice of each Event of Default hereunder, each default on the part of
Servicer or Transferor of its obligations under the Pooling and Servicing
Agreement and each default on the part of ILC of its obligations under the
Contribution Agreement.
SECTION 8.10. Taxes.
Issuer shall pay all taxes when due and payable or levied against its
assets, properties or income, including any property that is part of Trust
Estate.
SECTION 8.11. Indemnification.
Issuer agrees to indemnify and hold harmless Indenture Trustee and each
Noteholder (each an "Indemnified Party") against any and all liabilities,
losses, damages, penalties, costs and expenses (including costs of defense and
legal fees and expenses) which may be incurred or suffered by such Indemnified
Party without
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negligence or willful misconduct on its part as a result of claims, actions,
suits or judgments asserted or imposed against it and arising out of the
transactions contemplated hereby or by the Pooling and Servicing Agreement,
including without limitation, any claims resulting from any use, operation,
maintenance, repair, storage or transportation of any item of Equipment, whether
or not in Issuer's possession or under its control, and any tort claims and any
fines or penalties arising from any violation of the laws or regulations of the
United States or any state or local government or governmental authority;
provided that, all amounts payable pursuant to this Section 8.11 shall be fully
subordinated to amounts payable under the Notes, shall be without recourse to
Issuer except to the extent that all amounts otherwise due and payable under the
terms of this Indenture have been fully paid and shall not, to the extent that
such amounts are unpaid, constitute a claim against Issuer except to the extent
that all amounts otherwise due and payable under the terms of this Indenture
have been fully paid.
SECTION 8.12. Commission Reports; Reports to Indenture Trustee;
Reports to Noteholders.
Issuer shall:
(a) file with Indenture Trustee, within 15 days after Issuers required
to file the same with the Commission, copies of the annual reports and of the
information, documents and other reports which Issuer may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act
(or copies of such portions thereof as may be prescribed by rules and
regulations of the Commission); or, if Issuers not required to file with the
Commission information, documents or reports pursuant to either Section 13 or
Section 15(d) of the Exchange Act, then Issuer will file with Indenture Trustee
and with the Commission, in accordance with rules and regulations prescribed by
the Commission, such of the supplementary and periodic information, documents
and reports required pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities exchange as may be
prescribed in such rules and regulations;
(b) file with Indenture Trustee and the Commission, in accordance with
the rules and regulations prescribed by the Commission, such additional
information, documents and reports with respect to compliance by Issuer with the
conditions and covenants provided for in this Indenture as may be required by
such rules and regulations, including, in the case of annual reports, if
required by such rules and regulations, certificates or opinions of independent
public accountants, conforming to the requirements of Sections 11.3 and 11.4
hereof, as to compliance with conditions or covenants, compliance with which is
subject to verification by accountants; and
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(c) furnish to Indenture Trustee for distribution to the Noteholders,
as the names and addresses of such Noteholders appear in the Note Register, in
the manner and to the extent provided in Section 7.15 hereof, such summaries of
any information, documents and reports required to be filed with Indenture
Trustee pursuant to the provisions of Subsections (a) and (b) of this Section
8.12 as may be required to be provided to such Noteholders by the rules and
regulations of the Commission under the provisions of the Trust Indenture Act.
ARTICLE 9.
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of
Noteholders.
(a) Without the consent of any Noteholders, Issuer, by a Trust Order,
and Indenture Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto, in form satisfactory to Indenture Trustee,
for any of the following purposes:
(i) to add to the covenants of Issuer for the benefit of the
Noteholders, or to surrender any right or power herein conferred upon
the Trust;
(ii) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein; or
(iii) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or to better assure,
convey and confirm unto Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture;
provided such action pursuant to this Section 9.1(a) shall not adversely affect
the interests of the Noteholders in any respect. Additionally, Issuer, by Trust
Order, and Indenture Trustee, without the consent of any Noteholders, may
execute a Supplemental Indenture to conform the Indenture to the description
thereof and of the Notes and Certificates contained in the Prospectus.
(b) Indenture Trustee shall promptly deliver to each Noteholder and
each Rating Agency a copy of any supplemental indenture entered into pursuant to
Section 9.1(a).
SECTION 9.2. Supplemental Indentures with Consent of
Noteholders.
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(a) With the consent of the Holders of Notes evidencing not less than
66 2/3% of the then Outstanding Principal Amount of the Notes and by Act of said
Noteholders delivered to Issuer and Indenture Trustee, Issuer, by a Trust Order,
and Indenture Trustee may enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Noteholders under this Indenture; provided, that no
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby,
(i) change the Stated Maturity of any Note or the Principal
Payments or Interest Payments due or to become due on any Payment Date
with respect to any Note, or change the priority of payment thereof as
set forth herein, or reduce the principal amount thereof or the Note
Interest Rate thereon, or change the place of payment where, or the
coin or currency in which, any Note or the interest thereon is payable,
or impair the right to institute suit for the enforcement of any such
payment on or after the Maturity thereof;
(ii) reduce the percentage of the Outstanding Principal Amount
of the Notes the consent of whose Noteholders is required for any such
supplemental indenture, for any waiver of compliance with provisions of
this Indenture or Events of Default and their consequences, or for any
Act of Noteholders;
(iii) modify any of the provisions of this Section or Section
6.13 except to increase any percentage or fraction set forth therein or
to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding"; or
(v) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of
Trust Estate or, except as provided in Sections 4.1 or 4.2, terminate
the lien of this Indenture on any property at any time subject hereto
or deprive any Noteholder of the security afforded by the lien of this
Indenture.
(b) Indenture Trustee shall promptly deliver to each Noteholder and
each Rating Agency a copy of any supplemental indenture entered into pursuant to
Section 9.2(a).
SECTION 9.3. Execution of Supplemental Indentures.
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In executing any supplemental indenture (a) pursuant to Section 9.1 or
(b) pursuant to Section 9.2 without the consent of each Holder of the Notes to
the execution of the same, Indenture Trustee shall be entitled to receive, and
(subject to Section 7.1) 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. Indenture Trustee may, but shall not
be obligated to, enter into any supplemental indenture which affects Indenture
Trustee's own rights, duties, projections, or immunities under this Indenture or
otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes, and every
Noteholder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 9.5. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
Indenture Trustee, bear a notation in form approved by Indenture Trustee as to
any matter provided for in such supplemental indenture. If Issuer shall so
determine, new Notes so modified as to conform, in the opinion of Indenture
Trustee and Issuer, to any such supplemental indenture may be prepared and
executed by Issuer and authenticated and delivered by Indenture Trustee in
exchange for Outstanding Notes.
SECTION 9.6. Compliance with Trust Indenture Act.
Every amendment, supplement or waiver to this Indenture or the Notes
shall comply with the Trust Indenture Act as then in effect.
ARTICLE 10.
SATISFACTION AND DISCHARGE
SECTION 10.1. Satisfaction and Discharge of Indenture.
(a) This Indenture shall cease to be of further effect (except as to
any surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and Indenture Trustee, on demand of and at the expense
of Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
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(i) 100 days shall have elapsed since either
(A) all Notes theretofore authenticated and delivered
(other than (1) Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 2.4 and (2) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by Issuer and thereafter repaid to Issuer or discharged
from such trust, as provided in Section 8.3(c)) have been
delivered to Indenture Trustee for cancellation; or
(B) the final installments of principal on all such
Notes not theretofore delivered to Indenture Trustee for
cancellation
(1) have become due and payable, or
(2) will become due and payable at their
Stated Maturity, as applicable, within one year,
and Issuer has irrevocably deposited or caused to be deposited
with Indenture Trustee as trust funds in trust for the purpose
an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to
Indenture Trustee for cancellation, for principal and interest
to the date of such deposit (in the case of Notes which have
become due and payable) or to the Stated Maturity thereof;
(ii) Issuer has paid or caused to be paid all other sums
payable hereunder by Issuer for the benefit of the Noteholders; and
(iii) Issuer has delivered to Indenture Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
At such time, Indenture Trustee shall deliver to Issuer or, upon Issuer Order,
its assignee, all cash, securities and other property held by it as part of
Trust Estate other than funds deposited with Indenture Trustee pursuant to
Section 10.1(a)(i)(B), for the payment and discharge of the Notes.
(b) Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of Issuer to Indenture Trustee under Sections 7.7 and 8.11, and,
if money shall have been deposited with Indenture Trustee pursuant to Section
10.1(a)(i)(B), the obligations of Indenture Trustee under Section 10.2 and
Section 8.3(c) shall survive.
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(c) Indenture Trustee shall provide prompt written notice to each
Rating Agency of any satisfaction and discharge of this Indenture pursuant to
this Article 10.
SECTION 10.2. Application of Trust Money.
Subject to the provisions of Section 8.3(c), all money deposited with
Indenture Trustee pursuant to Sections 10.1 and 8.3 shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment to the Persons entitled thereto, of the principal and
interest for whose payment such money has been deposited with Indenture Trustee.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by operation of Trust Indenture Act Section 318(a), the
duties imposed by Section 318(a) shall control.
SECTION 11.2. Communication by Noteholders with Other
Noteholders.
Noteholders may communicate, pursuant to Trust Indenture Act Section
312(b), with other Noteholders with respect to their rights under this Indenture
or the Notes. Issuer, Indenture Trustee, the Note Registrar and all other
parties shall have the protection of Trust Indenture Act Section 312(c).
SECTION 11.3. Officers' Certificate and Opinion of Counsel as to
Conditions Precedent.
Upon any request or application by Issuer (or any other obligor upon
the Notes) to Indenture Trustee to take any action under this Indenture, Issuer
(or such other Obligor) shall furnish to Indenture Trustee:
(a) an Officers' Certificate (which shall include the
statements set forth in Section 11.4) stating that, in the opinion of
the signers, all conditions precedent and covenants, if any, provided
for in this Indenture relating to the proposed action have been
complied with; and
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(b) an Opinion of Counsel (which shall include the statements
set forth in Section 11.4) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been complied
with.
SECTION 11.4. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 11.5. Nonpetition.
Indenture Trustee shall not petition or otherwise invoke the process of
any Governmental Authority for the purpose of commencing or sustaining a case
against Issuer or Transferor under any federal or state bankruptcy, insolvency
or similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of Issuer or Transferor any
substantial part of its respective property, or ordering the winding up or
liquidation of the affairs of Issuer or Transferor.
SECTION 11.6. ERISA Matters. Each Holder and Note Owner, by acceptance
of a Note, or, in the case of a Note Owner, a beneficial interest in the Note,
shall be deemed to represent and warrant that either (a) it is not acquiring the
Note with the plan assets of a plan described in Section 4975(e)(1) of the Code,
or any entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"); or (b) the acquisition and
holding of the Note will not give rise to a nonexempt prohibited transaction
under Section 406(a) of ERISA or Section 4975 of the Code.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
witnessed, all as of the day and year first above written.
PROVIDENT EQUIPMENT LEASE TRUST
1998-A
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Trustee of the
Provident Equipment Lease Trust 1998-A
By: _________________________________
Name: _________________________________
Title: _________________________________
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: _________________________________
Name: _________________________________
Title: _________________________________
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EXHIBIT A
{FORM OF CLASS A-1 NOTE}
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PROVIDENT EQUIPMENT LEASE TRUST 1998-A
[_______]% CLASS A-1 LEASE-BACKED NOTE
CUSIP NO. ____________
No. R- $_____________
PROVIDENT EQUIPMENT LEASE TRUST 1998-A, a business trust duly organized
and existing under the laws of Delaware (herein called the "Trust", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ___________________________________ Dollars ($_____________),
payable in monthly installments beginning on [ ], 1998, in accordance with the
Indenture. Interest will accrue on the unpaid principal hereof from the date of
issuance, at the rate of [ ] per annum, until the full amount of principal
hereof is otherwise paid or made available for payment and shall be computed on
the basis of a year of 360 days and the actual number of days in the period
since the last Payment Date or with respect to the [ ] Payment Date, since the
Issuance Date.
Principal and interest on this Class A-1 Note shall be paid on the 25th
day of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing November 25, 1998, either by check to the registered
address of the Holder of this Class A-1 Note as of the relevant Record Date or
by wire transfer to an account at a bank in the United States as the Holder
shall specify, as provided more fully in the Indenture; provided, that the final
payment of principal and interest in respect of the Notes shall be payable to
the Holder of this Note only upon
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presentation and surrender of this Note at the Corporate Trust Office of
Indenture Trustee or at the principal office of any Paying Agent appointed
pursuant to the Indenture.
The Stated Maturity of the Class A-1 Notes is [ ], on which date the
Outstanding Principal Amount of the Class A-1 Notes shall be due and payable.
Unless the certificate of authentication hereon has been executed by
Indenture Trustee referred to on the reverse hereof by manual signature, this
Class A-1 Note shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
This Class A-1 Note is one of a duly authorized issue of Class A Notes
of Issuer designated as its "[ %] Class A-1 Lease-Backed Notes (herein called
the "Class A-1 Notes") limited in aggregate principal amount of $_____________,
issued under the Indenture, dated as of September , 1998 (herein called the
"Indenture"), between Issuer and [ ] as Indenture Trustee (herein called the
"Indenture Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of Issuer, Indenture Trustee and the Holders
and of the terms upon which the Class A-1 Notes are authenticated and delivered.
Unless otherwise defined herein, all capitalized terms used herein shall have
the meanings set forth in Appendix X of the Indenture.
This Class A-1 Note will be secured by the pledge to Indenture Trustee
of the Trust Estate.
If an Event of Default under the Indenture has been declared by
Indenture Trustee, the principal of all the Class A-1 Notes (but not less than
all the Class A-1 Notes) may be declared due and payable in the manner and with
the effect provided in the Indenture. Notice of such declaration will be given
by mail to Holders, as their names and addresses appear in the Note Register, as
provided in the Indenture. Upon payment of such principal amount together with
all accrued interest, the obligations of Issuer with respect to the payment of
principal and interest on this Class A-1 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of Issuer
and the rights of the Holders under the Indenture at any time by Issuer and
Indenture Trustee with the consent of the Holders of Notes evidencing at least
66 2/3% in aggregate principal amount of the Class A Notes and the Issuer's [ %]
Class B Lease-Backed Notes (the "Class B Notes") at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate
A-2
<PAGE>
principal amount of the Class A Notes and the Class B Notes at the time
Outstanding, on behalf of all the Holders, to waive compliance by 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 Class A-1 Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Class A-1 Note and of any Class A-1 Note issued upon
the registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Class A-1
Note or any Class A-1 Note.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Class A-1 Note is registrable in the Note
Register, upon surrender of this Class A-1 Note for registration of transfer at
the office or agency of Indenture Trustee in [ ], and at any other office or
agency maintained by Issuer for that purpose, duly endorsed by, or accompanied
by a written instrument of transfer in the form satisfactory to the Note
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Class A-1 Notes, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
Each Holder and Note Owner, by acceptance of a Class A-1 Note, or, in
the case of a Note Owner, a beneficial interest in the Class A-1 Note, shall be
deemed to represent and warrant that either (a) it is not acquiring the Class
A-1 Note with the plan assets of an "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title I of ERISA, or a "plan" as defined in
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (each
such entity a "Benefit Plan"); or (b) the acquisition and holding of the Class
A-1 Note will not give rise to a nonexempt prohibited transaction under Section
406(a) of ERISA or Section 4975 of the Code.
The Class A-1 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000. As provided in the Indenture and
subject to certain limitations therein set forth, Class A-1 Notes are
exchangeable for a like aggregate principal amount of Class A-1 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but Issuer may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
Issuer, Indenture Trustee and any agent of Issuer or Indenture Trustee
may treat the Person in whose name this Class A-1 Note is registered as the
owner hereof for all purposes, whether or not this Class A-1 Note may be
overdue, and neither
A-3
<PAGE>
Issuer, Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture and this Class A-1 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-4
<PAGE>
IN WITNESS WHEREOF, Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: , 199
PROVIDENT EQUIPMENT LEASE TRUST
1998-A
By: _____________________________________
Authorized Officer
Attest:
- ------------------
Indenture Trustee's Certificate of Authentication
This is one of the Class A-1 Notes referred to in the within mentioned
Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: _____________________________________
Authorized Signatory
A-5
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Class A-1 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-1 Note to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code and social security or tax ID
number of assignee)
and irrevocably appoint ____________________, agent to transfer this Class A-1
Note on the books of Issuer. The agent may substitute another to act for him.
Dated: __________________ Signed: __________________________________
(sign exactly as the name appears on the
other side of this Class A-1 Note)
Signature Guarantee ____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A-1 Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A-1 Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class
A-1 Note.
A-6
<PAGE>
{FORM OF CLASS A-2 NOTE}
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PROVIDENT EQUIPMENT LEASE TRUST 1998-A
[ % ] CLASS A-2 LEASE-BACKED NOTE
CUSIP NO. __________________
No. R- $_____________
PROVIDENT EQUIPMENT LEASE TRUST 1998-A, a business trust duly organized
and existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of __________________________ Dollars ($_____________), payable in
monthly installments beginning on [ ], in accordance with the Indenture.
Interest will accrue on the unpaid principal hereof from the date of issuance,
at the rate of [ %] per annum, until the full amount of principal hereof is
otherwise paid or made available for payment and shall be computed on the basis
of twelve 30-day months and a year of 360 days.
Principal and interest on this Class A-2 Note shall be paid on the 25th
day of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing November 25, 1998, either by check to the registered
address of the Holder of this Class A-2 Note as of the relevant Record Date or
by wire transfer to an account at a bank in the United States as the Holder
shall specify, as provided more fully in the Indenture; provided, that the final
payment of principal and interest in respect of the Notes shall be payable to
the Holder of this Note only upon presentation and surrender of this Note at the
Corporate Trust Office of Indenture Trustee or at the principal office of any
Paying Agent appointed pursuant to the Indenture.
A-7
<PAGE>
The Stated Maturity of the Class A-2 Notes is [ ], on which date the
Outstanding Principal Amount of the Class A-2 Notes shall be due and payable.
Unless the certificate of authentication hereon has been executed by
Indenture Trustee referred to on the reverse hereof by manual signature, this
Class A-2 Note shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
This Class A-2 Note is one of a duly authorized issue of Class A-2
Notes of Issuer designated as its "[ %] Class A-2 Lease-Backed Notes" (herein
called the "Class A-2 Notes") limited in aggregate principal amount of
$_____________, issued under the Indenture, dated as of September ____, 1998
(herein called the "Indenture"), between Issuer and [ ] as Indenture Trustee
(herein called the "Indenture Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of Issuer, Indenture
Trustee and the Holders and of the terms upon which the Class A-2 Notes are
authenticated and delivered. Unless otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in Appendix X of the
Indenture.
This Class A-2 Note will be secured by the pledge to Indenture Trustee
of the Trust Estate.
If an Event of Default under the Indenture has been declared by
Indenture Trustee, the principal of all the Class A-2 Notes (but not less than
all the Class A-2 Notes) may be declared due and payable in the manner and with
the effect provided in the Indenture. Notice of such declaration will be given
by mail to Holders, as their names and addresses appear in the Note Register, as
provided in the Indenture. Upon payment of such principal amount together with
all accrued interest, the obligations of Issuer with respect to the payment of
principal and interest on this Class A-2 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of Issuer
and the rights of the Holders under the Indenture at any time by Issuer and
Indenture Trustee with the consent of the Holders of [ %] in aggregate principal
amount of the Class A Notes and the Trust's [ %] Class B Lease-Backed Notes (the
"Class B Notes") at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Class A Notes and the Class B Notes at the time Outstanding, on behalf of
all the Holders, to waive compliance by 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 Class A-2 Note shall be
conclusive and binding upon
A-8
<PAGE>
such Holder and upon all future Holders of this Class A-2 Note and of any Class
A-2 Note issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Class A-2 Note or any Class A-2 Note.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Class A-2 Note is registrable in the Note
Register, upon surrender of this Class A-2 Note for registration of transfer at
the office or agency of Indenture Trustee in ___________________, and at any
other office or agency maintained by Issuer for that purpose, duly endorsed by,
or accompanied by a written instrument of transfer in the form satisfactory to
the Note Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Class A-2 Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
Each Holder and Note Owner, by acceptance of a Class A-2 Note, or, in
the case of a Note Owner, a beneficial interest in the Class A-2 Note, shall be
deemed to represent and warrant that either (a) it is not acquiring the Class
A-2 Note with the plan assets of an "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title I of ERISA, or a "plan" as defined in
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (each
such entity a "Benefit Plan"); or (b) the acquisition and holding of the Class
A-2 Note will not give rise to a nonexempt prohibited transaction under Section
406(a) of ERISA or Section 4975 of the Code.
The Class A-2 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000. As provided in the Indenture and
subject to certain limitations therein set forth, Class A-2 Notes are
exchangeable for a like aggregate principal amount of Class A-2 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but Issuer may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
Issuer, Indenture Trustee and any agent of Issuer or Indenture Trustee
may treat the Person in whose name this Class A-2 Note is registered as the
owner hereof for all purposes, whether or not this Class A-2 Note may be
overdue, and neither Issuer, Indenture Trustee nor any such agent shall be
affected by notice to the contrary.
A-9
<PAGE>
The Indenture and this Class A-2 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-10
<PAGE>
IN WITNESS WHEREOF, Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: , 199
PROVIDENT EQUIPMENT LEASE TRUST
1998-A
{SEAL} By: ______________________________________
Authorized Officer
Attest:
____________________________
Indenture Trustee's Certificate of Authentication
This is one of the Class A-2 Notes referred to in the within mentioned
Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: ______________________________________
Authorized Signatory
A-11
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Class A-2 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-2 Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and social security or tax ID
number of assignee)
and irrevocably appoint ___________________, agent to transfer this Class A-2
Note on the books of Issuer. The agent may substitute another to act for him.
Dated: _____________________ Signed: ______________
__________________________________________
(sign exactly as the name appears on the
other side of this Class A-2 Note)
Signature Guarantee ____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A Note and the signed "power of attorney" in separate envelopes.
For added protection, use certified or registered mail for a Class A-2 Note.
A-12
<PAGE>
{FORM OF CLASS A-3 NOTE}
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PROVIDENT EQUIPMENT LEASE TRUST 1998-A
[ % ] CLASS A-3 LEASE-BACKED NOTE
CUSIP NO. __________________
No. R- $_____________
PROVIDENT EQUIPMENT LEASE TRUST 1998-A, a business trust duly organized
and existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of __________________________ Dollars ($_____________), payable in
monthly installments beginning on [ ], in accordance with the Indenture.
Interest will accrue on the unpaid principal hereof from the date of issuance,
at the rate of [ %] per annum, until the full amount of principal hereof is
otherwise paid or made available for payment and shall be computed on the basis
of twelve 30-day months and a year of 360 days.
Principal and interest on this Class A-3 Note shall be paid on the 25th
day of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing November 25, 1998, either by check to the registered
address of the Holder of this Class A-3 Note as of the relevant Record Date or
by wire transfer to an account at a bank in the United States as the Holder
shall specify, as provided more fully in the Indenture; provided, that the final
payment of principal and interest in respect of the Notes shall be payable to
the Holder of this Note only upon presentation and surrender of this Note at the
Corporate Trust Office of Indenture Trustee or at the principal office of any
Paying Agent appointed pursuant to the Indenture.
A-13
<PAGE>
The Stated Maturity of the Class A-3 Notes is [ ], on which date the
Outstanding Principal Amount of the Class A-3 Notes shall be due and payable.
Unless the certificate of authentication hereon has been executed by
Indenture Trustee referred to on the reverse hereof by manual signature, this
Class A-3 Note shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
This Class A-3 Note is one of a duly authorized issue of Class A-3
Notes of Issuer designated as its "[ %] Class A-3 Lease-Backed Notes" (herein
called the "Class A-3 Notes") limited in aggregate principal amount of
$_____________, issued under the Indenture, dated as of September 1, 1998
(herein called the "Indenture"), between Issuer and Norwest Bank Minnesota,
National Association, as Indenture Trustee (herein called the "Indenture
Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of Issuer, Indenture Trustee and the Holders and of the
terms upon which the Class A-3 Notes are authenticated and delivered. Unless
otherwise defined herein, all capitalized terms used herein shall have the
meanings set forth in Appendix X of the Indenture.
This Class A-3 Note will be secured by the pledge to Indenture Trustee
of the Trust Estate.
If an Event of Default under the Indenture has been declared by
Indenture Trustee, the principal of all the Class A-3 Notes (but not less than
all the Class A-3 Notes) may be declared due and payable in the manner and with
the effect provided in the Indenture. Notice of such declaration will be given
by mail to Holders, as their names and addresses appear in the Note Register, as
provided in the Indenture. Upon payment of such principal amount together with
all accrued interest, the obligations of Issuer with respect to the payment of
principal and interest on this Class A-3 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of Issuer
and the rights of the Holders under the Indenture at any time by Issuer and
Indenture Trustee with the consent of the Holders of [ %] in aggregate principal
amount of the Class A Notes and the Trust's [ %] Class B Lease-Backed Notes (the
"Class B Notes") at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Class A Notes and the Class B Notes at the time Outstanding, on behalf of
all the Holders, to waive compliance by 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 Class A-3 Note shall be
conclusive and binding upon
A-14
<PAGE>
such Holder and upon all future Holders of this Class A-3 Note and of any Class
A-3 Note issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Class A-3 Note or any Class A-3 Note.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Class A-3 Note is registrable in the Note
Register, upon surrender of this Class A-3 Note for registration of transfer at
the office or agency of Indenture Trustee in ___________________, and at any
other office or agency maintained by Issuer for that purpose, duly endorsed by,
or accompanied by a written instrument of transfer in the form satisfactory to
the Note Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Class A-3 Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
Each Holder and Note Owner, by acceptance of a Class A-3 Note, or, in
the case of a Note Owner, a beneficial interest in the Class A-3 Note, shall be
deemed to represent and warrant that either (a) it is not acquiring the Class
A-3 Note with the plan assets of an "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title I of ERISA, or a "plan" as defined in
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (each
such entity a "Benefit Plan"); or (b) the acquisition and holding of the Class
A-3 Note will not give rise to a nonexempt prohibited transaction under Section
406(a) of ERISA or Section 4975 of the Code.
The Class A-3 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000. As provided in the Indenture and
subject to certain limitations therein set forth, Class A-3 Notes are
exchangeable for a like aggregate principal amount of Class A-3 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but Issuer may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
Issuer, Indenture Trustee and any agent of Issuer or Indenture Trustee
may treat the Person in whose name this Class A-3 Note is registered as the
owner hereof for all purposes, whether or not this Class A-3 Note may be
overdue, and neither Issuer, Indenture Trustee nor any such agent shall be
affected by notice to the contrary.
A-15
<PAGE>
The Indenture and this Class A-3 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-16
<PAGE>
IN WITNESS WHEREOF, Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: , 199
PROVIDENT EQUIPMENT LEASE TRUST
1998-A
{SEAL} By: ______________________________________
Authorized Officer
Attest:
- --------------------
Indenture Trustee's Certificate of Authentication
This is one of the Class A-3 Notes referred to in the within mentioned
Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: ______________________________________
Authorized Signatory
A-17
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Class A-3 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-3 Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and social security or tax ID
number of assignee)
and irrevocably appoint ___________________, agent to transfer this Class A-3
Note on the books of Issuer. The agent may substitute another to act for him.
Dated: _____________________ Signed: ____________
(sign exactly as the name appears on the
other side of this Class A-3 Note)
Signature Guarantee ____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A Note and the signed "power of attorney" in separate envelopes.
For added protection, use certified or registered mail for a Class A-3 Note
A-18
<PAGE>
{FORM OF CLASS A-4 NOTE}
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PROVIDENT EQUIPMENT LEASE TRUST 1998-A
[ % ] CLASS A-4 LEASE-BACKED NOTE
CUSIP NO. __________________
No. R- $_____________
PROVIDENT EQUIPMENT LEASE TRUST 1998-A, a business trust duly organized
and existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of __________________________ Dollars ($_____________), payable in
monthly installments beginning on [ ], in accordance with the Indenture.
Interest will accrue on the unpaid principal hereof from the date of issuance,
at the rate of [ %] per annum, until the full amount of principal hereof is
otherwise paid or made available for payment and shall be computed on the basis
of twelve 30-day months and a year of 360 days.
Principal and interest on this Class A-4 Note shall be paid on the 25th
day of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing November 25, 1998, either by check to the registered
address of the Holder of this Class A-4 Note as of the relevant Record Date or
by wire transfer to an account at a bank in the United States as the Holder
shall specify, as provided more fully in the Indenture; provided, that the final
payment of principal and interest in respect of the Notes shall be payable to
the Holder of this Note only upon presentation and surrender of this Note at the
Corporate Trust Office of Indenture Trustee or at the principal office of any
Paying Agent appointed pursuant to the Indenture.
A-19
<PAGE>
The Stated Maturity of the Class A-4 Notes is [ ], on which date the
Outstanding Principal Amount of the Class A-4 Notes shall be due and payable.
Unless the certificate of authentication hereon has been executed by
Indenture Trustee referred to on the reverse hereof by manual signature, this
Class A-4 Note shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
This Class A-4 Note is one of a duly authorized issue of Class A-4
Notes of Issuer designated as its "[ %] Class A-4 Lease-Backed Notes" (herein
called the "Class A-4 Notes") limited in aggregate principal amount of
$_____________, issued under the Indenture, dated as of September 1, 1998
(herein called the "Indenture"), between Issuer and Norwest Bank Minnesota,
National Association, as Indenture Trustee (herein called the "Indenture
Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of Issuer, Indenture Trustee and the Holders and of the
terms upon which the Class A-4 Notes are authenticated and delivered. Unless
otherwise defined herein, all capitalized terms used herein shall have the
meanings set forth in Appendix X of the Indenture.
This Class A-4 Note will be secured by the pledge to Indenture Trustee
of the Trust Estate.
If an Event of Default under the Indenture has been declared by
Indenture Trustee, the principal of all the Class A-4 Notes (but not less than
all the Class A-4 Notes) may be declared due and payable in the manner and with
the effect provided in the Indenture. Notice of such declaration will be given
by mail to Holders, as their names and addresses appear in the Note Register, as
provided in the Indenture. Upon payment of such principal amount together with
all accrued interest, the obligations of Issuer with respect to the payment of
principal and interest on this Class A-4 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of Issuer
and the rights of the Holders under the Indenture at any time by Issuer and
Indenture Trustee with the consent of the Holders of [ %] in aggregate principal
amount of the Class A Notes and the Trust's [ %] Class B Lease-Backed Notes (the
"Class B Notes") at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Class A Notes and the Class B Notes at the time Outstanding, on behalf of
all the Holders, to waive compliance by 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 Class A-4 Note shall be
conclusive and binding upon
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<PAGE>
such Holder and upon all future Holders of this Class A-4 Note and of any Class
A-4 Note issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Class A-4 Note or any Class A-4 Note.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Class A-4 Note is registrable in the Note
Register, upon surrender of this Class A-4 Note for registration of transfer at
the office or agency of Indenture Trustee in ___________________, and at any
other office or agency maintained by Issuer for that purpose, duly endorsed by,
or accompanied by a written instrument of transfer in the form satisfactory to
the Note Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Class A-4 Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
Each Holder and Note Owner, by acceptance of a Class A-4 Note, or, in
the case of a Note Owner, a beneficial interest in the Class A-4 Note, shall be
deemed to represent and warrant that either (a) it is not acquiring the Class
A-4 Note with the plan assets of an "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title I of ERISA, or a "plan" as defined in
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (each
such entity a "Benefit Plan"); or (b) the acquisition and holding of the Class
A-4 Note will not give rise to a nonexempt prohibited transaction under Section
406(a) of ERISA or Section 4975 of the Code.
The Class A-4 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000. As provided in the Indenture and
subject to certain limitations therein set forth, Class A-4 Notes are
exchangeable for a like aggregate principal amount of Class A-4 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but Issuer may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
Issuer, Indenture Trustee and any agent of Issuer or Indenture Trustee
may treat the Person in whose name this Class A-4 Note is registered as the
owner hereof for all purposes, whether or not this Class A-4 Note may be
overdue, and neither Issuer, Indenture Trustee nor any such agent shall be
affected by notice to the contrary.
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<PAGE>
The Indenture and this Class A-4 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
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<PAGE>
IN WITNESS WHEREOF, Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: , 199
PROVIDENT EQUIPMENT LEASE TRUST
1998-A
{SEAL} By: ______________________________________
Authorized Officer
Attest:
_______________________
Indenture Trustee's Certificate of Authentication
This is one of the Class A-4 Notes referred to in the within mentioned
Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: ______________________________________
Authorized Signatory
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<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Class A-4 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-4 Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and social security or tax ID
number of assignee)
and irrevocably appoint ___________________, agent to transfer this Class A-4
Note on the books of Issuer. The agent may substitute another to act for him.
Dated: _____________________ Signed: ____________
----------------------------------------
(sign exactly as the name appears on the
other side of this Class A-4 Note)
Signature Guarantee ____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A Note and the signed "power of attorney" in separate envelopes.
For added protection, use certified or registered mail for a Class A-4 Note
A-24
<PAGE>
{FORM OF CLASS B NOTE}
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PROVIDENT EQUIPMENT LEASE TRUST 1998-A
[ %] CLASS B LEASE-BACKED NOTE
CUSIP No. ___________________
No. R- $_____________
PROVIDENT EQUIPMENT LEASE TRUST 1998-A, a business trust duly organized
and existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ____________________ Dollars ($_____________), payable in
monthly installments beginning on [ ], 1998, in accordance with the Indenture.
Interest will accrue on the unpaid principal hereof from the date of issuance,
at the rate of [ %] per annum, until the full amount of principal hereof is
otherwise paid or made available for payment and shall be computed on the basis
of twelve 30-day months and a year of 360 days.
Principal and interest on this Class B Note shall be paid on the 25th
day of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing November 25, 1998, either by check to the registered
address of the Holder of this Class B Note or by wire transfer to an account at
a bank in the United States as the Holder shall specify, as provided more fully
in the Indenture; provided, that the final payment of principal and interest in
respect of the Class B Notes during the Principal Amortization Period shall be
payable to the Holder of this Class B Note only upon presentation and surrender
of this Class B Note at the Corporate Trust Office of Indenture Trustee or at
the principal office of any Paying Agent appointed pursuant to the Indenture.
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<PAGE>
The Stated Maturity of the Class B Notes is [ ], on which date the
Outstanding Principal Amount of the Class B Notes shall be due and payable.
Unless the certificate of authentication hereon has been executed by
Indenture Trustee referred to on the reverse hereof by manual signature, this
Class B Note shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
This Class B Note is one of a duly authorized issue of Class B Notes of
Issuer designated as its "[ ]% Class B Lease-Backed Notes" (herein called the
"Class B Notes"), limited in aggregate principal amount of $_____________,
issued under the Indenture, dated as of September 1, 1998 (herein called the
"Indenture"), between Issuer and Norwest Bank Minnesota, National Association,
as Indenture Trustee (herein called the "Indenture Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
Issuer, Indenture Trustee and the Holders and of the terms upon which the Class
B Notes are authenticated and delivered. Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings set forth in Appendix X of
the Indenture.
If an Event of Default under the Indenture has been declared by
Indenture Trustee, the principal of all the Class B Notes (but not less than all
the Class B Notes) may be declared due and payable in the manner and with the
effect provided in the Indenture. Notice of such declaration will be given by
mail to Holders, as their names and addresses appear in the Note Register, as
provided in the Indenture. Upon payment of such principal amount together with
all accrued interest, the obligations of Issuer with respect to the payment of
principal and interest on this Class B Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of Issuer
and the rights of the Holders under the Indenture at any time by Issuer and
Indenture Trustee with the consent of the Holders of Notes evidencing at least
66 2/3% in aggregate principal amount of the Trust's _____% Class A Lease-Backed
Notes (the "Class A Notes") and the Class B Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Class A Notes and the Class B
Notes at the time Outstanding, on behalf of all the Holders, to waive compliance
by 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 Class B Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Class B Note and of any Class B Note issued upon
the registration of transfer hereof
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<PAGE>
or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Class B Note or any Class B Note.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Class B Note is registrable in the Note
Register, upon surrender of this Class B Note for registration of transfer at
the office or agency of Indenture Trustee in ____________________, and at any
other office or agency maintained by Issuer for that purpose, duly endorsed by,
or accompanied by a written instrument of transfer in the form satisfactory to
the Note Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Class B Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
Each Holder and Note Owner, by acceptance of a Class B Note, or, in the
case of a Note Owner, a beneficial interest in the Class B Note, shall be deemed
to represent and warrant that either (a) it is not acquiring the Class B Note
with the plan assets of an "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which
is subject to Title I of ERISA, or a "plan" as defined in Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code") (each such entity a
"Benefit Plan"); or (b) the acquisition and holding of the Class B Note will not
give rise to a nonexempt prohibited transaction under Section 406(a) of ERISA or
Section 4975 of the Code.
The Class B Notes are issuable only in registered form without coupons
in minimum denominations of $1,000. As provided in the Indenture and subject to
certain limitations therein set forth, Class B Notes are exchangeable for a like
aggregate principal amount of Class B Notes of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but Issuer may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
Issuer, Indenture Trustee and any agent of Issuer or Indenture Trustee
may treat the Person in whose name this Class B Note is registered as the owner
hereof for all purposes, whether or not this Class B Note may be overdue, and
neither Issuer, Indenture Trustee nor any such agent shall be affected by notice
to the contrary.
The Indenture and this Class B Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
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<PAGE>
IN WITNESS WHEREOF, Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: ______________, 199
PROVIDENT EQUIPMENT LEASE TRUST
1998-A
{SEAL} By: _____________________________________
Authorized Officer
Attest:
________________________
Indenture Trustee's Certificate of Authentication
This is one of the Class B Notes referred to in the within mentioned
Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: _____________________________________
Authorized Signatory
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<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Class B Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class B Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and social security or tax ID number
of assignee)
and irrevocably appoint ___________________________, agent to transfer this
Class B Note on the books of Issuer. The agent may substitute another to act for
him.
Dated: _____________________ Signed: ____________
(signed exactly as the name
appears on the other side
of this Class B Note)
Signature Guarantee ___________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class B Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class B Note and the signed "power of attorney" in separate envelopes.
For added protection, use certified or registered mail for a Class B Note.
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<PAGE>
APPENDIX X
DEFINITIONS
SECTION 1.1 Defined Terms. The following terms have the meanings set
forth below for all purposes of the Basic Documents, and the definitions of such
terms are applicable to the singular as well as to the plural forms of such
terms and to the masculine as well as to the feminine and neuter genders of such
terms.
"Act" is defined in Section 1.4 of the Indenture.
"Additional Principal" means with respect to each Payment Date, an
amount equal to (a) the difference between (i) the Discounted Present Value of
the Performing Leases as of the Determination Date for the preceding Payment
Date and (ii) the Discounted Present Value of the Performing Leases as of the
related Determination Date, less (b) the Class A Principal Payment, the Class B
Principal Payment and the Certificate Principal Payment to be paid on such
Payment Date.
"Affiliate" means, with respect to any specified Person, any other
Person which directly or indirectly controls, or is controlled by, or is under
common control with, such specified Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means the Indenture, Trust Agreement, Pooling and Servicing
Agreement, or Management Agreement, as applicable, as the same may be amended
and supplemented from time to time.
"Authorized Officer" means, with respect to Issuer, any officer of
Indenture Trustee who is authorized to act for Indenture Trustee in matters
relating to the Trust and, so long as the Management Agreement is in effect, any
Vice President or more senior officer of Manager who is authorized to act for
Manager in matters relating to Issuer and to be acted upon by Manager pursuant
to the Management Agreement and who is identified on the list of Authorized
Officers delivered by Manager to Indenture Trustee on the Closing Date (in each
case as such list may be modified or supplemented from time to time thereafter).
With respect to ILC or Servicer, any officer of ILC or Servicer, as the case may
be, who is authorized to act for Servicer or ILC as the case may be.
"Available Funds" means, with respect to any Payment Date, the amount
on deposit in the Collection Account with respect to the immediately preceding
Due Period received on or prior to the Record Date for such Due Period,
including (a) Lease Payments due during the immediately preceding Due Period
(net of any Third
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<PAGE>
Party Amounts), (b) Residual Realizations up to the Residual Amount Cap; (c)
recoveries from Non-Performing Leases (net of amounts retained by Servicer in
accordance with the Pooling and Servicing Agreement); (d) proceeds from
repurchases by Transferor or ILC of Leases to the extent Transferor or ILC has
not substituted Substitute Leases for such Leases; (e) proceeds from the
investment of funds (other than Security Deposit Earnings) in the Collection
Account, the Residual Account and the Reserve Account; (f) Casualty Payments;
(g) Servicer Advances; (h) Termination Payments; and (i) funds, if any, on
deposit in the Reserve Account and/or the Residual Account, to the extent
provided in the Pooling and Servicing Agreement.
"Available Funds Shortfall" is defined in Section 6.4(b) of the Pooling
and Servicing Agreement.
"Available Reserve Amount" means the amount on deposit in the Reserve
Account.
"Available Residual Amount" means the excess of (a) the Residual Amount
Cap over (b) the Utilized Residual Amount.
"Basic Documents" means the Contribution Agreement, the Pooling and
Servicing Agreement, the Indenture, the Trust Agreement, the Management
Agreement, the Certificate Depository Agreement and the Depository Agreement.
"Benefit Plan" is defined in Section 3.4 of the Trust Agreement.
"Book-Entry Class A-1 Notes" means beneficial interests in the Class
A-1 Notes, the ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 2.5 of the Indenture.
"Book-Entry Class A-2 Notes" means beneficial interests in the Class
A-2 Notes, the ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 2.5 of the Indenture.
"Book-Entry Class A-3 Notes" means beneficial interests in the Class
A-3 Notes, the ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 2.5 of the Indenture.
"Book-Entry Class A-4 Notes" means beneficial interests in the Class
A-4 Notes, the ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 2.5 of the Indenture.
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<PAGE>
"Book-Entry Class B Notes" means beneficial interests in the Class B
Notes, the ownership and transfers of which shall be made through book entries
by a Clearing Agency as described in Section 2.5 of the Indenture.
"Booked Residual Value" means the estimated residual value of the
Equipment recorded on the books of Transferor.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banking institutions in the cities in which the
Corporate Trust Office or Servicer are located are authorized or obligated by
law or executive order to remain closed.
"Casualty Payment" means any payment pursuant to a Lease on account of
the loss, theft, condemnation, governmental taking, destruction, or damage
beyond repair of any item of Equipment subject thereto which results, in
accordance with the terms of the Lease, in a reduction in the number or amount
of any future Lease Payments due thereunder or in the termination of the
Lessee's obligation to make future Lease Payments thereunder.
"Cede & Co." means the initial registered holder of the Class A Notes
and the Class B Notes, acting as nominee of The Depository Trust.
"Certificated Security" has the meaning assigned thereto in Section 8-
102(a)(4) of Article 8 of the UCC.
"Certificate Balance" means the aggregate principal amount of the
Certificates outstanding at any time.
"Certificate Distribution Account" is defined in Section 5.1 of the
Trust Agreement.
"Certificate Floor" means, with respect to each Payment Date, an amount
equal to the total of (a) [_______]% of the initial Discounted Present Value of
the Leases as of the Cut-Off Date, plus (b) the Cumulative Loss Amount with
respect to such Payment Date, minus (c) the sum of the Overcollateralization
Amount as of such Payment Date plus the amount on deposit in the Reserve Account
after giving effect to withdrawals to be made on such Payment Date.
"Certificate of Trust" means the Certificate of Trust substantially in
the form of Exhibit B to the Trust Agreement to be filed for Trust pursuant to
Section 3810(a) of the Trust Statute.
"Certificate Owner" means each Holder of a Definitive Trust
Certificate.
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<PAGE>
"Certificate Percentage" means [_______]%.
"Certificate Principal Payment" means (a) while the Class A-1 Notes are
outstanding, zero and (b) after the Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the amount necessary to reduce the
Certificate Balance to the greater of the Certificate Target Investor Principal
Amount and the Certificate Floor.
"Certificate Rate" means ____%.
"Certificate Register" and "Certificate Registrar" means the register
mentioned and the registrar appointed pursuant to Section 3.4 of the Trust
Agreement.
"Certificate Target Investor Principal Amount" means, with respect to
each Payment Date, an amount equal to the product of (a) the Certificate
Percentage and (b) the Discounted Present Value of the Performing Leases as of
the related Determination Date.
"Certificateholder" means a Person in whose name a Trust Certificate is
registered.
"Certificates" means Issuer's [______]% Lease-Backed Certificates
issued in the original principal amount of [$___________].
"Class A Notes" means Issuer's Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes and Class A-4 Notes.
"Class A Percentage" means [_____%].
"Class A Principal Payment" means (a) while the Class A-1 Notes are
outstanding, (i) on all Payment Dates prior to the [Month/Year] Payment Date,
the lesser of (1) the amount necessary to reduce the Outstanding Principal
Amount on the Class A-1 Notes to zero and (2) the difference between (A) the
Discounted Present Value of the Performing Leases as of the Determination Date
for the preceding Payment Date and (B) the Discounted Present Value of the
Performing Leases as of the related Determination Date, and (ii) on the
[Month/Year] Payment Date and thereafter until the Class A-1 Notes have been
paid in full, the entire Outstanding Principal Amount on the Class A-1 Notes,
and (b) after the Class A-1 Notes have been paid in full, the amount necessary
to reduce the aggregate Outstanding Principal Amount on the Class A Notes to the
Class A Target Investor Principal Amount.
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<PAGE>
"Class A Target Investor Principal Amount" means, with respect to each
Payment Date, an amount equal to the product of (a) the Class A Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
"Class A-1 Note Interest Rate" means the rate at which interest accrues
on the Class A-1 Notes, which rate with respect to each Due Period shall be at a
rate per annum equal to [____]%.
"Class A-1 Note Owner" means with respect to a Book-Entry Class A-1
Note, the Person who is the beneficial owner of such Book-Entry Class A-1 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 with
respect to a Definitive Class A-1 Note, a Holder of a Definitive Class A-1 Note.
"Class A-1 Noteholder" means each Holder of a Class A-1 Note.
"Class A-1 Notes" means Issuer's [_____]% Class A-1 Lease-Backed Notes
issued in the original principal amount of [$_____________].
"Class A-2 Note Interest Rate" means, the rate at which interest
accrues on the Class A-2 Notes, which rate with respect to each Due Period shall
be at a rate per annum equal to [___%].
"Class A-2 Note Owner" means, with respect to a Book-Entry Class A-2
Note, the Person who is the beneficial owner of such Book-Entry Class A-2 Note,
as reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency) and, with
respect to a Definitive Class A-2 Note, a Holder of a Definitive Class A-2 Note.
"Class A-2 Noteholder" means the Holder of a Class A-2 Note.
"Class A-2 Notes" means Issuer's [_____]% Class A-2 Lease-Backed Notes
issued in the original principal amount of [$____________].
"Class A-3 Note Interest Rate" means, the rate at which interest
accrues on the Class A-3 Notes, which rate with respect to each Due Period shall
be at a rate per annum equal to [___%].
"Class A-3 Note Owner" means, with respect to a Book-Entry Class A-3
Note, the Person who is the beneficial owner of such Book-Entry Class A-3 Note,
as reflected on the books of the Clearing Agency, or on the books of a Person
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<PAGE>
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency) and, with
respect to a Definitive Class A-3 Note, a Holder of a Definitive Class A-3 Note.
"Class A-3 Noteholder" means the Holder of a Class A-3 Note.
"Class A-3 Notes" means Issuer's [_____]% Class A-3 Lease-Backed Notes
issued in the original principal amount of [$____________].
"Class A-4 Note Interest Rate" means, the rate at which interest
accrues on the Class A-4 Notes, which rate with respect to each Due Period shall
be at a rate per annum equal to [___%].
"Class A-4 Note Owner" means, with respect to a Book-Entry Class A-4
Note, the Person who is the beneficial owner of such Book-Entry Class A-4 Note,
as reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency) and, with
respect to a Definitive Class A-4 Note, a Holder of a Definitive Class A-4 Note.
"Class A-4 Noteholder" means the Holder of a Class A-4 Note.
"Class A-4 Notes" means Issuer's [_____]% Class A-4 Lease-Backed Notes
issued in the original principal amount of [$____________].
"Class B Floor" means, with respect to each Payment Date (the "subject
Payment Date"), an amount equal to the total of (a) [___]% of the initial
Discounted Present Value of the Leases as of the Cut-Off Date, plus (b) the
Cumulative Loss Amount with respect to the subject Payment Date, minus (c) the
sum of the Certificate Balance as of the preceding Payment Date after giving
effect to all payments made on such Payment Date plus the Overcollateralization
Amount as of the subject Payment Date plus the amount on deposit in the Reserve
Account after giving effect to any withdrawals to be made on the related Payment
Date.
"Class B Note Interest Rate" means the rate at which interest accrues
on the Class B Notes, which rate shall be [___%] per annum.
"Class B Note Owner" means with respect to a Book-Entry Class B Note,
the Person who is the beneficial owner of such Book-Entry Class B 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, with
respect to a Definitive Class B Note, a Holder of a Class B Note.
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<PAGE>
"Class B Noteholder" means a Holder of a Class B Note.
"Class B Notes" means Issuer's [_____]% Class B Lease-Backed Notes
issued in the original principal amount of [$_____________].
"Class B Percentage" means [_____]%.
"Class B Principal Payment" means (a) while the Class A-1 Notes are
outstanding, zero and (b) after the Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class B Notes to the greater of the Class B
Target Investor Principal Amount and the Class B Floor.
"Class B Target Investor Principal Amount" means with respect to each
Payment Date, an amount equal to the product of (a) the Class B Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"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.
"Closing Date" means September __, 1998.
"Code" means the Internal Revenue Code of 1986.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 6.1(a) of the Pooling and Servicing
Agreement.
"Commission" means the Securities and Exchange Commission.
"Contributed Equipment" are defined in Section 2.3 of the Contribution
Agreement.
"Control" means with respect to any Federal Book Entry Security,
Indenture Trustee shall have obtained control if:
(i) Indenture Trustee is a participant
in the book entry system maintained by the Federal Reserve Bank that is
acting as fiscal agent for the issuer of such Federal Book Entry
Security, and such Federal Reserve Bank has indicated by book entry
that such Federal Book Entry
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Security has been credited to Indenture Trustee's securities account in
such book entry system; or
(ii) (a) Indenture Trustee (1) is
registered on the records of a Securities Intermediary as the person
having a Securities Entitlement in respect of such Federal Book Entry
Security against such Securities Intermediary; or (2) has obtained the
agreement, in writing, of the Securities Intermediary for such
Securities Entitlement that such Securities Intermediary will comply
with Entitlement Orders of Indenture Trustee without further consent of
any other Person; and (b) the Securities Intermediary is a participant
in the book entry system maintained by the Federal Reserve Bank that is
acting as fiscal agent for the issuer of such Federal Book Entry
Security; and (c) such Federal Reserve Bank has indicated by book entry
that such Federal Book Entry Security has been credited to the
Securities Intermediary's Securities Account in such book entry system.
"Corporate Trust Office" means, with respect to Indenture Trustee, the
principal corporate trust office of Indenture Trustee located at
[________________], or at such other address as Indenture Trustee may designate
from time to time by notice to Noteholders, Issuer and ILC, and with respect to
Trustee means, the principal corporate trust office of Trustee located at [
], Wilmington, Delaware [ ], Attention: [ ]; or at such other
address as Trustee may designate from time to time by notice to the
Certificateholders and Depositor, or the principal corporate trust office of any
successor Trustee (the address of which the successor Trustee will notify the
Certificateholders and Depositor).
"Cumulative Loss Amount" means, with respect to each Payment Date (the
"subject Payment Date"), an amount equal to the excess, if any, of (a) the
difference of (i) the sum of the Outstanding Principal Amount of the Notes and
the Certificate Balance as of the immediately preceding Payment Date after
giving effect to all payments made on such Payment Date, minus (ii) the lesser
of (A) the Discounted Present Value of the Performing Leases as of the
Determination Date relating to the immediately preceding Payment Date minus the
Discounted Present Value of the Performing Leases as of the Determination Date
related to the subject Payment Date and (B) Available Funds for the subject
Payment Date (including any funds withdrawn from the Reserve Account or the
Residual Account as a result of an Available Funds Shortfall) remaining after
the payment of amounts owing to Servicer and in respect of interest on the Notes
and Certificates on the subject Payment Date over (b) the Discounted Present
Value of Performing Leases as of the Determination Date related to the subject
Payment Date.
"Cut-Off Date" means the close of business on August 31, 1998.
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"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Class A-1 Note" means a definitive, fully registered Class
A-1 Note issued pursuant to Section 2.7 of the Indenture.
"Definitive Class A-2 Note" means a definitive, fully registered Class
A-2 Note issued pursuant to Section 2.7 of the Indenture.
"Definitive Class A-3 Note" means a definitive, fully registered Class
A-3 Note issued pursuant to Section 2.7 of the Indenture.
"Definitive Class A-4 Note" means a definitive, fully registered Class
A-4 Note issued pursuant to Section 2.7 of the Indenture.
"Definitive Class B Note" means a definitive, fully registered Class B
Note issued pursuant to Section 2.7 of the Indenture.
"Definitive Trust Certificate" is defined in Section 3.11 of the Trust
Agreement.
"Delinquent Lease" means, as of any Determination Date, any Lease
(other than a Lease which became a Non-Performing Lease prior to such
Determination Date) with respect to which the Lessee has not paid all Lease
Payments then due.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to a Certificated
Security, transfer of such Certificated Security to Indenture Trustee
or its nominee or custodian by physical delivery to Indenture Trustee
or its nominee or custodian, endorsed to, or registered in the name of,
Indenture Trustee or its nominee or custodian or endorsed in blank; and
(b) with respect to any such Trust Account
Property that constitutes an Uncertificated Security (including any
investments in money market mutual funds, but excluding any Federal
Book Entry Security), (A) registration of Indenture Trustee as the
registered owner by the issuer, or (B) satisfaction of the requirements
for obtaining "control" pursuant to Section 8-106(c)(2) of Article 8 of
the UCC.
"Depositor" means Transferor in its capacity as Depositor under the
Trust Agreement.
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"Depository Agreement" means the letter of representations, between
Issuer, Indenture Trustee and the Depository Trust Company, as Clearing Agency.
"Determination Date" means with respect to any Payment Date, the third
day immediately preceding such Payment Date, or if such day is not a Business
Day, the first Business Day preceding such day.
"Discount Rate" means, with respect to any Determination Date,
[_______]%, which equals the sum of (a) the weighted-average interest rate of
the Class A Notes (utilizing the Class A-4 Note Interest Rate), Class B Note
Interest Rate and the Certificate Rate on the Closing Date and (b) the Servicing
Fee rate of 0.75% per annum.
"Discounted Present Value of the Leases" means, with respect to any
Lease as of the Cut-Off Date or any date thereafter, an amount equal to the net
present value of all Lease Payments (including Payaheads but excluding
delinquent amounts and Third Party Amounts) to become due thereunder following
the Cut-Off Date or the Due Period preceding the following Payment Date, as the
case may be (determined by discounting on a monthly basis (assuming a calendar
year consisting of twelve 30-day months), at a rate equal to the Discount Rate,
each such Lease Payment from the Payment Date following such Lease Payment to
such date). In determining the Discounted Present Value of the Leases on any
Determination Date or with respect to a Payment Date, the future remaining Lease
Payments will be calculated after giving effect to any payments received on or
prior to the Record Date for the related Due Period to the extent such payments
relate to Lease Payments due and payable by the Lessees with respect to the
related Due Period and any prior Due Period.
"Discounted Present Value of the Performing Leases" means the
Discounted Present Value of the Leases, reduced by the Discounted Present Value
of the Leases that are Non-Performing Leases.
"Due Period" means with respect to any Payment Date and the
Determination Date with respect thereto, the calendar month prior to the month
in which such Payment Date and Determination Date occur; provided, that the
initial Due Period shall be the period from the Closing Date through the
calendar month prior to the month in which such Payment Date and Determination
Date occur.
"Eligible Account" means either (a) a segregated account maintained
with an Eligible Institution or any other segregated account, the deposit of
funds into which has been approved by the Rating Agencies or (b) a segregated
trust account maintained in the corporate trust department of a depository
institution organized under the laws of the United States of America or any of
the states thereof, the District of Columbia, or any domestic branch of a
foreign bank, in any case having
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corporate trust powers and acting as trustee for funds deposited in such
account, so long as any of the securities of such depository institution have a
credit rating from each Rating Agency in one of its generic rating categories
which signifies investment grade.
"Eligible Institution" means either (a) The Provident Bank or the
corporate trust department of the Indenture Trustee or the Trustee, as
applicable, or (b) a depository institution organized under the laws of the
United States of America or any of the states thereof, the District of Columbia,
or any domestic branch of a foreign bank, (i) which has either (A) a long-term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies or (B) a short-term unsecured debt rating or certificate of deposit
rating acceptable to the Rating Agencies and (ii) whose deposits are insured by
the FDIC.
"Eligible Investments" means any one or more of the following
obligations or securities:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) (i) demand deposits, time deposits or certificates of deposit of
The Provident Bank and (ii) demand deposits, time deposits or certificates of
deposit of any depository institution or trust company incorporated under the
laws of the United States of America or any State (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, however, that in the
case of clause (ii), at the time of the investment or contractual commitment to
invest therein, the commercial paper or other short-term senior unsecured debt
obligations (other than such obligations the rating of which is based on the
credit of a Person other than such depository institution or trust company)
thereof shall have a credit rating from each of the Rating Agencies in the
highest investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the Rating
Agencies in the highest investment category granted thereby;
(d) investments in money market funds having a rating from each of the
Rating Agencies in the highest investment category granted thereby (including
funds for which Indenture Trustee, Trustee, Transferor or any of their
respective Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b);
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(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed as to timely payment 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 (b); and
(g) any other investment permitted by each of the Rating Agencies as
set forth in writing delivered to the Indenture Trustee; provided, that
investments described in clauses (d) and (g) shall be made only so long as
making such investments will not require the Issuer to register as an investment
company under the Investment Company Act of 1940, as amended.
"Eligible Lease" means a Lease that, on the effective date of the
substitution of such Lease, satisfies the representations and warranties set
forth in Section 3.4 of the Contribution Agreement and the requirements of
Section 4.3 of the Contribution Agreement or Section 5.4 of the Pooling and
Servicing Agreement, as applicable.
"Entitlement Order" has the meaning assigned thereto in Section
8-102(a)(8) of Article 8 of the UCC.
"Equipment" means each item of personal property, together with any
replacement parts, additions, and repairs thereto, any replacements thereof, and
any accessories incorporated therein and/or affixed thereto, subject to a Lease
or, following expiration or termination of the Lease to which the same was
previously subject, remaining subject to the lien of the Indenture in accordance
with the provisions hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Event of Default" is defined in Section 6.1 of the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934.
"Expenses" is defined in Section 8.2 of the Trust Agreement.
"Federal Book Entry Security" means an obligation (i) issued by the
U.S. Treasury, the Federal Home Loan Mortgage Corporation or the Federal
National Mortgage Association, or any other direct obligation of, or obligation
fully guaranteed as to timely payment or principal and interest by, the United
States of America, that is a book-entry security held through the Federal
Reserve System pursuant to Federal book entry regulations, and (ii) the
perfection of a security interest in which is governed pursuant to federal
regulations by Article 8 of the UCC.
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"Filing Requirements" means Financing Statements necessary to perfect
the ownership interest of the Transferor and Issuer and the perfected security
interest of Indenture Trustee in the Leases and as of the Closing Date and as of
June 1 and December 1 of every year following the Closing Date, in Equipment (i)
subject to Leases having a Discounted Present Value of at least 75% of the
aggregate Discounted Present Value of the Leases and (ii) relating to not less
than 75% of the Booked Residual Value of such Equipment.
"Financing Statement" means a statement filed pursuant to the UCC which
evidences a perfected security or ownership interest in an asset.
"Governmental Authority" means any court or federal or state regulatory
body, administrative agency or other tribunal or other governmental
instrumentality.
"Grant" means to grant, bargain, convey, assign, transfer, mortgage,
pledge, create and grant a security interest in and right of set-off against,
deposit, set over and confirm. The Grant of the Trust Estate effected by the
Indenture shall include all rights, powers, and options (but none of the
obligations) of Issuer with respect thereto, including the immediate and
continuing right to claim for, collect, receive, and give receipts for Lease
Payments in respect of the Leases and all other moneys payable thereunder, to
give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring judicial proceedings in
the name of Issuer or otherwise, and generally to do and receive anything that
Issuer may be entitled to do or receive thereunder or with respect thereto.
"Granted Assets" means the assets referred to in the Granting Clause of
the Indenture.
"Holder" as used in the Indenture and Pooling and Servicing Agreement,
means each Noteholder and each Certificateholder, and as used in the Trust
Agreement, means a Certificateholder.
"ILC" means Information Leasing Corporation, an Ohio corporation.
"Indemnified Party" with respect to the Indenture and Pooling and
Servicing Agreement is defined in Section 4.3 of the Indenture, with respect to
the Contribution Agreement, is defined in Section 4.1 of the Contribution
Agreement, and with respect to the Trust Agreement is defined in Section 8.2 of
the Trust Agreement.
"Indenture" means the Indenture, dated the date hereof, between Issuer
and Indenture Trustee, as the same may be amended and supplemented from time to
time.
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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" means, when used with respect to any specified Person,
that the Person: (a) is in fact independent of the Issuer, any other obligor
upon the Notes, the Transferor and any Affiliate of any of the foregoing
Persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the
Transferor or any Affiliate of any of the foregoing Persons and (c) is not
connected with the Issuer, any such other obligor, the Transferor 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 11.4 of the
Indenture, 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 the Indenture and that the signer is Independent
within the meaning thereof.
"Initial Certificate Balance" means the amount specified as the Initial
Certificate Balance in a letter of instruction from Depositor to Trustee.
"Initial Payment Date" means November 25, 1998.
"Interest Payments" is defined in Section 2.1(c) of the Indenture.
"Issuer" means Provident Equipment Lease Trust 1998-A.
"Issuer Order" or "Issuer Request" means a written order or request
delivered to Indenture Trustee and signed in the name of Issuer by an Authorized
Officer.
"Lease" means, at any time, each separate lease agreement and each
lease schedule or supplement (and each master lease agreement insofar as the
same relates to any such schedule or supplement) described in Schedule 1 of the
Contribution Agreement, as the same may be amended or modified from time to time
in accordance with the provisions thereof unless and until released from the
lien of the Indenture.
"Lease Files" is defined in Section 3.2 of the Pooling and Servicing
Agreement.
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"Lease Payment" means each periodic installment of rent payable by a
Lessee under a Lease. The following shall not be deemed to be "Lease Payments":
(a) prepayments of rent required pursuant to the terms of a Lease, at or before
the commencement of the Lease; (b) payments (other than Payaheads) collected on
or before the Cut-Off Date, (c) Payaheads, until such time as such Payaheads are
released from the Collection Account in accordance with Section 6.5 of the
Pooling and Servicing Agreement, (d) Third Party Amounts and (e) any security
deposit, unless and until such security deposit is permitted to be treated as a
payment on a Lease in accordance with the terms of such Lease.
"Lease Repurchase Amount" means at any date with respect to any Lease,
an amount equal to the Discounted Present Value of the Lease as of the next
following Payment Date plus any amounts previously due and unpaid.
"Lessee" means each lessee under a Lease.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind other than tax liens, mechanics liens, and any liens
that attach to a Lease by operation of law.
"Management Agreement" means the Management Agreement, dated as of the
date hereof, among Manager, Issuer and Indenture Trustee.
"Management Fee" means the fee payable to the Manager pursuant to
Section 3 of the Management Agreement.
"Manager" means Information Leasing Corporation, a Delaware
corporation, or any successor Manager under the Management Agreement.
"Maturity" means with respect to any installment of principal of or
interest on any Note, the date on which such installment is due and payable as
therein or herein provided, whether at the Stated Maturity, by declaration of
acceleration, or otherwise.
"Monthly Delinquency Percentage" means, with respect to any Payment
Date, the percentage equivalent of a fraction (a) the numerator of which is the
Discounted Present Value of the Delinquent Leases determined as of the related
Determination Date and (b) the denominator of which is the Discounted Present
Value of the Performing Leases as of the related Determination Date.
"Monthly Servicer Realization Percentage" means, with respect to any
Payment Date, the percentage equivalent of a fraction (a) the numerator of which
is the aggregate amount of Servicer Residual Realizations collected during the
related Due Period and (b) the denominator of which is equal to the aggregate
Servicer
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Booked Residual Values with respect to the Leases for which Servicer Residual
Realizations have been collected in respect of such related Due Period.
"Nominal Buy-Out Lease" means each Lease identified on Schedule 1 of
the Agreement as having an estimated residual value of $0 or $1 in the column
under the-heading "RESIDUAL".
"Non-Performing Lease" means, as of any Determination Date, any Lease
with respect to which at any time following the Cut-Off Date or related Pooling
Date, as the case may be, either (a) a Lease Payment, or any portion thereof,
was determined by Servicer to be more than 90 days overdue as of the last day of
the Due Period with respect to such Determination Date, unless on or before such
Determination Date such Lease Payment (or portion thereof) has been paid or (b)
Servicer has accelerated the remaining payments or has determined such Lease to
be uncollectible in accordance with Servicer's customary practices prior to the
last day of the Due Period with respect to such Determination Date.
"Non-Performing Lease Payments" means any payment made with respect to
a Non-Performing Lease in an amount equal to all or part of any specific Lease
Payment due with respect to such Non-Performing Lease.
"Non-Performing Lease Pay-Through Amount" means with respect to any
Lease with respect to which a Lease Payment is made or due, an amount equal to
the Discounted Present Value of such Lease as of the Payment Date immediately
following the first Determination Date on which such Lease was a Non-Performing
Lease.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 6.1(a) of the Pooling and
Servicing Agreement.
"Note Interest Rate" means the Class A-1 Note Interest Rate, the Class
A-2 Note Interest Rate, the Class A-3 Note Interest Rate, the Class A-4 Note
Interest Rate or the Class B Note Interest Rate, as the case may be.
"Note Owner" means a Class A-1 Note Owner, Class A-2 Note Owner, Class
A-3 Note Owner, Class A-4 Note Owner or Class B Note Owner, as the case may be.
"Note Register" is defined in Section 2.3 of the Indenture.
"Noteholder" means at any time, any Holder of a Note.
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"Notes" means the Class A Notes and Class B Notes issued pursuant to
the Indenture and all notes issued in exchange therefor pursuant to the
Indenture.
"Officers' Certificate" means (i) with respect to Transferor or
Servicer, a certificate delivered to Trustee and signed by the Chairman, the
President, or a Vice President, and by another Vice President, the Treasurer, an
Assistant Treasurer, the Secretary, or an Assistant Secretary of Transferor or
Servicer, as the case may be, who is not the same person as the other officer
signing such certificate and (ii) a certificate delivered to Indenture Trustee
and signed by the Chairman, the President, or a Vice President of Manager, and
by another Vice President, the Treasurer, and Assistant Treasurer, the
Secretary, or an Assistant Secretary of Manager who is not the same Person as
the other officer signing such certificate.
"Opinion of Counsel" means a written opinion, which shall be
satisfactory in form and substance to Indenture Trustee, of counsel who may,
except as otherwise expressly provided in this Indenture, be inside or outside
counsel for Issuer or Manager and who shall be satisfactory to Indenture
Trustee.
"Other Lease Payments" means all payments on or in respect of leases
which are not Lease Payments, Casualty Payments, Termination Payments or
Residual Realizations.
"Outstanding" means with respect to the Notes, as of any date of
determination, all Notes theretofore authenticated and delivered under this
Indenture except:
(a) Notes theretofore
canceled by Indenture Trustee or delivered to Indenture Trustee for
cancellation;
(b) Notes or portions
thereof for whose payment money in the necessary amount has been
theretofore irrevocably deposited with Indenture Trustee in trust for
the holders of such Notes; and
(c) Notes in exchange
for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture unless proof satisfactory to
Indenture Trustee is presented that any such Notes are held by a Person
in whose hands the Note is a valid obligation;
provided, that in determining whether the holders of the requisite percentage of
the Outstanding Principal Amount of the Notes have given any request, demand,
authorization, direction, notice, consent, or waiver hereunder, Notes owned by
Transferor, ILC or any Affiliate of ILC shall be disregarded and deemed not to
be
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Outstanding, except that, in determining whether Indenture Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, or waiver, only Notes that a Responsible Officer of Indenture
Trustee actually knows to be so owned shall be so disregarded.
"Outstanding Principal Amount" means the aggregate unpaid principal
amount of the Notes at any time.
"Overcollateralization Amount" means, with respect to each Payment
Date, an amount equal to (a) the Discounted Present Value of the Performing
Leases as of the related Determination Date minus (b) the Outstanding Principal
Amount of the Notes and the Certificate Balance (after giving effect to payments
of principal (other than Additional Principal) on such Payment Date); provided,
that such amount will never be less than zero.
"Payaheads" means Lease Payments received prior to their respective Due
Periods that do not constitute full prepayments or partial prepayments in
accordance with Servicer's customary practices.
"Paying Agent" means each agent of Issuer appointed for the purpose of
making payments on the Notes or Certificates, as applicable, including Indenture
Trustee.
"Payment Date" means the 25th day of each month, or if such day is not
a Business Day, the next succeeding Business Day, commencing on the Initial
Payment Date, and ending on the latest Stated Maturity.
"Pension Plan" is defined in Section 3.13 of the Contribution
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Placement Agent Agreement" means the Placement Agent Agreement,
among Issuer, ILC, and Lehman Brothers Inc.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of the date hereof between Issuer, Transferor and Servicer,
as the same may be amended or modified from time to time in accordance with the
provisions hereof and thereof.
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"Predecessor Lease" for purposes of the Pooling and Servicing
Agreement, is defined in Section 5.4(a) of the Pooling and Servicing Agreement,
and for purposes of the Contribution Agreement, is defined in Section 4.3(a) of
the Contribution Agreement.
"Predecessor Notes" 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 2.4 of the Indenture in lieu of a
lost, destroyed or stolen Note (or a mutilated Note surrendered to Indenture
Trustee) shall be deemed to evidence the same debt as the lost, destroyed or
stolen Note (or a mutilated Note surrendered to Indenture Trustee).
"Prime Rate" means the [Name of Indenture Trustee] prime lending rate.
"Principal Payments" is defined in Section 2.1(b) of the Indenture.
"Private Placement Memorandum" means the final Private Placement
Memorandum used in connection with the private offering of the Certificates.
"Prohibited Transaction" means any transaction described in Section 406
of ERISA which is not exempt by reason of Section 408 of ERISA or the
transitional rules set forth in Section 414(c) of ERISA and any transaction
described in Section 4975(c) of the Code which is not exempt by reason of
Section 4975(c)(2) or Section 4975(d) of the Code, or the transitional rules of
Section 2003(c) of ERISA.
"Prospectus" means the form of final prospectus to be used in
connection with the public offering of the Notes as filed with the Securities
and Exchange Commission pursuant to Rule 424(b).
"Contribution Agreement" means the Contribution Agreement dated as
September 1, 1998, between Transferor and ILC, as the same may be amended and
supplemented from time to time.
"Rating Agency" means [Name of each Rating Agency].
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days prior notice thereof and that each
of the Rating Agencies shall have notified Transferor that such action will not
result in a reduction or withdrawal of the then current rating of any Class of
the Notes.
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"Record Date" means with respect to any Payment Date, the close of
business on the last day of the calendar month immediately preceding such
Payment Date.
"Registration Statement" means the registration statement (File No.
333-58909) filed with the Securities and Exchange Commission for the
registration of the Notes.
"Related Person" means any Person (whether or not incorporated) which
is under common control with Transferor within the meaning of Section 414(c) of
the Internal Revenue Code of 1986, as amended, or of Section 4001(b) of ERISA.
"Reportable Event" means any of the events set forth in Section 4043(c)
of ERISA or the regulations thereunder, a withdrawal from a Pension Plan
described in Section 4063 of ERISA, or a cessation of operations described in
Section 4062(e) of ERISA.
"Required Deposit Date" means, as to any funds or item required to be
deposited into the Collection Account, the date falling two Business Days after
Servicer's receipt of such funds or item, provided that at any time when (a) ILC
is Servicer, (b) there exists no Servicer Event of Default and (c) any other
condition to making deposits less frequently than daily as may be specified by
the Rating Agencies is satisfied, the Business Day preceding the applicable
Payment Date shall be the "Required Deposit Date."
"Required Payment" is defined in Section 6.4(b) of the Pooling and
Servicing Agreement.
"Required Reserve Amount" means the lesser of (a) 1.0% of the
Discounted Present Value of the Leases as of the Cut-Off Date and (b) the
Outstanding Principal Amount of the Notes and the Certificate Balance.
"Reserve Account" means the account or accounts by that name
established and maintained by Indenture Trustee pursuant to Section 6.1(a) of
the Pooling and Servicing Agreement.
"Residual Account" means the account or accounts by that name
established and maintained by Indenture Trustee pursuant to Section 6.1(a) of
the Pooling and Servicing Agreement.
"Residual Amount Cap" means an amount equal to $[ ] which equals [ ]%
of the Discounted Present Value of the Leases as of the Cut-Off Date.
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"Residual Event" means the occurrence of one or more of the following:
(a) ILC is no longer the Servicer, (b) with respect to the [month/year] Due
Period and each Due Period thereafter, the Three-Month Servicer Realization
Percentage calculated on any Determination Date is less than [___]%; or (c) with
respect to the [month/year] Due Period and each Due Period thereafter, the
Three-Month Delinquency Percentage is greater than [__]%; provided, that the
Residual Event referred to in clause (b) may be cured if the Three-Month
Servicer Realization Percentage is greater than or equal to [___]% for three
consecutive months thereafter and the Residual Event referenced in clause (c)
may be cured if the Three-Month Delinquency Percentage for any Due Period
thereafter is less than or equal to [___]%.
"Residual Realizations" means the net cash flows realized by and
allocable to ILC from the sale (including pursuant to a Lessee's purchase
option) or reletting of any Equipment following the scheduled termination of the
related Lease. Amounts received in respect of Non-Performing Leases shall only
be included as Residual Realizations to the extent such amounts exceed the
related Non-Performing Lease Pay-Through Amount.
"Responsible Officer" means with respect to Indenture Trustee, any
person regularly engaged in the administration or supervision of corporate trust
accounts (including, in the case of the original Indenture Trustee hereunder,
any officer in its Corporate Trust Office) and also, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Secretary of State" means the Secretary of State of the State of
Delaware.
"Securities Account" has the meaning assigned thereto in Section
8-501(a) of Article 8 of the UCC.
"Securities Entitlement" has the meaning assigned thereto in Section 8-
102(a)(17) of Article 8 of the UCC.
"Securities Intermediary" is defined in Section 8-102(a)(14) of Article
8 of the UCC.
"Security Deposit Earnings" are defined in Section 6.1(b) of the
Pooling and Servicing Agreement.
"Seller Assets" are defined in Section 2.1 of the Contribution
Agreement.
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<PAGE>
"Servicer" means ILC and any successor Servicer appointed pursuant to
the terms of the Pooling and Servicing Agreement and, to the extent that it at
any time is performing the functions of Servicer, Indenture Trustee.
"Servicer Advance" means a payment by Servicer pursuant to Section 5.1
of the Pooling and Servicing Agreement.
"Servicer Booked Residual Values" means the estimated residual value of
the Equipment recorded on the books of ILC.
"Servicer Event of Default" is defined in Section 9.1 of the Pooling
and Servicing Agreement.
"Servicer Order" means a written order or request delivered to
Indenture Trustee and signed in the name of Servicer by an Authorized Officer.
"Servicer Residual Realizations" means the aggregate cash flows
realized by ILC from the sale (including pursuant to a Lessee's purchase option)
or releasing of any Equipment following the termination of the related Lease.
"Servicer's Certificate" means an Officers' Certificate of Servicer
delivered pursuant to Section 4.8 of the Pooling and Servicing Agreement,
substantially in the form of Exhibit C to the Pooling and Servicing Agreement.
"Servicing Fee" means the fee payable to Servicer for services rendered
during the respective Due Period, determined pursuant to Section 4.6 of the
Pooling and Servicing Agreement.
"Servicing Report" is defined in Section 4.8(b) of the Pooling and
Servicing Agreement.
"Servicing Standard" is defined in Section 4.1 of the Pooling and
Servicing Agreement.
"Securities Act" the Securities Act of 1933.
"Stated Maturity" means the date on which the entire remaining unpaid
Outstanding Principal Amount of each class of Notes is due and payable, which
date is the [month/year] Payment Date with respect to the Class A-1 Notes and
the [month/year] Payment Date for the Class A-2 Notes, Class A-3 Notes, Class
A-4 Notes and Class B Notes.
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"Stated Maturity of the Notes" means [month/year] Payment Date for the
Class A-1 Notes; the Certificates Payment Date for the Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes, Class B Notes and Certificates.
"Substitute Lease" for purposes of the Pooling and Servicing Agreement,
is defined in Section 5.4(a) of the Pooling and Servicing Agreement, and for
purposes of the Contribution Agreement, is defined in Section 4.3(a) of the
Contribution Agreement.
"Supplemental Servicing Fee" is defined in Section 4.6(d) of the
Pooling and Servicing Agreement.
"Termination Payment" means a payment payable by a Lessee under a Lease
upon the early termination, in full or in part, of such Lease (but not on
account of a Casualty or a Lease default) which may be agreed upon by Servicer,
acting in the name of Issuer, and the Lessee in accordance with the provisions
of Section 4.5 of the Pooling and Servicing Agreement.
"Third Party Amounts" means supplemental or additional Payments
required by the terms of a Lease with respect to taxes, insurance, maintenance,
or other specific charges, including charges included in an invoice but payable
to vendors.
"Three-Month Delinquency Percentage" means, with respect to any Payment
Date, the percentage equivalent of fraction, (a) the numerator of which is the
sum of the Monthly Delinquency Percentage for such Payment Date and the two
immediately preceding Payment Dates and (b) the denominator of which is three.
"Three-Month Servicer Realization Percentage" means, with respect to
any Payment Date, the percentage equivalent of a fraction, (a) the numerator of
which is the sum of the Monthly Servicer Realization Percentage for such Payment
Date and the two immediately preceding Payment Dates and (b) the denominator of
which is three.
"Transaction Payment Amount" means for each Required Deposit Date, the
amount of all Lease Payments, Non-Performing Lease Payments, Casualty Payments,
Termination Payments and other payments on or in respect of a Lease received by
Servicer excluding Payaheads and deposited in the Collection Account pursuant to
Section 6.2(c) of the Pooling and Servicing Agreement and reported by Servicer
for such Required Deposit Date in accordance with Section 4.8 of the Pooling and
Servicing Agreement.
"Transfer Date" means the Business Day immediately preceding any
Payment Date.
A-52
<PAGE>
"Transfer Taxes" are defined in Section 3.20 of the Contribution
Agreement.
"Transferor" means Provident Lease Receivables Corporation, a Delaware
corporation, and its successors in interest to the extent permitted hereunder.
"Treasury Regulations" means regulations, including proposed or
temporary regulations, promulgated under the Code. References to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" means the trust established by the Trust Agreement.
"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), and all proceeds of the foregoing.
"Trust Accounts" is defined in Section 6.1(b) of the Pooling and
Servicing Agreement.
"Trust Agreement" means the Trust Agreement dated as of the date
hereof, between Transferor and Trustee, as the same may be amended and
supplemented from time to time.
"Trust Certificate" means a certificate evidencing the beneficial
interest of a Certificateholder in Trust, substantially in the form attached as
Exhibit A to the Trust Agreement.
"Trustee" means the Person acting as Trustee under the Trust Agreement,
its successors in interest and any successor trustee under the Trust Agreement.
"Trust Estate" means all money, instruments and other property subject
to or intended to be subject to the lien of the Indenture including all proceeds
thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
effect on the date on which the Indenture is qualified under Trust Indenture
Act, except as provided in Section 9.6 of the Indenture.
"Trust Officer" means, in the case of Indenture Trustee, any officer
within the Corporate Trust Office of Indenture Trustee, including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any other
officer of Indenture Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and
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<PAGE>
familiarity with the particular subject and, with respect to Trustee, any
officer in the Corporate Trust Administration Department of Trustee with direct
responsibility for the administration of the Trust Agreement and the Basic
Documents on behalf of Trustee.
"Trust Statute" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code ss. 3801 et seq., as the same may be amended from time to time.
"Uncertificated Security" has the meaning assigned thereto in Section
8- 102(a)(18) of Article 8 of the UCC.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code as in effect in the relevant jurisdiction, as amended from time
to time.
"Underwriting Agreement" means the Underwriting Agreement, among
Transferor, ILC and Lehman Brothers Inc.
"Utilized Residual Amount" means on any day of determination, the sum
of (a) the total Residual Realizations applied to make payments of amounts owing
Servicer, Noteholders and Certificateholders (including any such amounts
withdrawn from the Reserve Account and the Residual Account, but not including
any amounts paid to Issuer under Section 6.3 of the Pooling and Servicing
Agreement the amount on deposit in the Reserve Account and the Residual Account
on such date allocable to Residual Realizations.
"Warranty Lease" means a Lease subject to repurchase by ILC as a result
of a breach of a representation or warranty in accordance with the provisions of
Section 5.2 of the Pooling and Servicing Agreement.
SECTION 1.2 Other Interpretive Provisions. All terms defined in this
Appendix X shall have the defined meanings when used in any Basic Document or
any certificate or other document delivered pursuant to any Basic Document
unless otherwise defined therein. For purposes of the Basic Documents, and all
certificates and other documents delivered in connection with the Basic
Documents, unless the context otherwise requires: (a) accounting terms not
otherwise defined in any Basic Document, and accounting terms partly defined in
any Basic Document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles; (b) terms defined
in Article 9 of the UCC as in effect in the State of New York and not otherwise
defined in the Basic Documents are used in the Basic Documents as defined in
that Article; (c) any reference to each Rating Agency shall only apply to any
specific rating agency if such rating agency is then rating any outstanding
Notes and/or Certificates, as applicable; (d) references to any amount as on
deposit or outstanding on any particular date means such amount at the
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<PAGE>
close of business on such day; (e) the words "hereof," "herein" and "hereunder"
and words of similar import refer to this in any Basic Document (or any
certificate or other document in which they are used) as a whole and not to any
particular provision of such Basic Document (or such certificate or document);
(f) references in any Basic Document to any Section, Schedule or Exhibit are
references to Sections, Schedules and Exhibits in such Basic Document (or the
certificate or other document in which the reference is made), and references to
any paragraph, subsection, clause or other subdivision within any Section or
definition refer to such paragraph, subsection, clause or other subdivision of
such Section or definition; (g) the term "including" means "including without
limitation"; (h) references to any law or regulation refer to that law or
regulation as amended from time to time and include any successor law or
regulation; and (i) references to any Person include that Person's successors
and assigns.
A-55
<PAGE>
EXHIBIT 8.1
[MAYER, BROWN & PLATT LETTERHEAD]
September 21, 1998
Provident Lease Receivables Corporation
One East Fourth Street
Cincinnati, OH 45202
Provident Equipment Lease Trust 1998-A
RE: Registration Statement on Form S-1 (No. 333-58909)
Ladies and Gentlemen:
We have acted as your special Federal tax counsel in connection with the
above-referenced registration statement (together with the exhibits and any
amendments thereto, the "Registration Statement"), filed with the Securities
and Exchange Commission in connection with the registration of the
Lease-Backed Notes (the "Notes") to be issued by Provident Equipment Lease
Trust 1998-A (the "Trust").
We are familiar with the proceedings to date in connection with the
proposed issuance and sale of the Notes, and in order to express our opinion
hereinafter stated: (a) we have examined copies of the form of the Pooling and
Servicing Agreement, the Notes, the Trust Agreement and the Indenture filed as
exhibits to the Registration Statement (collectively the "Operative
Documents"), (b) we have examined the Registration Statement and the
prospectus contained therein (the "Prospectus"), and (c) we have examined such
other records and documents and such matters of law, and we have satisfied
ourselves as to such matters of fact, as we have considered relevant for
purposes of this opinion.
The opinion set forth in this letter is based upon the applicable
provisions of the Internal Revenue Code of 1986, as amended, Treasury
regulations promulgated and proposed thereunder, current positions of the
Internal Revenue Service (the "IRS") contained in published Revenue Rulings
and Revenue Procedures, current administrative positions of the IRS and
existing judicial decisions, all of which are subject to change, possibly
retroactively. No tax rulings will be sought from the IRS with respect to any
of the matters discussed herein.
Based on the foregoing and assuming that the Operative Documents are
executed and delivered in substantially the form we have examined, we hereby
adopt and confirm as our opinion those statements described as such in the
Prospectus under the heading "U.S. Federal Income Tax Considerations", namely
that (1) the Notes will be treated as debt for federal income tax purposes,
and (2) the Trust will not be classified as an association or publicly traded
partnership taxable as a corporation for federal income tax purposes, and
because the Trust has not elected under Treasury Regulation 301-7701-3 to be
classified as an association, the Trust will not be so classified for federal
income tax purposes.
<PAGE>
Provident Lease Receivables Corporation
Provident Equipment Lease Trust 1998-A
September 21, 1998
Page 2
There can be no assurance, however, that the tax conclusions presented in
the sections of the Prospectus referenced above will not be successfully
challenged by the IRS, or significantly altered by new legislation, changes in
IRS positions or judicial decisions, any of which challenges or alterations
may be applied retroactively with respect to completed transactions.
We hereby consent to the filing of this opinion and our related opinion
with respect to the validity of the Notes as Exhibits 8.1 and 5.1,
respectively, to the Registration Statement and to the reference to our firm
in the Prospectus under the captions "Prospectus Summary -- Federal Income Tax
Considerations," "U.S. Federal Income Tax Considerations" and "Legal Matters".
In giving such consent, we do not admit that we are "experts" within the
meaning of the term used in the Act or the rules and regulations of the
Securities and Exchange Commission issued thereunder, with respect to any part
of the Registration Statement, including this opinion as an exhibit or
otherwise.
Very truly yours,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
<PAGE>
EXHIBIT 8.2
[KEATING, MUETHING & KLEKAMP, P.L.L. LETTERHEAD]
September 21, 1998
Provident Lease Receivables Corporation
One East Fourth Street
Cincinnati, OH 45202
Re: Provident Equipment Lease Trust 1998-A
Registration Statement on Form S-1 (No. 333-58909)
--------------------------------------------------
Ladies and Gentlemen:
We have acted as your special Ohio tax counsel in connection with the
above-referenced registration statement (together with the exhibits and any
amendments thereto the "Registration Statement"), filed with the Securities
and Exchange Commission in connection with the registration of the
Lease-Backed Notes (the "Notes") to be issued by Provident Equipment Lease
Trust 1998-A (the "Trust"). You have asked for our opinion as to certain Ohio
tax law matters in connection with the issuance of the Notes by the Trust.
We are familiar with the proceedings to date in connection with the
proposed issuance and sale of the Notes, and in order to express our opinion
hereinafter stated: (a) we have examined copies of the form of the Pooling and
Servicing Agreement, the Notes, the Trust Agreement and the Indenture filed as
exhibits to the Registration Statement (collectively the "Operative
Documents"), (b) we have examined the Registration Statement and the
prospectus contained therein (the "Prospectus"), and (c) we have examined such
other records and documents and such matters of law, and we have satisfied
ourselves as to such matters of fact, as we have considered relevant for
purposes of this opinion.
In our review of the foregoing documents, we have assumed the accuracy of
all information set forth in such documents, the genuineness of all signatures
on the documents which we have reviewed and the conformity with the originals
(and the authenticity of such originals) of all documents submitted to us as
copies. Our opinion is conditioned on the accuracy of the factual statements
made in the documents, and on timely and full compliance with the terms of the
documents by all relevant parties to such documents.
We have also relied on the opinions of Mayer, Brown & Platt, special
federal tax counsel to the Trust, dated September 8, 1998, to the effect that:
1. The Trust will not be classified as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes, and
<PAGE>
Page 2
September 21, 1998
2. The Notes will be treated as debt for federal income tax purposes.
With your permission, we have assumed for purposes of our opinion that
the foregoing opinions of Mayer, Brown & Platt are accurate and correct.
Our opinion is based on the Ohio Revised Code, Ohio administrative
regulations promulgated thereunder, and other administrative and judicial
interpretations thereof, all as of the date hereof and all of which are
subject to change, possibly on a retroactive basis. There can be no assurance
that current or future legislative proposals, or final legislation, adverse
judicial decisions, or official pronouncements will not affect the taxation of
the Notes by the State of Ohio. Furthermore, no tax ruling will be sought from
Ohio tax officials with respect to any of the matters discussed herein.
Subject to the assumptions, qualifications and conditions set forth
herein, we hereby adopt and confirm as our opinion those statements described
as such in the Prospectus under the heading "Ohio State Tax Considerations",
namely that unless the Noteholders are Ohio residents or otherwise subject to
Ohio taxation, the Noteholder will not be subject to any Ohio income,
franchise, or dealers in intangibles taxes as a result of the purchase,
ownership or disposition of the Notes.
This opinion is limited solely to matters of Ohio tax law discussed
herein. This opinion is subject to the qualifications and restrictions noted
herein and is based upon our understanding of the material facts as stated
herein. This opinion is expressed as of the date hereof and we disclaim any
undertaking to advise you of any subsequent changes to the facts stated or
assumed herein, or any subsequent changes in applicable law. This opinion is
rendered solely for your benefit in connection with the transaction described
herein and may not be used by any other person or for any other purpose
without our prior express written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and furthermore consent to all references made to this
firm in the Registration Statement.
Very truly yours,
KEATING, MUETHING & KLEKAMP, P.L.L.
By: /s/ Joseph P. Mellen
--------------------------------
Joseph P. Mellen
<PAGE>
EXHIBIT 10.3
==============================================================================
FORM OF
INFORMATION LEASING CORPORATION,
Seller,
and
PROVIDENT LEASE RECEIVABLES CORPORATION,
as Purchaser
---------------------------
CONTRIBUTION AGREEMENT
Dated as of September 1, 1998
---------------------------
==============================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
Section 1.1 SECTION 1.2 Definitions; Interpretive Provisions.............................1
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase of Leases............................................................1
Section 2.2 Consideration and Payment.....................................................2
Section 2.3 Capital Contribution..........................................................2
Section 2.4 Transfer of Leases; Grant of Security Interest................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Corporate Organization and Authority..........................................3
Section 3.2 Business and Property.........................................................4
Section 3.3 Financial Statements..........................................................4
Section 3.4 Equipment and Leases..........................................................4
Section 3.5 Payments......................................................................8
Section 3.6 Full Disclosure...............................................................8
Section 3.7 Pending Litigation............................................................8
Section 3.8 Title to Properties...........................................................9
Section 3.9 Transactions Legal and Authorized.............................................9
Section 3.10 Governmental Consent..........................................................9
Section 3.11 Taxes.........................................................................9
Section 3.12 Compliance with Law..........................................................10
Section 3.13 ERISA........................................................................10
Section 3.14 Ability to Perform...........................................................10
Section 3.15 Ordinary Course; No Insolvency...............................................11
Section 3.16 Assets and Liabilities.......................................................11
Section 3.17 Fair Consideration...........................................................11
Section 3.18 Ability to Pay Debts.........................................................11
Section 3.19 Bulk Transfer Provisions.....................................................11
Section 3.20 Transfer Taxes...............................................................11
Section 3.21 Principal Executive Office...................................................12
Section 3.22 Nonconsolidation.............................................................12
Section 3.23 Sale Treatment...............................................................12
Section 3.24 Leases are Chattel Paper.....................................................12
</TABLE>
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<PAGE>
ARTICLE IV
SELLER'S OBLIGATONS
<TABLE>
<S> <C>
Section 4.1 Indemnification..............................................................12
Section 4.2 Repurchases; Other Payments..................................................13
Section 4.3 Substitution.................................................................14
Section 4.4 Procedure for Substitution...................................................15
Section 4.5 Objection and Repurchase.....................................................16
Section 4.6 Seller's Subsequent Obligations..............................................17
Section 5.1 Merger or Consolidation of Seller............................................17
Section 5.2 Inspection...................................................................17
Section 5.3 Books and Records............................................................18
Section 5.4 Communications...............................................................18
ARTICLE VI
ASSIGNMENT
Section 6.1 Assignment to Indenture Trustee..............................................18
Section 6.2 Assignment by Seller.........................................................18
ARTICLE VII
NATURE OF SELLER'S OBLIGATIONS AND SECURITY THEREFOR
Section 7.1 Seller's Obligations Absolute................................................18
Section 7.2 Security for Obligations.....................................................19
Section 7.3 Further Assurances; Financing Statements.....................................19
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Continuing Obligations.......................................................20
Section 8.2 GOVERNING LAW................................................................20
Section 8.3 Successors and Assigns.......................................................20
Section 8.4 Modification.................................................................20
Section 8.5 Notices......................................................................21
Section 8.6 Counterparts.................................................................21
Section 8.7 Nonpetition Covenant.........................................................21
</TABLE>
Schedule 1 - Schedule of Leases and Equipment
-ii-
<PAGE>
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT is made and dated as of September 1, 1998,
between PROVIDENT LEASE RECEIVABLES CORPORATION, a Delaware corporation
("Purchaser"), and INFORMATION LEASING CORPORATION ("ILC"), an Ohio
corporation ("Seller").
R E C I T A L S
A. Seller wishes to sell and assign to Purchaser, and Purchaser wishes to
purchase from Seller, all right, title and interest of Seller in, to and under
the Leases originated by Seller from time to time.
B. Seller and Purchaser wish to set forth certain representations,
warranties, covenants and indemnities of Seller with respect to the Leases for
the benefit of Purchaser, Issuer, the Noteholders and the Certificateholders.
Now, therefore, in consideration of the foregoing, other good and
valuable consideration and the mutual terms and covenants contained herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 SECTION 1.2 Definitions; Interpretive Provisions. (a)
Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to such terms in Appendix X to the Indenture, dated as of
the date hereof, between Provident Equipment Lease Trust 1998-A and [Name of
Indenture Trustee], as amended, supplemented or otherwise modified from time
to time (the "Indenture").
(b) The other interpretive provisions specified in Appendix X to the
Indenture shall apply to this Agreement.
(c) It is understood and agreed that all transfers of Leases made
pursuant to this Agreement shall be made as contributions by ILC to the
capital of Transferor. Each reference herein to any "purchase" of leases by
Transferor from ILC, or "sale" of leases by ILC to Transferor or similar terms
shall be deemed to refer to such capital contributions. Each reference to
Leases "sold" by ILC or "purchased" by Transferor shall be deemed to refer to
Leases that are contributed by ILC to the capital of Transferor. All other
terms of this Agreement shall be construed in a manner consistent with the
foregoing.
<PAGE>
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase of Leases. By their execution and delivery of this
Agreement, Seller hereby sells and assigns to Purchaser, and Purchaser hereby
purchases from Seller without recourse (except to the extent of Seller's
repurchase obligations as set forth herein), all of Seller's right, title and
interest in, to and under the following (collectively, with the Contributed
Equipment, the "Seller Assets"):
(a) the Leases listed in Schedule 1, as such Schedule 1 is amended
or supplemented from time to time, including all instruments, documents,
books and other records relating thereto,
(b) all Lease Payments, Casualty Payments, Termination Payments and
other amounts not collected with respect thereto prior to the Cut-Off
Date (other than any prepayments of rent required pursuant to the terms
of any Lease at or before the commencement of the Lease), all Payaheads
relating to payments on Leases due or becoming due after the Cut-Off and
all Substitute Leases and all Lease Payments, Casualty Payments,
Termination Payments and other amounts not collected prior to the
effective date of their respective substitution (other than any
prepayments of rent required by the terms of any Substitute Lease at or
before the commencement of the Substitute Lease) and all Payaheads
relating to payments on the Substitute Leases due or becoming due after
the effective date of their respective substitution,
(c) all rights of Seller to or under any guarantees of or collateral
(including all rights of Seller in any security deposits) for the
Lessee's obligations under any Lease and all UCC financing statements
relating to such collateral, all rights of Seller to or under any
guarantees of or collateral (including all rights of Seller in any
security deposits) for the Lessee's obligations under any Lease and all
UCC financing statements relating to such collateral,
(d) any proceeds with respect to the Leases from claims on insurance
policies covering the Equipment or Lessees,
(e) all moneys from time to time on deposit in any of the Trust
Accounts, including all investments and income from the investment of
such moneys,
(f) all proceeds of the foregoing, whether by voluntary or
involuntary conversion thereof.
2
<PAGE>
Section 2.2 Consideration and Payment. The purchase price of Seller
Assets is $[__________].
Section 2.3 Capital Contribution. Seller and Purchaser each acknowledge
and confirm that contemporaneously with the sale and purchase of Seller Assets
referred to in Section 2.1, ILC, as the sole stockholder of Seller, is
contributing and transferring to Seller, and in connection with each sale,
transfer and assignment of Substitute Leases, ILC will contribute and transfer
to Seller, without recourse, all right, title and interest of ILC in and to
each item of Equipment subject to each Lease and Substitute Lease
(collectively, the "Contributed Equipment"). After such contribution and
transfer by ILC to Seller, all right, title and interest of ILC in and to each
item of Equipment subject to each Lease shall be vested in Seller.
Section 2.4 Transfer of Leases; Grant of Security Interest. It is the
intention of the parties hereto that the transfer of the Seller Assets being
made hereunder shall constitute a sale or contribution, as applicable, and not
a loan. Seller shall take no action inconsistent with Purchaser's ownership of
the Seller Assets, Seller shall indicate in its records that ownership of each
of the Lease is held by Purchaser, and Seller shall respond to any inquiries
from third parties by indicating that its ownership in the Leases, Substitute
Leases, and all other Seller Assets is held by Purchaser and pledged to
Indenture Trustee. If a court of competent jurisdiction were to hold that any
transaction evidenced hereby constitutes a loan and not a sale or a
contribution, it is the intention of the parties hereto that this Agreement
shall constitute a security agreement under applicable law and that Seller
shall be deemed to have granted to Purchaser a first priority security
interest in the Seller Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants as follows:
Section 3.1 Corporate Organization and Authority. Seller:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation,
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry
on its business as now conducted (except where the failure to have
such licenses and permits would not have a material adverse effect
on the Trust Estate or the business or condition (financial or
otherwise) of Seller or impair the enforceability of any Lease) and
to enter into and perform its obligations
3
<PAGE>
under this Agreement, and the transactions contemplated hereby,
including performance of Seller's support obligations hereunder, and
(c) has duly qualified and is authorized to do business and is
in good standing as a foreign corporation in each jurisdiction where
the character of its properties or the nature of its activities
makes such qualification necessary (except where the failure to be
so qualified or in good standing would not have a material adverse
effect on the Trust Estate or the business or condition (financial
or otherwise) of Seller or impair the enforceability of any Lease).
Section 3.2 Business and Property. The Prospectus and the Private
Placement Memorandum, accurately describe in all material respects the general
nature of the business of Seller.
Section 3.3 Financial Statements. (a) The consolidated balance sheet of
Provident Financial Group, Inc. and its consolidated subsidiaries, including
ILC and PLRC, for the fiscal periods ended December 31, 1997 and December 31,
1996 and the related consolidated statements of income, retained earnings and
cash flow for the respective period and fiscal years ended on such dates, all
accompanied by reports thereon containing opinions without qualification,
except as therein noted, by Ernst & Young, independent certified public
accountants, and the unaudited interim consolidated balance sheet of Provident
Financial Group, Inc. and its consolidated subsidiaries as of June 30, 1998
and the related consolidated statements of income, retained earnings and cash
flow for the three months ended on such date have been prepared in accordance
with generally accepted accounting principles consistently applied, and
present fairly the financial position of Provident Financial Group, Inc. and
its subsidiaries as of such dates and the results of their operations for such
periods.
(b) Except as disclosed in the Prospectus, the Private Placement
Memorandum and the financial statements referred to in paragraph (a), since
December 31, 1997, there has been no change in the business, condition or
prospects (financial or otherwise) of Seller except changes in the ordinary
course of business, none of which individually or in the aggregate has been
materially adverse. Neither Seller nor any of its subsidiaries has any
material liabilities or obligations not incurred in the ordinary course of
business other than those disclosed in the financial statements referred to in
paragraph (a) or for which adequate reserves are reflected in such financial
statements.
Section 3.4 Equipment and Leases. (a) Prior to the date of each transfer
of any Leases and other Seller Assets in accordance with Section 2.1 and the
contribution of the Contributed Equipment pursuant to Section 2.3, Seller
purchased each item of Equipment from either (i) the manufacturer or other
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supplier following receipt of an invoice from such manufacturer or supplier or
(ii) a Lessee following confirmation that such item of equipment was on such
Lessee's premises. Seller has paid in full, to the manufacturer, supplier or
Lessee, as applicable, the purchase price and any related charges in
connection with the acquisition of the Equipment. The sale and contribution to
Purchaser of the Seller Assets, including all of Seller's right, title and
interest in each item of Equipment does not violate the terms or provisions of
any Lease or any other agreement to which Seller is a party or by which it is
bound.
(b) Upon payment of the consideration described in Section 2.2 and
concurrent contribution described in Section 2.3, Purchaser will (i) be the
legal owner of the Leases, (ii) have good title to each item of the Equipment
subject to any Lease other than a Nominal Buy-Out Lease, and (iii) have a
perfected security interest in each item of Equipment with a purchase price in
excess of $10,000 to a Nominal Buy-Out Lease. At such time, the Leases and
Seller's interest in the Equipment will be free and clear of all Liens other
than the rights of each Lessee under the Lease to which such Lessee is a party
and the Liens contemplated by this Agreement and the other Basic Documents;
and there will be no delinquent taxes or other outstanding charges affecting
the Equipment which are or may be Liens prior to, or equal or coordinate with,
the Lien of Purchaser hereunder or Indenture Trustee under the Indenture.
(c) At the time of each transfer of a Lease hereunder, each such Lease
(i) is or will be a triple-net lease and (ii) is or will be a legal, valid and
binding full recourse obligation of the Lessee thereunder, enforceable by
Purchaser (and by Indenture Trustee as assignee of Purchaser) against such
Lessee in accordance with the terms thereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting the enforcement of creditors' rights and by general
equity principles, is noncancellable by the Lessee and is in full force and
effect, and any and all requirements of any federal, state or local law,
including usury, truth-in-lending and equal credit opportunity laws applicable
to each Lease have been complied with; and Seller has no knowledge (after due
inquiry) of any challenge, dispute or claim by or against the Lessee under or
affecting any Lease or of the bankruptcy or insolvency of any such Lessee. As
of the initial Determination Date, or the effective date of the transfer of
any Substitute Lease, each Lessee has paid at least one installment of rent
under its respective Lease.
(d) At the time that any item of Equipment (including Seller's security
interest in any item not owned by it) is transferred hereunder, Seller will
have no knowledge that any item of the Equipment has suffered any loss or
damage which has not been repaired.
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(e) Each Lease requires the Lessee thereunder to maintain insurance on
the Equipment subject thereto in an amount at least equal to the fair market
value thereof.
(f) In addition to the insurance maintained by the Lessees with respect
to the Equipment, Seller (or an Affiliate of Seller) maintains (i) one or more
casualty insurance policies which, in the aggregate, are in an amount not less
than the aggregate Outstanding Principal Amount of the Notes, (ii) a general
liability insurance policy in the aggregate amount of [$1,000,000] and (iii)
an excess liability insurance policy in umbrella form in the aggregate amount
of [$10,000,000]. Each of such policies is in full force and effect and covers
all equipment owned by Seller and transferred to Purchaser. All premiums in
respect of such policies have been paid. Each of Purchaser and Indenture
Trustee are named as loss payees and additional insureds, as their interests
may appear, on such casualty and liability policies maintained by Seller.
(g) At the time of each transfer of a Lease hereunder, no Lease had
outstanding rent which was 63 or more days past due as of the Cut-Off Date.
(h) Each Lease was originated by Seller in accordance with Seller's
regular credit approval process described in the Prospectus, and no selection
procedures adverse to the credit quality of the Leases were employed in
selecting the Leases for sale under this Agreement.
(i) The obligation of each Lessee to pay rent under each of the Leases
throughout the term thereof is and will be unconditional, without any right of
setoff by such Lessee and without regard to any event affecting the Equipment,
the obsolescence of any Equipment, any claim of such Lessee against Issuer,
Purchaser, Seller or Servicer or any change in circumstance of such Lessee or
any other circumstance whatsoever except to the extent that in the event of a
casualty of any item of Equipment, the Lessee is obligated to pay, in lieu of
the future Lease Payments with respect to such item, an amount which equals or
exceeds the Discounted Present Value of the Lease as of the Payment Date next
succeeding the making of such payment.
(j) In the case of each Lease which consists of a master lease and one or
more exhibits or schedules thereto, Seller has neither assigned such master
lease in its entirety, nor delivered physical possession of such master lease,
to any Person other than Purchaser or Indenture Trustee.
(k) As of the time of each transfer of Leases and Equipment hereunder,
there are no facts or circumstances which give rise, or would give rise at any
time in the future, to any right of rescission, setoff, counterclaim or
defense, including the defense of usury, to obligations of any Lessee,
including the obligation of such
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Lessee to pay all amounts due with respect to any Lease to which such Lessee
is a party, and neither the operation of any of the terms of any Lease or the
exercise of any right thereunder will render such Lease unenforceable in whole
or in part or subject to any right of rescission, setoff, counterclaim or
defense, including the defense of usury, and no such right of rescission,
setoff, counterclaim or defense has been asserted with respect thereto.
(l) As of the time of each transfer of Leases and Equipment hereunder, no
Lease has been amended, altered or modified in any respect, except in writing
and copies of all such writings are attached to the Lease delivered to
Indenture Trustee.
(m) As of the time of each transfer of Leases and Equipment hereunder, no
Lessee will have been released, in whole or in part, from any of its
obligations in respect of any Lease; no Lease will have been satisfied,
cancelled or subordinated, in whole, or in part, or rescinded, and no
Equipment covered by any Lease will have been released from such Lease, in
whole or in part, nor has any instrument been executed that would effect any
such satisfaction, release, cancellation, subordination or rescission.
(n) As of the time of each transfer of Leases and Equipment hereunder,
each Lease was purchased or originated by Seller for value and taken into
possession prior to the Cut-Off Date or, in the case of Substitute Leases, the
related date of transfer in the ordinary course of its business.
(o) No Lease was originated in or is subject to the laws of any
jurisdiction whose laws would make the transfer and sale thereof under this
Agreement unlawful.
(p) All parties to each Lease had authority and capacity to execute such
Lease.
(q) None of the Leases is a consumer lease and each Lessee has accepted
the Equipment leased to it.
(r) The Booked Residual Value of the Equipment as of the Cut-Off Date
equals $[__________].
(s) All parties to each Lease had all requisite authority and capacity to
execute such Lease.
(t) As of the Cut-Off Date, the Final Lease Payment on each Lease was due
and payable on or prior to [month/year].
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(u) There is only one original of each Lease for purposes of the UCC as
in effect in Ohio and in New York and such counterpart will be delivered to
Indenture Trustee (or a custodian on its behalf) on or before the Closing
Date.
Section 3.5 Payments. (a) The aggregate amount of Lease Payments payable
by the Lessees under the Leases during each Due Period, including amounts on
deposit in the Reserve Account, is sufficient to cover the Servicing Fee and
pay the principal and interest on the Notes, as such payments become due and
payable.
(b) The portfolio detail delivered or to be delivered to Indenture
Trustee on or prior to the Closing Date: (i) accurately sets forth, as of the
Cut-Off Date, the amount of each Lease Payment due under each of the Leases
and the month in which such Lease Payment is to be paid in accordance with the
terms of the Lease under which the same is to be paid, (ii) accurately sets
forth, as of the Cut-Off Date, the information with respect to certain other
characteristics of the Leases and the Equipment described in such portfolio
detail and (iii) is otherwise true and correct in all respects.
Section 3.6 Full Disclosure. The Prospectus and the Private Placement
Memorandum (including the statistical and descriptive information with respect
to the initial Leases, Lessees and Equipment), as of their respective dates,
do not contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. There is no fact
peculiar to Seller or any Affiliate of Seller or, to the knowledge of Seller,
any Lease, Lessee or item of Equipment, which Seller has not disclosed in the
Prospectus or the Private Placement Memorandum which materially affects
adversely nor, so far as Seller can now reasonably foresee, will materially
affect adversely the ability of Seller to perform the transactions
contemplated by this Agreement and the other Basic Documents.
Section 3.7 Pending Litigation. There are no proceedings or
investigations pending, or to the knowledge (after due inquiry) of Seller
threatened, against or affecting Seller or any subsidiary in or before any
court, governmental authority or agency or arbitration board or tribunal,
including any such proceeding or investigation with respect to any
environmental or other liability resulting from the ownership or use of any of
the Equipment, which, individually or in the aggregate, involve the
possibility of materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of Seller, or the
ability of Seller to perform its obligations under this Agreement or any other
Basic Document to which Seller is a party. Seller is not in default with
respect to any order of any court, governmental authority or agency or
arbitration board or tribunal.
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Section 3.8 Title to Properties. Immediately following the transfer by
Seller to Purchaser of the Leases and Seller's interest in the Equipment, the
Leases and the interest in the Equipment will be free and clear of all Liens,
except the Liens contemplated by this Agreement and the other Basic Documents.
Section 3.9 Transactions Legal and Authorized. The transfer by Seller of
all of its right, title and interest in and to the Seller Assets and
compliance by Seller with all of the provisions of this Agreement and the
other Basic Documents to which Seller is a party:
(a) have been duly authorized by all necessary corporate action on the
part of Seller, and do not require any stockholder approval, or approval or
consent of any trustee or holders of any indebtedness or obligations of Seller
except such as have been duly obtained;
(b) are within the corporate powers of Seller; and
(c) are legal and will not conflict with, result in any breach in any of
the provisions of, constitute a default under, or result in the creation of
any Lien upon any property of Seller under the provisions of, any agreement,
charter instrument, by-law or other instrument to which Seller is a party or
by which it or its property may be bound or result in the violation of any
law, regulation, rule, order or judgment applicable to Seller or its
properties, or any order to which Seller or its properties is subject, of or
by any government or governmental agency or authority.
Section 3.10 Governmental Consent. No consent, approval or authorization
of, or filing, registration or qualification with, any governmental authority
is necessary or required on the part of Seller in connection with the
execution and delivery of this Agreement and the other Basic Documents or the
transfer of the Leases and other Seller Assets.
Section 3.11 Taxes. (a) All tax returns required to be filed by Seller in
any jurisdiction have in fact been filed, and all taxes, assessments, fees and
other governmental charges upon Seller, or upon any of its properties, income
or franchises, shown to be due and payable on such returns have been paid. To
the best of Seller's knowledge all such tax returns were true and correct and
Seller knows of no proposed additional tax assessment against it in any
material amount nor of any basis therefor.
(b) The provisions for taxes on the books of Seller are in accordance
with generally accepted accounting principles.
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Section 3.12 Compliance with Law.
Seller:
(a) is not in violation of any laws, ordinances, governmental rules or
regulations to which it is subject;
(b) has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its property or to
the conduct of its business; and
(c) is not in violation in any material respect of any term of any
agreement, charter instrument, by-law or other instrument to which it is a
party or by which it may be bound,
which violation or failure to obtain would have a material adverse affect on
the Trust Estate or the business or condition (financial or otherwise) of
Seller or impair the enforceability of any Lease.
Section 3.13 ERISA. (a) The present value of all benefits vested under
all "employee pension benefit plans," as such term is defined in Section 3 of
ERISA, maintained by or contributed to by Seller and its Related Persons
(other than multi-employer plans as such term is defined in Section 3 of
ERISA), as from time to time in effect (herein called the "Pension Plans"),
does not exceed the value of the assets of the Pension Plans allocable to such
vested benefits;
(b) No Prohibited Transactions, Accumulated Funding Deficiencies,
Withdrawals or Reportable Events have occurred with respect to any Pension
Plans that, in the aggregate, could subject Seller to any material tax,
penalty or other liability; and
(c) No notice of intent to terminate a Pension Plan under a distress
termination has been filed, nor has the PBGC instituted proceedings to
terminate, or appoint a trustee to administer, a Pension Plan and no event has
occurred or condition exists which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan.
Section 3.14 Ability to Perform. At the date hereof, Seller does not
believe, nor does it have any reasonable cause to believe, that it cannot
perform each and every covenant contained in this Agreement and the other
Basic Documents to which Seller is a party.
Section 3.15 Ordinary Course; No Insolvency. The transactions
contemplated by this Agreement and the other Basic Documents are being
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consummated by Seller in furtherance of Seller's ordinary business purposes
and constitute a practical and reasonable course of action by Seller designed
to improve the financial position of Seller, with no contemplation of
insolvency and with no intent to hinder, delay or defraud any of its present
or future creditors. Seller will not, either as a result of the transactions
contemplated by this Agreement, or immediately before or after such
transactions, be insolvent or have an unreasonably small capital for the
conduct of its business and the payment of anticipated obligations.
Section 3.16 Assets and Liabilities. (a) Both immediately before and
after any transfer of Leases and the interests in the Equipment contemplated
by this Agreement, the present fair salable value of Seller's assets was or
will be in excess of the amount that will be required to pay Seller's probable
liabilities as they then exist and as they become absolute and matured; and
(b) Both immediately before and after any transfer of Leases, the
transfer of the interests in the Equipment contemplated by this Agreement, the
sum of Seller's assets was or will be greater than the sum of Seller's debts,
valuing Seller's assets at a fair salable value.
Section 3.17 Fair Consideration. The consideration received by Seller, in
exchange for the Seller Assets, is fair consideration having value equivalent
to or in excess of the value of the assets being transferred by Seller.
Section 3.18 Ability to Pay Debts. Neither as a result of the transaction
contemplated by this Agreement nor otherwise does Seller believe that it will
incur debts beyond its ability to pay or which would be prohibited by its
charter documents or by-laws. Seller's assets and cash flow enable it to meet
its present obligations in the ordinary course of business as they become due.
Section 3.19 Bulk Transfer Provisions. The sale, transfer, assignment and
conveyance of the Seller Assets by Seller pursuant to this Agreement is not
subject to the bulk transfer or any similar statutory provisions in effect in
any applicable jurisdiction.
Section 3.20 Transfer Taxes. The sale, transfer, assignment and
conveyance of the Seller Assets by Seller pursuant to this Agreement is not
subject to and will not result in any tax, fee or governmental charge payable
by Seller to any federal, state or local government ("Transfer Taxes"). If
Purchaser receives actual notice of any Transfer Taxes arising out of the
transfer, assignment and conveyance of the Seller Assets, on written demand by
Purchaser, or upon Seller otherwise being given notice thereof, Seller shall
pay, and otherwise indemnify and hold Purchaser, Indenture Trustee, Owner
Trustee, Noteholders and Certificateholders and the holders of the Notes
harmless, on an after-tax basis,
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from and against any and all such Transfer Taxes (it being understood that
Indenture Trustee, Owner Trustee, Noteholders and Certificateholders shall
have no obligation to pay such Transfer Taxes).
Section 3.21 Principal Executive Office. The principal executive office
of Seller is located at 1023 West Eighth Street, Cincinnati, Ohio 45203.
Section 3.22 Nonconsolidation. Seller shall not take any action which
would cause Purchaser to breach Section 7.2(b) of the Pooling and Servicing
Agreement.
Section 3.23 Sale Treatment. Seller will treat the transfer to Purchaser
of the Seller Assets (other than the Contributed Equipment) as a sale for
reporting and accounting purposes and will treat the transfer of the
Contributed Equipment as a contribution for reporting and accounting purposes.
Section 3.24 Leases are Chattel Paper. Each Lease agreement is "chattel
paper" within the meaning of the Uniform Commercial Code in the states of New
York and Ohio.
ARTICLE IV
SELLER'S OBLIGATONS
Section 4.1 Indemnification. Seller agrees to indemnify and hold harmless
Purchaser, Servicer, Indenture Trustee, Owner Trustee, the Noteholders and the
Certificateholders (each an "Indemnified Party") against any and all
liabilities, losses, damages, penalties, costs and expenses (including costs
of defense and legal fees and expenses) which may be incurred or suffered by
such Indemnified Party (except to the extent arising out of the gross
negligence or willful misconduct on the part of the Indemnified Party) as a
result of claims, actions, suits or judgments asserted or imposed against it
and arising out of the transactions contemplated hereby or by the Indenture,
including any claims resulting from any use, operation, maintenance, repair,
storage or transportation of any item of Equipment, whether or not in Seller's
possession or under its control pursuant to this Agreement, and any tort
claims and any fines or penalties arising from any violation of the laws or
regulations of the United States or any state or local government or
governmental authority; provided that the foregoing indemnity shall in no way
be deemed to impose on Seller any obligation, other than to the extent
specifically set forth in this Article IV, to make any payment with respect to
principal or interest on the Notes or Certificates or to reimburse Purchaser
for any payments on account of the Notes or Certificates.
Section 4.2 Repurchases; Other Payments. (a) If (i) any of the
representations or warranties made by Seller in Sections 3.4 and 3.5 with
respect
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to any of the Leases or the Equipment subject thereto proves at any time to
have been inaccurate in any material respect as of the Closing Date or related
transfer date in the case of Subsequent Leases, as the case may be, (ii) any
adjustment or modification is made to any Lease pursuant to the second
sentence of Section 4.4 of the Pooling and Servicing Agreement or (iii) any
Lease shall be terminated in whole or in part by a Lessee, or any amounts due
with respect to any Lease shall be reduced or impaired, as a result of any
action or inaction by Seller (other than any such action or inaction of
Seller, when acting as Servicer, in connection with the enforcement of any
Lease in a manner consistent with the provisions of the Pooling and Servicing
Agreement) or any claim by any Lessee against Seller and, in the case of
clauses (i) and (iii), the event or condition causing such inaccuracy,
termination, reduction, impairment or claim shall not have been cured or
corrected within 30 days after the earlier of the date on which Seller is
given notice thereof by Purchaser or Indenture Trustee or the date on which
Seller otherwise first has notice thereof, Seller will repurchase such Lease
and the Equipment subject thereto by paying to Purchaser, not later than the
third Business Day after the Determination Date (A) next following the
expiration of such 30-day period with respect to any such event referred to in
clauses (i) and (iii), and (B) next following the date of such event with
respect to any such event referred to in clause (ii), an amount equal to the
Lease Repurchase Amount, and simultaneously with such repurchase, Seller shall
reimburse Servicer for all amounts, if any, theretofore advanced by Servicer
pursuant to the Pooling and Servicing Agreement with respect to such Lease;
provided, that if Seller is required to repurchase any Lease under clause (i)
or (ii), Seller may instead substitute a Substitute Lease if such substitution
is permitted under Section 4.3. Without limiting the generality of the
foregoing, it is agreed and understood that for purposes of this Section 4.2,
any inaccuracy in any representation or warranty with respect to (i) the
priority of the Lien of the Indenture with respect to any Lease or (ii) the
amount (if less than represented) of the Lease Payments, Casualty Payments or
Termination Payment under any Lease shall be deemed to be material.
(b) By the Closing Date, Seller agrees to obtain and provide to Indenture
Trustee UCC searches against it and Purchaser from the central and county
filing offices in Ohio confirming the absence of any UCC filings against
either Seller or Purchaser with respect to the Leases (including the right to
receive all payments due or to become due thereunder) and the Equipment, other
than those naming Purchaser as Purchaser of the Leases or Indenture Trustee as
secured party. If any searches delivered pursuant to this Section 4.1(b)
disclose UCC filings (which are not in the process of being released pursuant
to releases delivered on the Closing Date) against Purchaser or Seller with
respect to Leases of Equipment the Discounted Present Value of which (i) is
greater than 2% but less than 5% of all the Leases, then Seller shall cause
searches to be made in additional states within 30 days following such
disclosure so that the Discounted Present Value of Leases of Equipment in
states where searches have been
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performed exceeds 75% of the aggregate Discounted Present Value of all Leases
and 75% of the Booked Residual Value of Equipment or (ii) is equal to or
greater than 5% of all the Leases then Seller shall cause searches to be made
in additional states within 30 days following such disclosure so that the
Discounted Present Value of Leases of Equipment in states where such searches
have been performed equals 100% of the aggregate Discounted Present Value of
all Leases. Without limiting the provisions of Section 4.2(a) or this Section
4.2(b), if Seller fails to provide any such searches required by the preceding
sentences of this Section 4.2(b) within the required time period or any search
reveals the existence of any conflicting Liens (which are not removed within
30 days of receipt of such search), Seller shall be required to repurchase not
later than the third Business Day after the Determination Date following the
expiration of the time period during which such search was to be obtained or
such Lien released, as the case may be, any Lease of Equipment in any such
state for which such searches are not provided or with respect to which
conflicting Liens are found to exist at the Lease Repurchase Amount for such
Lease.
(c) Seller's obligations under this Section 4.2 are the full recourse
obligations of Seller and shall in no way be limited or discharged by the
application of any funds constituting part of the Trust Estate.
Section 4.3 Substitution.
(a) Subject to the satisfaction of the requirements set forth in
paragraph (b), and in lieu of repurchasing any Lease if required pursuant to
clause (i) or (ii) of Section 4.2, Seller will have the right (but not the
obligation) at any time to substitute one or more Eligible Leases and the
Equipment subject thereto (each, a "Substitute Lease") for such Lease (for
purposes of this Section 4.3, a "Predecessor Lease") and the Equipment subject
thereto if:
(i) such Predecessor Lease became a Warranty Lease or was adjusted
pursuant to the second sentence of Section 4.4 of the Pooling and
Servicing Agreement during the immediately preceding Due Period; and
(ii) the aggregate Discounted Present Value of the Predecessor
Leases shall not exceed 10% of the Discounted Present Value of the Leases
on the Cut-off Date.
(b) Each transfer of Substitute Leases will be subject to the
satisfaction of the following conditions precedent:
(i) after giving effect to such substitutions, the aggregate Booked
Residual Value of such Leases must be not less than 90% of the Booked
Residual Value of the Leases substituted since the Closing Date;
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(ii) either the final payment on such Substitute Lease must be on or
prior to [final scheduled maturity month/year] or, to the extent the
final payment on such Lease is due subsequent to [final scheduled
maturity month/year], only scheduled payments due on or prior to such
date may be included in the Discounted Present Value of such Lease for
the purpose of making any calculation under the Basic Documents;
(iii) after giving effect to such substitutions, the aggregate
amount of Lease Payments through the term of the Leases (including the
Substitute Leases) will not be materially less than the aggregate
scheduled Lease Payments of the Leases prior to such substitution; and
(iv) after giving effect to such substitutions, the Discounted
Present Value of the Performing Leases must not be less than the
Discounted Present Value of the Performing Leases prior to such
substitution.
(c) Each substitution pursuant to this Section 4.3 shall include the
right to receive all amounts not collected under each Substitute Lease prior
to being substituted and any security deposits paid by the related Lessee to
Seller in connection therewith (other than any prepayments of rent required
pursuant to the terms thereof at or before the commencement of such Lease, all
Payaheads relating to payments on such Substitute Leases due or becoming due
after the effective date of such substitution and all other related assets
referred to in Section 2.1.
Section 4.4 Procedure for Substitution. (a) By 11:00 a.m. on the third
Business Day following each Determination Date, Seller shall give written
notice to Purchaser and Servicer of any substitution of Substitute Leases for
Predecessor Leases. By 11:00 a.m. on the fourth Business Day following each
Payment Date, Seller shall deliver to Purchaser, Servicer and Indenture
Trustee and, to the extent not included in the Monthly Servicer Report,
Indenture Trustee shall promptly deliver to each Rating Agency (i) a
supplement to Exhibit A setting forth the information shown thereon for each
such Substitute Lease, (ii) an Officer's Certificate (A) certifying that each
such Substitute Lease is an Eligible Lease, (B) specifying each Predecessor
Lease for which a substitution has been made and the amount of each periodic
Lease Payment and the Booked Residual Value under each such Predecessor Lease
and the amount of each periodic Lease Payment and the Booked Residual Value
under each Substitute Lease being transferred thereby and (C) that all
conditions precedent to such substitution have been satisfied and (iii) such
additional information concerning such Substitute Leases or Predecessor Leases
as may be needed for Servicer to prepare its monthly reports pursuant to
Section 4.8 of the Pooling and Servicing Agreement and to otherwise carry out
its duties as servicer thereunder.
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(b) Subject to the provisions of Section 4.5, the delivery of any
Officer's Certificate and supplement to Schedule 1 pursuant to Section 4.3(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Due Period (i) Seller assigned to Purchaser pursuant to
Section 2.1 all of Seller's right, title and interest in and to the Substitute
Leases identified in such supplement and the related rights described in
Section 2.1, (ii) Seller transferred to Purchaser, as a contribution to
capital, all of Seller's right, title and interest in and to the Equipment
subject to such Substitute Leases (to the extent of Seller's interest in such
Equipment, including Seller's security interest in any Equipment which is not
owned by Seller), and (iii) Purchaser assigned and transferred to Seller,
without representation or warranty, all of Purchaser's right, title and
interest in and to the Predecessor Leases identified in such Officer's
Certificate and the Equipment subject thereto (to the extent of Purchaser's
interest in such Equipment, including Purchaser's security interest in any
Equipment which is not owned by Purchaser). Seller shall promptly deliver to
Indenture Trustee (or a custodian on its behalf) on behalf of Purchaser the
original executed counterpart of each Substitute Lease assigned to Purchaser
in accordance with Section 4.3 and Purchaser shall promptly request Indenture
Trustee to deliver to Seller the original executed counterpart of each
Predecessor Lease for which substitution has been made pursuant to Section
4.3.
Section 4.5 Objection and Repurchase. If any Noteholder or
Certificateholder objects to any substitution of Leases within ten days of
receipt of Servicer's monthly report providing notice thereof pursuant to
Section 4.8 of the Pooling and Servicing Agreement, on the grounds either that
any Substitute Lease is not an Eligible Lease within the meaning of the
definition thereof or that such substitution or addition is otherwise not
permitted under the provisions of Section 4.3 Seller shall be entitled to
present such additional information as it deems appropriate in an effort to
demonstrate that such Lease is an Eligible Lease and that such substitution is
permitted under the provisions of Section 4.3. Following such presentation,
the substitution shall remain effective if each person originally objecting to
the substitution withdraws his objection. If the conditions specified in the
preceding sentence are not satisfied, or if at any time it is established that
any lease was not, at the time of substitution, an Eligible Lease, then Seller
shall be required to repurchase such Lease in accordance with the provisions
of Section 4.2.
Section 4.6 Seller's Subsequent Obligations. Upon any substitution of
Leases in accordance with the provisions of this Article IV, Seller's
obligations hereunder with respect to the related Predecessor Lease shall
cease but Seller shall thereafter have the same obligations with respect to
the Substitute Lease substituted as it has with respect to all other Leases
subject to the terms hereof.
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ARTICLE V
SELLER
Section 5.1 Merger or Consolidation of Seller. (a) Seller will keep in
full force and effect its existence, rights and franchise as a corporation
under the laws of its jurisdiction of incorporation and will preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is necessary to protect the validity and
enforceability of any of the Leases or to permit performance of Seller's
duties under this Agreement and the other Basic Documents to which Seller is a
party.
(b) Seller shall not merge or consolidate with any other Person unless
(i) the entity surviving such merger or consolidation is a corporation
organized under the laws of the United States or any jurisdiction thereof and
(ii) the surviving entity, if not Seller, shall execute and deliver to
Purchaser, Servicer and Indenture Trustee, in form and substance satisfactory
to each of them, (a) an instrument expressly assuming all of the obligations
of Seller hereunder and (b) an Opinion of Counsel to the effect that such
Person is a corporation of the type described in the preceding clause (i) and
has effectively assumed the obligations of Seller hereunder.
Section 5.2 Inspection. Seller will permit, on reasonable prior notice,
the representatives of Purchaser, Servicer, Indenture Trustee, Owner Trustee
or any Noteholder or Certificateholder evidencing not less than 25% of the
Outstanding Principal Amount of any class of Notes or the Certificate Balance,
as applicable, to examine all of the books of account, records, reports and
other papers of Seller, to make copies and extracts therefrom, and to discuss
Seller's affairs, finances and accounts with its officers, employees and
independent public accountants (and by this provision Seller authorizes said
accountants to discuss the finances and affairs of Seller) all at such
reasonable times and as often as may be reasonably requested for the purpose
of reviewing or evaluating the financial condition or affairs of Seller or
Seller's performance of its duties and obligations hereunder. Any expense
incident to the exercise by Purchaser, Indenture Trustee, Owner Trustee or any
Noteholder or Certificateholder during the continuance of any default by
Seller in any of its obligations hereunder of any right under this Section
7.05 shall be borne by Seller.
Section 5.3 Books and Records. Seller will clearly mark its books and
records to reflect each sale of a Lease and contribution of the Equipment
subject thereto to Purchaser.
Section 5.4 Communications. Seller will reply to all inquiries by third
parties with respect to the transactions contemplated by this Agreement by
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indicating that it has sold to Purchaser the Leases and contributed to
Purchaser its right, title and interest in the related Equipment.
ARTICLE VI
ASSIGNMENT
Section 6.1 Assignment to Indenture Trustee. It is understood that this
Agreement and all rights of Purchaser hereunder will be assigned by Purchaser
to Indenture Trustee pursuant to the Indenture, for the benefit of Indenture
Trustee and the Noteholders as provided in the Indenture, and may be
subsequently assigned by Indenture Trustee to any successor Indenture Trustee
or as otherwise provided in the Indenture. Seller hereby expressly agrees to
each such assignment and agrees that all of its duties, obligations,
representations and warranties hereunder shall be for the benefit of, and may
be enforced by, Indenture Trustee, the Noteholders, and any successor to or
assignee of any thereof.
Section 6.2 Assignment by Seller. None of the respective rights or
obligations of Seller hereunder may be assigned without the prior written
consent of Purchaser, Indenture Trustee (acting upon the instructions of the
Holders of Notes representing 66 2/3% of the then aggregate unpaid Outstanding
Principal Amount of the Notes) and the Holders of Notes representing 66 2/3% of
the Certificate Balance.
ARTICLE VII
NATURE OF SELLER'S OBLIGATIONS AND SECURITY THEREFOR
Section 7.1 Seller's Obligations Absolute. The obligations of Seller
hereunder, and the rights of Indenture Trustee, as assignee of Purchaser, in
and to all amounts payable by Seller hereunder, shall be absolute and
unconditional and shallnot be subject to any abatement, reduction, setoff,
defense, counterclaim or recoupment whatsoever, including abatements,
reductions, setoffs, defenses, counterclaims or recoupments due or alleged to
be due to, or by reason of, any past, present or future claims which Seller
may have against Servicer, Purchaser, Indenture Trustee, Owner Trustee and any
Noteholder or Certificateholder or any other Person for any reason whatsoever;
nor, except as otherwise expressly provided herein, shall this Agreement
terminate, or the obligations of Seller be otherwise affected, by reason of
any defect in any Lease or in any unit of Equipment or in the respective
rights and interests of Purchaser, Seller and Indenture Trustee therein, or by
reason of any Liens, encumbrances, security interests or rights of others with
respect to any Lease or any unit of Equipment, or any failure by Purchaser to
perform any of its obligations herein contained, or by reason of any other
indebtedness or liability, howsoever and whenever arising, of Purchaser,
Servicer, Indenture Trustee, or any Noteholder or Certificateholder to Seller
or any other Person or by reason of any insolvency, bankruptcy, or
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similar proceedings by or against Seller, Servicer, Purchaser, Indenture
Trustee or any other Person or for any other cause whether similar or
dissimilar to the foregoing, any present or future law to the contrary
notwithstanding, it being the intention of the parties hereto that all
obligations of Seller hereunder and all amounts payable by Seller hereunder
shall continue to be due and payable in all events and in the manner and at
the times herein provided unless and until the obligation to perform or pay
the same shall be terminated or limited pursuant to the express provisions of
this Agreement.
Section 7.2 Security for Obligations. As security for the full and timely
performance by Seller of each of its obligations hereunder, Seller hereby
pledges and grants to Purchaser (as a precaution in the event that, contrary
to the intent of the parties to the transactions contemplated hereby, it is
contended that Seller has any continuing interest in any Lease or item of
Equipment subject to the Indenture) a first priority Lien on and security
interest in all right, title and interest of Seller now or hereafter acquired
in and to each Lease (including the right to receive all payments due or to
become due thereunder) and each item of Equipment at any time subject to this
Agreement. The foregoing security interest is granted upon and is subject to
the same terms and provisions as are set forth in the Indenture and shall
continue in full force and effect until the same is discharged in accordance
with the terms therein, notwithstanding any waiver or modification of any of
the terms hereof or thereof or of any of the Notes or the Certificates,
whether with or without the consent of Seller.
Section 7.3 Further Assurances; Financing Statements. Seller agrees that
at any time and from time to time, at its expense, it shall promptly execute
and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable or that Purchaser or Indenture
Trustee may request to perfect and protect the assignments and security
interests granted or purported to be granted herein with respect to the Leases
and the Lease Payments or to enable Purchaser or Indenture Trustee to exercise
and enforce its rights and remedies under this Agreement and the other Basic
Documents with respect to any Leases and the Lease Payments. Without limiting
the generality of the foregoing, Seller shall execute and file such financing
or continuation statements, or amendments thereto, and such other instruments
or notices as may be necessary or desirable or that Purchaser or Indenture
Trustee may request to protect and preserve the assignments and security
interests granted by this Agreement and the other Basic Documents with respect
to the Leases.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Continuing Obligations. This Agreement shall continue in full
force and effect until each of the Notes and any other amounts due to any
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holder of the Notes have been paid in full and all other obligations, if any,
secured by the Lien of the Indenture have been fully satisfied.
Section 8.2 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
LAWS OF THE STATE OF NEW YORK. IF ANY PROVISION OF THIS AGREEMENT IS DEEMED
INVALID, IT SHALL NOT AFFECT THE BALANCE OF THIS AGREEMENT.
Section 8.3 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of Purchaser, Seller,
Servicer and Indenture Trustee and shall inure to the benefit of the
successors and assigns of the holders, from time to time, of the Notes.
Section 8.4 Modification. The Agreement may be amended from time to time
by a written amendment duly executed and delivered by Seller and Purchaser,
with the written consent of Indenture Trustee, but without the consent of any
of Noteholders or Certificateholders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
in this Agreement or of modifying in any manner the rights of Noteholders or
Certificateholders; provided, that such action shall not, as evidenced by an
Opinion of Counsel delivered to Trustee and Indenture Trustee, adversely
affect in any material respect the interests of any Noteholder or
Certificateholder.
This Agreement may also be amended from time to time by Seller and
Purchaser, with the written consent of (a) Indenture Trustee, (b) Noteholders
holding Notes evidencing not less than 66 2/3% of the Outstanding Principal
Amount of the Notes, and (c) the Holders of Certificates evidencing not less
than 66 2/3% 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
Certificateholders; provided, that no such amendment shall: (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Leases or distributions that shall be required to be
made for the benefit of Noteholders or Certificateholders or (b) reduce the
aforesaid percentage of the Notes and the Certificates that are required to
consent to any such amendment, without the consent of the holders of all the
outstanding Notes and Certificates.
Promptly after the execution of any such amendment or consent (or, in the
case of the Rating Agencies, 10 days prior thereto), Seller and Purchaser
shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, Indenture Trustee and each of the Rating
Agencies.
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It shall not be necessary for the consent of Certificateholders or
Noteholders 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.
Prior to the execution of any amendment to this Agreement, Trustee and
Indenture 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 and that all conditions precedent to such
execution and delivery by Trustee and Indenture Trustee have been satisfied.
Trustee and Indenture Trustee may, but shall not be obligated to, enter into
any such amendment that affects Trustee's or Indenture Trustee's, as
applicable, own rights, duties or immunities under this Agreement or
otherwise.
Section 8.5 Notices. All notices and other communications given in
connection with this Agreement shall be sufficient for every Person hereunder
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid or certified mail return receipt requested, or
sent by private courier or confirmed telecopy, in case of Seller, to 1023 West
Eighth Street, Cincinnati, Ohio 45203, Attention: [Name] (telecopy:
513/579-____), and in the case of Purchaser, to 1023 West Eighth Street,
Cincinnati, Ohio 45203, Attention: [Name] (telecopy: 513/579-____), or to such
other address as either party may specify to the other from time to time in
accordance with this Section 8.5.
Section 8.6 Counterparts. This Agreement may be executed in any number of
counterparts, each counterpart constituting an original, but all together
constituting only one Agreement.
Section 8.7 Nonpetition Covenant. Seller shall not petition or otherwise
invoke the process of any Governmental Authority for the purpose of commencing
or sustaining a case against Purchaser under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of Purchaser or any
substantial part of its respective property, or ordering the winding up or
liquidation of the affairs of Purchaser so long as there shall not have
elapsed one year plus one day since the latest maturing Notes have been paid
in full in cash.
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IN WITNESS WHEREOF, the parties hereto have executed this Pooling and
Servicing Agreement as of the date and year first written above.
PROVIDENT LEASE RECEIVABLES
CORPORATION
By:
------------------------------------
Name:
Title:
INFORMATION LEASING
CORPORATION
By:
------------------------------------
Name:
Title:
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SCHEDULE 1
SCHEDULE OF LEASES AND EQUIPMENT
ON FILE AT INDENTURE TRUSTEE
A-1
