AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1999
REGISTRATION STATEMENT NO. 333- 64045
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 3
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
CHARTER EQUIPMENT LEASE 1999-1 LLC
(Exact name of registrant as specified in its charter)
6100
(Primary Standard Industrial Classification Code Number)
New York 530 Fifth Avenue 13-4063218
(State or other Jurisdiction of New York, New York 10036 (I.R.S. Employer
Incorporation or Organization) (212) 805-1000 Identification No.)
(Address of principal offices)
----------------------
GARY CORR
Charter Equipment Lease 1999-1 LLC
530 Fifth Avenue
New York, New York 10036
(212) 399-7777
(Name, address and telephone number, including area code, of agent for service)
----------------------
Copies to:
<TABLE>
<S> <C> <C>
STEWART G. ABRAMSON, ESQ. PETER HUMPHREYS, ESQ. JAMES J. CROKE, ESQ.
Charter Equipment Lease 1999-1 LLC Dewey Ballantine, LLP Cadwalader, Wickersham & Taft
530 Fifth Avenue 1301 Avenue of the Americas 100 Maiden Lane
New York, New York 10036 New York, New York 10019 New York, New York 10038
</TABLE>
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Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
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 number of the earlier effective
registration statement for the same offering.[_]
If this Form is filed as a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration 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.[_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Amount Proposed Maximum Proposed Maximum Amount
Title of Each Class of Securities To Be Aggregate Price Per Aggregate Offering of Registration Fee
to be Registered Registered Note* Price
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<S> <C> <C> <C> <C>
Lease-Backed Notes, Class A-1 $51,000,000 100% $51,000,000 $14,195(1)
Lease-Backed Notes, Class A-2 $41,000,000 100% $41,000,000 $11,415(2)
Lease-Backed Notes, Class A-3 $19,000,000 100% $19,000,000 $ 5,299(3)
Lease-Backed Notes, Class A-4 $49,000,000 100% $49,000,000 $13,639(4)
Lease-Backed Notes, Class B $ 8,000,000 100% $ 8,000,000 $ 2,241(5)
====================================================================================================================================
</TABLE>
(1) $13,900 is paid pursuant to this registration statement. $295 was
previously paid pursuant to this registration statement to register the
initial $1,000,000.
(2) $ 11,120 is paid pursuant to this registration statement. $295 was
previously paid pursuant to this registration statement to register the
initial $1,000,000.
(3) $5,004 is paid pursuant to this registration statement. $295 was previously
paid pursuant to this registration statement to register the initial
$1,000,000.
(4) $13,344 is paid pursuant to this registration statement. $295 was
previously paid pursuant to this registration statement to register the
initial $1,000,000.
(5) $1,946 is paid pursuant to this registration statement. $295 was previously
paid pursuant to this registration statement to register the initial
$1,000,000.
*Estimated solely for purpose of calculating the registration fee.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED August 11, 1999.
PROSPECTUS
- --------------------------------------------------------------------------------
$166,169,936
Charter Equipment Lease 1999-1 LLC
$50,642,266 [ ] Lease-Backed Notes, Class A-1
$40,355,556 [ ] Lease-Backed Notes, Class A-2
$18,990,850 [ ] Lease-Backed Notes, Class A-3
$48,708,013 [ ] Lease-Backed Notes, Class A-4
$7,473,251 [ ] Lease-Backed Notes, Class B
(all amounts approximate)
CHARTER EQUIPMENT LEASE 1999-1 LLC
Issuer
CHARTER FINANCIAL, INC.
Seller and Servicer
CHARTER FUNDING CORPORATION V
Transferor
- --------------------------------------------------------------------------------
The Lease-Backed Notes (the "Notes") issued by the Charter Equipment
Lease 1999-1 LLC, a limited liability company organized under the laws of the
state of Delaware (the "Issuer"), consist of seven classes, the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes (the foregoing the
"Class A Notes"), the Class B Notes, the Class C Notes and the Class D Notes
(each a "Class"), of nonrecourse debt obligations of the Issuer, which
respectively represent the right to receive repayment of the initial outstanding
principal amount of such Class of the Notes (the "Initial Outstanding Principal
Amount") and monthly interest at a rate per annum for such Class of Notes (the
"Note Interest Rate") on the unpaid portion of such Outstanding Principal Amount
(as defined herein). The Class C Notes and the Class D Notes are not offered
hereby. (continued overleaf)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Initial Note Initial Underwriting Proceeds to
Outstanding Interest Public Discount(3) Transferor(4)
Principal Rate Offering
Amount(1) Price(2)
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<S> <C>
A-1 Notes $50,642,266
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A-2 Notes $40,355,556
- ---------------------------------------------------------------------------------------------------------
A-3 Notes $18,990,850
- ---------------------------------------------------------------------------------------------------------
A-4 Notes $48,708,013
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B Notes $7,473,251
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Total $166,169,936
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</TABLE>
(1) approximate
(2) Plus accrued interest, if any, from [ ], 1999.
(3) The Issuer and Charter have agreed to indemnify the Underwriter against
certain liabilities, including liabilities under the Securities Act of
1933.
(4) Before deducting expenses, estimated to be $[ ].
The Offered Notes are offered subject to receipt and acceptance by First Union
Capital Markets Corp. (the "Underwriter"), to prior sale and to the
Underwriter's right to reject any order in whole or in part and withdraw,
cancel, or modify any order without notice. It is expected that delivery of the
Offered Notes will be made in book-entry form through the facilities of The
Depository Trust Company on or about August __, 1999 (the "Closing Date").
FIRST UNION CAPITAL MARKETS CORP.
August __, 1999
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OFFERED NOTES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
(cover page continued)
The Notes are backed solely by a pledge of the assets of the Issuer governed
pursuant to a LLC Agreement (the "LLC Agreement"). The Notes will be issued by
the Issuer pursuant to an indenture of trust dated as of August 1, 1999 (the
"Indenture") between the Issuer and LaSalle Bank National Association, as
trustee (the "Trustee"). The assets of the Issuer will consist of a portfolio of
finance leases, leases intended as security agreements, installment sale
contracts, loan contracts, synthetic leases and/or rental stream obligations,
together with all monies received relating thereto (the "Leases"), and the
ownership or security interests, if any, held by Charter Funding Corporation V
("CFC" or the "Transferor") in the financed equipment and property related to
such Leases (the "Equipment" together with the Leases, the "Lease Receivables")
originated or acquired by the Seller and underwritten to the credit and
collections policies of Charter Financial, Inc., a specialty capital equipment
finance and leasing company ("Charter") and the contractual rights of the
purchasers under the agreements by which the Lease Receivables were acquired.
The Leases include extrusion/intrusion molding, computer, printing,
film/television/video/audio production, transportation, telecommunications,
medical, furniture and fixtures and railroad equipment leases. Only the Class A
Notes and the Class B Notes are hereby being offered (together, the "Offered
Notes"). Each of the Offered Notes will be rated investment grade at the time of
issuance. See "Summary of Terms--Ratings" herein.
Principal and interest will be paid to the holders of the Notes (the
"Noteholders") monthly on the 25th day (or, if such day is not a Business Day,
on the next succeeding Business Day thereafter) of each month, commencing on
August 25th, 1999 (each, a "Payment Date"), as further described herein.
Interest will accrue on each Class of the Notes at the respective Note Interest
Rate from Payment Date to Payment Date, or with respect to the initial Payment
Date, from the Closing Date. Distributions of interest on the Class B Notes will
be subordinated in priority of payment to interest due on the Class A Notes to
the extent described herein. Distributions of interest on the Class C Notes will
be subordinated in priority of payment to interest due on the Class A Notes and
the Class B Notes to the extent described herein. Distributions of interest on
the Class D Notes will be subordinated in priority to interest due on the Class
A Notes, the Class B Notes and the Class C Notes to the extent described herein.
Distributions of principal on the Class B Notes will be subordinated in priority
of payment to principal due on the Class A Notes to the extent described herein.
Distributions of principal on the Class C Notes will be subordinated in priority
of payment to principal due on the Class A Notes and the Class B Notes to the
extent described herein. Distributions of principal on the Class D Notes will be
subordinated in priority of payment to principal due on the Class A Notes, the
Class B Notes and the Class C Notes to the extent described herein. The final
payment of principal and interest on each class of the Notes is scheduled to be
made on the respective Payment Date set forth under "Summary of Terms -- The
Notes," to the extent that there are sufficient funds available (the "Stated
Maturity Date") but there can be no assurance that all such payments will be
made by such Payment Dates.
THE NOTES REPRESENT OBLIGATIONS OF THE ISSUER ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE TRANSFEROR, CHARTER, THE TRUSTEE, THE SELLER,
THE SERVICER, ANY SUCCESSOR SERVICER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE NOTES NOR THE UNDERLYING LEASES WILL BE GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE TRANSFEROR, CHARTER, THE
TRUSTEE, THE SELLER OR THE SERVICER.
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS"
AT PAGE 21 HEREIN.
THE POOL OF ASSETS (AS DEFINED HEREIN) MAY INCLUDE AN OWNERSHIP OR SECURITY
INTEREST IN THE EQUIPMENT RELATED TO LEASE RECEIVABLES.
Charter Financial, Inc., a New York corporation (in its capacity as seller,
the "Seller"), will contribute and sell the Lease Receivables to the Transferor
pursuant to a contribution and sale agreement (the "Seller Contribution and Sale
Agreement"). The Transferor will, in turn, sell the Lease Receivables to the
Issuer pursuant to a separate contribution and sale agreement (the "Transferor
Contribution and Sale Agreement" and together with the Seller Contribution and
Sale Agreement, the "Contribution and Sale Agreements"). Charter Financial,
Inc., (in such
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<PAGE>
capacity the "Servicer") will service the Lease Receivables pursuant to a
servicing agreement dated as of August 1, 1999 (the "Servicing Agreement") among
the Servicer, the Issuer and the Trustee.
AVAILABLE INFORMATION
The Transferor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Offered Notes offered pursuant to this Prospectus.
This Prospectus, which forms a part of the Registration Statement, omits certain
information contained in such Registration Statement pursuant to the Rules and
Regulations of the Commission. The Registration Statement can be inspected and
copied at the Public Reference Room at the Commission at 450 Fifth Street, N.W.,
Washington, D.C. and the Commission's regional offices at Seven World Trade
Center, 13th Floor, New York, New York, 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the Commission maintains a site on the World Wide Web containing
reports, proxy materials, information statements and other items. The address is
http://www.sec.gov.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the Notes offered hereby and thereby, nor an offer
of the Notes to any person in any state or other jurisdiction in which such
offer would be unlawful. The delivery of this Prospectus at any time does not
imply that information herein is correct as of any time subsequent to its date.
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REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued, periodic and annual unaudited
reports containing information concerning the Lease Receivables will be prepared
by the Servicer and sent on behalf of the Issuer only to Cede & Company ("Cede")
, as nominee of The Depository Trust Company ("DTC") and registered holders of
the Offered Notes (as defined herein). See "Description of the Notes -- Reports
to Noteholders" herein. Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. The
Transferor will cause to be filed with the Commission such periodic reports as
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder and as are otherwise
agreed to by the Commission. Copies of such periodic reports may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates, or from the Commission's Web Site
at http://www.sec.gov, free of charge.
The Transferor will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents referred to above that have been or may be
incorporated by reference in this Prospectus (not including exhibits to the
information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Such requests should be directed to: Charter Financial, Inc., 530
Fifth Avenue, New York, New York 10036, Attention: David Oplanich, Treasurer.
ADDITIONAL INFORMATION
This Prospectus contains a summary of the material terms of the applicable
exhibits to the Registration Statement and the documents referred to herein and
therein. Copies of such exhibits are on file at the offices of the Securities
and Exchange Commission in Washington, D.C., and may be obtained at rates
prescribed by the Commission upon request to the Commission and may be
inspected, without charge, at the Commission's offices.
3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein. Certain capitalized terms used
herein are defined elsewhere in this Prospectus on the pages indicated in the
"Index of Terms."
Issuer............................ Charter Equipment Lease 1999-1 LLC (the
"Issuer"), a limited liability company
organized under the laws of the state of
Delaware. The activities of the Issuer will
be limited by the terms of the LLC
Agreement to acquiring, holding and
managing the Lease Receivables, issuing and
making payments on the Notes and other
activities related thereto.
Transferor........................ Charter Funding Corporation V (the
"Transferor"), a New York corporation, and
wholly-owned bankruptcy-remote subsidiary
of Charter Financial, Inc. ("Charter" or
the "Company"), a New York corporation, is
the transferor of the Lease Receivables to
the Issuer pursuant to the Transferor
Contribution and Sale Agreement. The
Transferor's principal executive offices
are located at 530 Fifth Avenue, New York,
New York 10036. The Transferor's telephone
number is (212) 805-1000. See "The
Transferor."
Seller............................ Charter Financial, Inc., the "Seller" of
the Lease Receivables to the Transferor
pursuant to the Seller Contribution and
Sale Agreement.
Servicer.......................... Charter Financial, Inc. (in its capacity as
servicer, the "Servicer"), will service the
Lease Receivables comprising the Pool of
Assets owned by the Issuer and pledged to
the Trustee under the Indenture and
administer the Lease Receivables pursuant
to the Servicing Agreement. The Servicer
may subcontract all or any portion of its
obligations as Servicer under the Servicing
Agreement to a qualified subservicer (each,
a "Sub-Servicer") but the Servicer will not
be relieved thereby of its liability with
respect thereto. See "Description of the
Transaction Documents-- The Servicer."
Trustee........................... La Salle Bank National Association, a
national banking association organized
under the laws of the United States (the
"Trustee"). The corporate trust offices of
the Trustee are located at 135 South
LaSalle Street, Suite 1625, Chicago,
Illinois 60674-4107. On each Payment Date,
the Trustee will be entitled to receive a
monthly fee for the related Collection
Period (the "Trustee Fee") equal to the
product of (i) one-twelfth, (ii) 0.05% (the
"Trustee Fee Rate") and (iii) the Aggregate
Discounted Lease Balance as of the first
day of such Collection Period, payable out
of the Distribution Account, as
compensation for acting as Trustee.
Cut-Off Date...................... The close of business on June 30, 1999 (the
"Cut-Off Date").
Closing Date...................... On or about August __, 1999 (the "Closing
Date").
Collection Period................. The period from and including the first day
of each calendar month to and including the
last day of the calendar month (each, a
"Collection Period").
Payment Date...................... Payments on the Notes will be made on the
twenty-fifth day of each month (or if such
day is not a Business Day (as defined
below), the next succeeding Business Day),
commencing August 25, 1999 (each, a
"Payment Date") to holders of record on the
related Record Date (as defined below).
"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
of the Trustee or the Servicer are located
are authorized or obligated by law or
executive order to remain closed.
4
<PAGE>
Calculation Date.................. The last day of the month preceding the
month of each Payment Date (each, a
"Calculation Date").
Record Date....................... With respect to any Payment Date, the last
Business Day immediately preceding such
Payment Date (each, a "Record Date").
The Notes......................... The lease-backed notes issued under the
Indenture (the "Notes") consist of seven
Classes of non-recourse debt obligations of
the Issuer: approximately $50,642,266 [ ]
Lease-Backed Notes, Class A-1 (the "Class
A-1 Notes"), approximately $40,355,556 [ ]
Lease-Backed Notes, Class A-2 (the "Class
A-2 Notes"), approximately $18,990,850 [ ]
Lease-Backed Notes, Class A-3 (the "Class
A-3 Notes"), approximately $48,708,013 [ ]
Lease-Backed Notes, Class A-4 (the "Class
A-4 Notes") (collectively, the Class A-1
Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes are referred
to herein as the "Class A Notes"),
approximately $7,473,251 [ ] Lease-Backed
Notes, Class B (the "Class B Notes"),
approximately $3,956,427 [ ] Lease-Backed
Notes, Class C (the "Class C Notes"), and
approximately $1,318,809 [ ] Lease-Backed
Notes, Class D (the "Class D Notes)",
which, respectively, represent the right to
receive repayment of the then unpaid
principal amount (the "Outstanding
Principal Amount") of such Class of Notes
and monthly interest at the respective Note
Interest Rate thereof on the Outstanding
Principal Amount thereof. In the aggregate
the Initial Outstanding Principal Amount of
the Notes equals approximately
$171,445,172, which is anticipated to equal
97.50% of the Aggregate Discounted Lease
Balance (as defined herein) as of the
Cut-off Date. The "Stated Maturity Dates"
for the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4
Notes, the Class B Notes, the Class C Notes
and the Class D Notes are August, 2000,
February, 2002, September, 2002, January,
2006, October, 2006, December, 2006, and
May, 2007, respectively.
The Notes will be issued pursuant to the
Indenture, to be dated as of August 1,
1999, between the Issuer and the Trustee
and will be secured solely by the Pool of
Assets pursuant to the Indenture. Only the
Class A Notes and the Class B Notes
(collectively, the "Offered Notes") are
being offered hereby.
The Class A Notes and the Class B Notes
will be issued in minimum denominations of
$1,000 and integral multiples thereof.
Each Class of Notes will represent
non-recourse debt obligations of the Issuer
which are secured solely by a segregated
pool of Lease Receivables (the "Pool of
Assets"), as described herein. The Pool of
Assets may consist of any combination of
finance leases, leases intended as security
agreements, installment sale contracts,
loan contracts, synthetic leases or rental
stream obligations, together with all
monies received relating thereto (the
"Leases"). The Pool of Assets also may
include the underlying equipment and
property relating thereto, together with
the proceeds thereof, whether as a result
of the liquidation thereof to offset any
payment deficiency under the Lease, the
receipt of insurance proceeds in respect
thereof, if any, in the event of damage or
destruction of the Equipment, or otherwise
(the "Equipment" and together with the
Leases, the "Lease Receivables").
The Equipment underlying the Lease
Receivables included in the Pool of Assets
will generally be limited to personal
property which is leased or financed by the
Seller or the originator of the paper to
the Lessee. However, certain Leases may
also have as additional security a security
interest in related fixtures or be
additionally secured by mortgages on
related real property.
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<PAGE>
The Transferor will acquire the Lease
Receivables from the Seller on or prior to
the date of issuance of the Notes pursuant
to a lease sale and contribution agreement
between the Seller and the Transferor (the
"Seller Contribution and Sale Agreement"),
as described herein.
The Issuer will be governed pursuant to a
limited liability company operating
agreement (the "LLC Agreement"). The LLC
Agreement will provide for the operation of
the Issuer and set forth certain
restrictions upon its operation. The Issuer
will enter into a contribution and sale
agreement with the Transferor (the
"Transferor Contribution and Sale
Agreement") by which it will acquire the
Lease Receivables from the Transferor. The
Transferor Contribution and Sale Agreement
will contain schedules which detail the
characteristics of the pool of Lease
Receivables held by the Issuer from time to
time. See "Description of the Transaction
Documents."
The Issuer will enter into an indenture
(the "Indenture") by and between the Issuer
and the trustee named on the Indenture (the
"Trustee"). The Indenture will describe the
respective rights of the Noteholders of
each of the classes of Notes to the funds
derived from the pool of Lease Receivables
which comprise the Pool of Assets and will
detail the security for the debt issued
thereunder by the Issuer.
The Lease Receivables comprising the Pool
of Assets will be serviced by the Servicer
pursuant to a servicing agreement (the
"Servicing Agreement") by and among the
Servicer, the Issuer and the Trustee.
Collectively, the LLC Agreement, the
Transferor Contribution and Sale Agreement,
the Seller Contribution and Sale Agreement,
the Servicing Agreement and the Indenture,
and other agreements relating to the
issuance of the Notes are referred to as
the "Transaction Documents."
The Notes will not be obligations, either
recourse or non-recourse of the Transferor,
the Servicer, the Trustee, the Seller or
any person other than the Issuer. The Notes
represent obligations of the Issuer, and do
not represent interests in or obligations
of the Transferor, the Servicer, the
Trustee, the Seller or any of their
respective affiliates other than the
Issuer. The Notes will, in any event, be
secured by assets in the Pool of Assets.
Neither the Notes nor the underlying Lease
Receivables will be guaranteed or insured
by the Transferor, the Servicer, the
Seller, the Trustee or any of their
affiliates.
Immediately prior to the issuance of the
Notes, the Issuer will have an ownership
interest in the Pool of Assets, and the
Issuer will have a first priority perfected
security interest in the Equipment which is
related to finance leases with an initial
cost in excess of $50,000.00.
Pool of Assets.................... The assets of the Issuer granted pursuant
to the Indenture (the "Pool of Assets")
will consist of the Leases and the
interests, if any, held by the Transferor
in the financed equipment (the "Equipment")
originated by the Seller and underwritten
to Charter's credit and collections
policies. The Pool of Assets will not have
any residual interest in the related
Equipment after a Lease Receivable has been
paid in full. In addition, the Pool of
Assets will include (i) funds on deposit in
any Trust Accounts established and
maintained by the Servicer pursuant to the
Servicing Agreement and the Indenture, (ii)
the rights to proceeds from certain
insurance policies covering the Equipment;
(iii) the interest of the Transferor in any
proceeds from recourse to Vendors on
contract payments; (iv) other rights
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<PAGE>
of the Transferor under the Seller
Contribution and Sale Agreement conveyed to
the Issuer under the Transferor
Contribution and Sale Agreement; and (v)
all proceeds of the foregoing.
The Pool of Assets will consist of the
Leases, and may include the Equipment. The
Leases are obligations for the lease or
purchase of the Equipment, or evidence
borrowings used to acquire or refinance the
Equipment, entitling the obligee thereunder
(the "Lessor") to receive a stream of
scheduled payments and related payments
and, in some cases, to either the return of
the Equipment at the termination of the
related Lease or, with respect to certain
of the Leases, the payment of a purchase
price of an amount at least equal to the
Repurchase Amount (as defined herein), for
the Equipment at the election of the
obligor thereunder (the "Lessee"). The type
and characteristics of the Leases included
in the Pool of Assets are described herein
under the heading "Leases." No more than 5%
of the aggregate Lease Receivables in the
Pool of Assets as of the Closing Date will
deviate from the characteristics of the
Lease Receivables in the Pool of Assets as
of the Cut-Off Date. The Leases, including
any Substitute Leases, will be underwritten
in accordance with Charter's credit
criteria as are in effect from time to
time. Charter's Lease underwriting
procedures focus primarily upon the credit
quality of the related obligor. As such,
the underwriting procedure does not
principally depend upon a credit support
analysis which is based upon the estimated
liquidation value of any related Equipment.
Accordingly, when making investment
decisions with respect to the Notes,
potential investors and Holders of the
Notes should not rely upon the value of any
of the related Equipment in the event of
the liquidation of any Leases hereunder.
Each of the Leases which comprise the Pool
of Assets as of the Closing Date will have
been selected to comply with the criteria
established for an Eligible Lease (as
defined herein). See "The Leases--Eligible
Leases" herein. Further, as of the related
Transfer Date (as defined herein), each
Substitute Lease (as defined herein) shall
be selected to comply with the same
criteria established for an Eligible Lease.
The Lease Receivables comprising the Pool
of Assets will be acquired by the
Transferor from the Seller; such Lease
Receivables will have theretofore been
either (i) originated by the Seller, (ii)
originated by Vendors and acquired by the
Seller or (iii) acquired by the Seller from
other sellers or owners of Lease
Receivables.
The Transferor will acquire the Lease
Receivables from the Seller pursuant to the
Seller Contribution and Sale Agreement as
defined herein. The Transferor will
transfer such Lease Receivables to the
Issuer pursuant to the Transferor
Contribution and Sale Agreement and
thereupon the Issuer will pledge the
Issuer's right, title and interest in and
to such Lease Receivables to the Trustee on
behalf of Noteholders pursuant to the
Indenture. The Leases transferred to the
Issuer and pledged by the Issuer shall have
an Aggregate Discounted Lease Balance (as
defined herein) specified herein under the
heading "Leases." The obligations of the
Transferor, the Seller, the Servicer, the
Issuer and the Trustee, if any, under the
Transaction Documents include those
specified below.
The "Discounted Lease Balance" of any Lease
as of the Cut-Off Date or as of any Payment
Date shall be determined on the Cut-Off
Date or the related Calculation Date,
respectively, and it shall equal the
present value of each remaining Lease
Payment to become due under a Lease
(excluding payments with respect to (x)
Defaulted Leases (as defined herein), (y)
Early Termination Leases (as defined
herein) and Leases subject to a Warranty
Event
7
<PAGE>
(as defined herein) which are not
substituted for by Substitute Leases (as
defined herein) or Additional Leases (as
defined herein) on or before the related
Calculation Date, and (z) Leases subject to
Casualty Losses (as defined herein), to the
extent of such Casualty Losses, which are
not substituted for by Substitute Leases on
or before the related Calculation Date),
discounted monthly, as to each Lease
Payment, from the last day of the
Collection Period in which such Lease
Payment is due at a rate equal to the
product of (i) one-twelfth and (ii) the
Discount Rate. Notwithstanding the
foregoing, on the date that a Lease becomes
a Defaulted Lease, the Discounted Lease
Balance for such Lease will be reduced to
zero. A "Warranty Event" with respect to a
Lease shall occur and exist when one or
more of the representations and warranties
given with respect to such Lease under the
Seller Contribution and Sale Agreement or
the Transferor Contribution and Sale
Agreement shall have been breached and
remain uncured.
The "Aggregate Discounted Lease Balance"
for any Calculation Date is the sum of the
Discounted Lease Balances of all Leases.
The "Discount Rate" is [ ]% per annum,
which is equal to the sum of :
(a) the weighted average of 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, the Class B Note
Interest Rate, the Class C Note
Interest Rate and the Class D Note
Interest Rate, weighted by (x) the
Initial Class A-1 Note Principal
Balance, Initial Class A-2 Note
Principal Balance, Initial Class A-3
Note Principal Balance, Initial Class
A-4 Note Principal Balance, Initial
Class B Note Principal Balance,
Initial Class C Note Principal
Balance, Initial Class D Note
Principal Balance, as applicable, and
(y) the expected weighted average life
of each Class of Notes, as applicable,
assuming no defaults and a constant
prepayment rate of 7%, calculated as
of the Closing Date,
(b) the Servicing Fee Rate (as hereinafter
defined); and
(c) The Trustee Fee Rate.
None of the Lessees are located outside of
the United States. No more than 2% of the
Equipment related to the Leases is located
outside the United States.
8
<PAGE>
Structure of Transaction
Contractual Agreements
9
<PAGE>
Available Funds................... With respect to each Payment Date, the
funds received on or prior to the
Calculation Date which relate to payments
on the Leases, proceeds from casualties,
terminations or repurchases of Leases,
recoveries on defaulted Leases, advances
made by the Servicer to cover Delinquent
Leases (as defined herein) and investment
proceeds thereon (excluding certain amounts
specified in the Indenture) shall
constitute the Available Funds (as defined
herein) which are available for
distribution by the Trustee on such Payment
Date. In addition, funds on deposit in the
Reserve Account will be available to make
interest and principal payments to
Noteholders to the extent there occurs an
Available Funds Shortfall (as defined
herein). Available Funds will also include
amounts transferred from the Reserve
Account to the Distribution Account for the
purpose of repaying the Notes in full on
the final Payment Date.
Application of Payments........... Monthly distributions will be made by the
Trustee on each Payment Date from Available
Funds in the following priority:
(a) to pay (i) the Trustee Fee and (ii) to
pay to the Trustee an amount not to
exceed the lesser of (A) any expenses
or liabilities incurred by the Trustee
pursuant to the terms of the
Indenture, or (B) the Trustee Priority
Expense Amount for such Payment Date;
(b) to pay the Servicing Fee (as
hereinafter defined);
(c) to reimburse unreimbursed Servicer
Advances in respect of a prior Payment
Date;
(d) to make Interest Payments owing on the
Class A Notes concurrently and pro
rata to the Class A-1 Noteholders,
Class A-2 Noteholders, Class A-3
Noteholders and Class A-4 Noteholders;
(e) to make Interest Payments owing on the
Class B Notes;
(f) to make Interest Payments owing on the
Class C Notes;
(g) to make Interest Payments owing on the
Class D Notes;
(h) 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 and
finally, (iv) to the Class A-4
Noteholders until the Outstanding
Principal Amount on the Class A-4
Notes is reduced to zero
(i) to make the Class B Principal Payment
to the Class B Noteholders;
(j) to make the Class C Principal Payment
to the Class C Noteholders;
(k) to make the Class D Principal Payment
to the Class D Noteholders;
(l) to pay Additional Principal, if any,
to the Class A Noteholders then
receiving the Class A Principal
Payment as provided in clause (g)
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
10
<PAGE>
the Outstanding Principal Amount on
the Class B Notes has been reduced to
zero, then to the Class C Noteholders
until the Outstanding Principal Amount
on the Class C Notes has been reduced
to zero, thereafter to the Class D
Noteholders until the Outstanding
Principal Amount on the Class D Notes
has been reduced to zero;
(m) to make a deposit to the Reserve
Account in an amount equal to the
excess of the Required Reserve Amount
(as defined herein) over the Available
Reserve Amount (as defined herein);
(n) to reimburse the Trustee for any
expenses or liabilities pursuant to
the terms of the Indenture to the
extent not already paid pursuant to
clause (a)(ii) hereof; and
(n) to the Issuer, the balance, if any.
See "Description of the Notes --
Application of Payments."
"Trustee Priority Expense Amount" means
with respect to any Payment Date, the
excess, if any, of (x) $50,000, over (y)
the aggregated amounts paid to the Trustee
pursuant to clause (a)(ii) above on all
prior Payment Dates.
Interest.......................... On each Payment Date, the interest due (the
"Interest Payments") with respect to the
Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the
Class B Notes, the Class C Notes and the
Class D Notes since the last Payment Date
will be the interest that has accrued on
such Notes since the last Payment Date (or
in the case of the first Payment Date,
since the Closing Date (the "Interest
Accrual Period") at the applicable Note
Interest Rate applied to the then unpaid
principal amounts (the "Outstanding
Principal Amounts") of the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes,
the Class A-4 Notes, the Class B Notes, the
Class C Notes, and the Class D Notes,
respectively, after giving effect to
payments of principal to the Class A-1
Noteholders, the Class A-2 Noteholders, the
Class A-3 Noteholders, the Class A-4
Noteholders, the Class B Noteholders, the
Class C Noteholders and the Class D
Noteholders, respectively, on the preceding
Payment Date. Interest Payments on the
Notes are required to be made on each
Payment Date to Noteholders on the related
Record Date. See "Description of the
Notes--General" and "Application of
Payments."
The Interest Payments with respect to Class
A-1 Notes will be calculated on the basis
of actual days elapsed over a year of 360
days, and with respect to all other Notes,
will be calculated on the basis of a year
of 360 days consisting of twelve 30-day
months.
Principal......................... On each Payment Date, each of the
Noteholders will be entitled to receive
payments of principal ("Principal
Payments") to the extent of funds available
as described herein under "Description of
the Notes -- Available Funds," in the
priorities described herein under
"Application of Payments." Principal
Payments on the Notes are required to be
made on each Payment Date to Noteholders on
the related Record Date.
On each Payment Date, to the extent funds
are available therefor, the following
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 (as
defined below), then
11
<PAGE>
(ii) to the Class A-2 Noteholders
only, until the Outstanding
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,
and
(iv) to the Class A-4 Noteholders,
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 (as defined
below),
(c) to the Class C Noteholders, the Class
C Principal Payment (as defined
below),
(d) to the Class D Noteholders, the Class
D Principal Payment (as defined
below), and
(e) to the extent that the Class B Floor
(as defined below) exceeds the Class B
Target Investor Principal Amount (as
defined below), the Class C Floor (as
defined below) exceeds the Class C
Target Investor Principal Amount (as
defined below) and/or the Class D
Floor (as defined below) exceeds the
Class D Target Investor Principal
Amount (as defined below), Additional
Principal (defined below) 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,
Class B Notes, Class C Notes, and
Class D Notes as applicable, until the
Outstanding Principal Amount of each
Class has been reduced to zero.
The "Class A Principal Payment" shall
equal:
(a) while the Class A-1 Notes are
outstanding,
(i) on all Payment Dates prior to the
Class A-1 Stated Maturity 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 Aggregate Discounted Lease
Balance as of the previous
Calculation Date (or with respect
to the first Payment Date, the
initial Aggregate Discounted
Lease Balance), and (B) the
Aggregate Discounted Lease
Balance as of the related
Calculation Date, and
(ii) on all Payment Dates on and after
the Class A-1 Stated Maturity
Date, 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 Outstanding Principal
Amount on the Class A Notes to the
Class A Target Investor Principal
Amount (as defined below) for such
Payment Date.
The "Class B Principal Payment" shall
equal: (a) while the Class A-1 Notes are
outstanding, zero and (b) after the
Outstanding Principal Amount on the Class
12
<PAGE>
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 (as defined below) and the
Class B Floor (as defined below).
The "Class C Principal Payment" shall
equal: (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 C Notes to
the greater of the Class C Target Investor
Principal Amount (as defined below) and the
Class C Floor (as defined below).
The "Class D Principal Payment" shall
equal: (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 D Notes to
the greater of the Class D Target Investor
Principal Amount (as defined below) and the
Class D Floor (as defined below).
The "Class A Target Investor Principal
Amount" with respect to each Payment Date
is an amount equal to the product of (a)
the Class A Percentage (as defined below)
and (b) the Aggregate Discounted Lease
Balance as of the related Calculation 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 (as defined below)
and (b) the Aggregate Discounted Lease
Balance as of the related Calculation Date.
The "Class C Target Investor Principal
Amount" with respect to each Payment Date
is an amount equal to the product of (a)
the Class C Percentage (as defined below)
and (b) the Aggregate Discounted Lease
Balance as of the related Calculation Date.
The "Class D Target Investor Principal
Amount" with respect to each Payment Date
is an amount equal to the product of (a)
the Class D Percentage (as defined below)
and (b) the Aggregate Discounted Lease
Balance as of the related Calculation Date.
The Class A Target Investor Principal
Amount, the Class B Target Investor
Principal Amount, the Class C Target
Investor Principal Amount, and the Class D
Target Investor Principal Amount are
collectively referred to as the "Class
Target Investor Principal Amounts."
The "Class A Percentage" will be equal to
approximately 86.31%. The "Class B
Percentage" will be equal to approximately
5.97%. The "Class C Percentage" will be
equal to approximately 3.16%. The "Class D
Percentage" will be equal to approximately
1.05%.
The "Class B Floor" with respect to each
Payment Date means:
(a) 2.15% of the initial Aggregate
Discounted Lease Balance as of the
Cut-Off Date, plus
(b) the Cumulative Loss Amount with
respect to such Payment Date, minus
13
<PAGE>
(c) the sum of the Outstanding Principal
Amount of the Class C Notes, the
Outstanding Principal Amount of the
Class D Notes, and the
Overcollateralization Balance as of
the immediately preceding Payment Date
after giving effect to all principal
payments made on that day minus
(d) the amount on deposit in the Reserve
Account after giving effect to
withdrawals to be made on such Payment
Date.
The "Class C Floor" with respect to each
Payment Date means:
(a) 1.30% of the initial Aggregate
Discounted Lease Balance as of the
Cut-Off Date, plus
(b) the Cumulative Loss Amount with
respect to such Payment Date, minus
(c) the sum of the Outstanding Principal
Amount of the Class D Notes and the
Overcollateralization Balance as of
the immediately preceding Payment Date
after giving effect to all principal
payments made on that day, minus
(d) the amount on deposit in the Reserve
Account after giving effect to
withdrawals to be made on such Payment
Date; provided, however, that if the
Outstanding Principal Amount of the
Class B Notes is less than or equal to
the Class B Floor on such Payment
Date, the Class C Floor will equal the
Outstanding Principal Amount of the
Class C Notes utilized in the
calculation of the Class B Floor for
such Payment Date.
The "Class D Floor" with respect to each
Payment Date means:
(a) 0.85% of the initial Aggregate
Discounted Lease Balance as of the
Cut-Off Date, plus
(b) the Cumulative Loss Amount with
respect to such Payment Date, minus
(c) the Overcollateralization Balance as
of the immediately preceding Payment
Date after giving effect to all
principal payments made on that day,
minus
(d) the amount on deposit in the Reserve
Account after giving effect to
withdrawals to be made on such Payment
Date; provided, however, that if the
Outstanding Principal Amount of the
Class C Notes is less than or equal to
the Class C Floor on such Payment
Date, the Class D Floor will equal the
Outstanding Principal Amount of the
Class D Notes utilized in the
calculation of the Class C Floor for
such Payment Date.
The Class B Floor, the Class C Floor and
the Class D Floor are collectively referred
to herein as the "Class Floors."
"Additional Principal" with respect to each
Payment Date equals:
14
<PAGE>
(a) zero, if each of the Class Target
Investor Principal Amounts for the
Class B Notes, the Class C Notes, and
the Class D Notes exceed their
respective Class Floors on such
Payment Date and
(b) in each other case the excess, if any,
of
(i) (A) the Outstanding Principal
Amount of the Notes plus the
Overcollateralization Balance as
of the immediately preceding
Payment Date after giving effect
to payments on such Payment Date,
minus (B) the Aggregate
Discounted Lease Balance as of
the related Calculation Date,
over
(ii) the sum of the Class A Principal
Payment, the Class B Principal
Payment, the Class C Principal
Payment, and the Class D
Principal Payment to be paid on
such Payment Date.
The "Overcollateralization Balance" with
respect to each Payment Date is an amount
equal to the excess, if any, of (a) the
Aggregate Discounted Lease Balance as of
the related Calculation Date over (b) the
Outstanding Principal Amount of the Notes
as of such Payment Date after giving effect
to all principal payments made on that day.
The "Cumulative Loss Amount" with respect
to each Payment Date is an amount equal to
the excess, if any, of
(a) the total of:
(i) the Outstanding Principal Amount
of the Notes as of the
immediately preceding Payment
Date after giving effect to all
principal payments made on that
day, plus
(ii) the Overcollateralization Balance
as of the immediately preceding
Payment Date, minus
(iii) the lesser of (A) the excess, if
any, of the Aggregate Discounted
Lease Balance as of the
Calculation Date relating to the
immediately preceding Payment
Date, over the Aggregate
Discounted Lease Balance as of
the related Calculation Date and
(B) Available Funds remaining
after the payment of amounts
owing the Servicer and in respect
of interest on the Notes on such
Payment Date, over
(b) the Aggregate Discounted Lease Balance
as of the related Calculation Date.
Subordination..................... Payments of interest on the Class B Notes,
the Class C Notes and the Class D Notes
will be subordinated in priority of payment
to interest due on the Class A Notes to the
extent described herein. The Class B Notes,
the Class C Notes and the Class D Notes
will not receive any payments of interest
with respect to a Collection Period until
the full amount of interest on the Class A
Notes relating to such Collection Period
has been allocated to the Class A Notes.
Payments of interest on the Class C Notes
and the Class D Notes, will be subordinated
in priority of payment to interest due on
the Class B Notes to the extent described
herein. The Class C Notes and the Class D
Notes will not receive any payments of
interest with respect to a Collection
Period until the full amount of interest on
the Class B Notes relating to such
Collection Period has been allocated to the
15
<PAGE>
Class B Notes. Payments of interest on the
Class D Notes will be subordinated in
priority of payment to interest due on the
Class C Notes to the extent described
herein. The Class D Notes will not receive
any payments of interest with respect to a
Collection Period until the full amount of
interest on the Class C Notes relating to
such Collection Period has been allocated
to the Class C Notes.
Payments of principal on the Class B Notes,
the Class C Notes and the Class D Notes
will be subordinated in priority of payment
to principal due on the Class A Notes to
the extent described herein. Payments of
principal on the Class C Notes and the
Class D Notes will be subordinated in
priority of payment to principal due on the
Class B Notes to the extent described
herein. Payments of principal on the Class
D Notes will be subordinated in priority of
payment to principal due on the Class C
Notes to the extent described herein.
Reserve Account................... On any Payment Date, the Noteholders 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 (a)
to the Trustee, the Servicer and to make
interest payments on the Notes and
principal payments on the Notes from the
amount of funds on deposit in the Reserve
Account. The Reserve Account will be funded
by an initial deposit of 1.0% of the
Initial Aggregate Discounted Lease Balance
of the Leases. Thereafter, to the extent
provided in the Indenture, 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)
1.0% of the Initial Aggregate Discounted
Lease Balance of the Leases and (b) the
Outstanding Principal Amount of the Notes.
Amounts on deposit in the Reserve Account
in excess of the Required Reserve Amount
will be disbursed to the Issuer in
accordance with the provisions of the
Indenture.
If, on any Payment Date, the aggregate
amounts on deposit in the Distribution
Account as of the end of the related
Collection Period and the Reserve Account
are greater than or equal to the sum of (i)
the remaining Outstanding Principal Amount
of the Notes, (ii) the
Overcollateralization Balance as of such
Payment Date, (iii) the accrued and unpaid
interest thereon, (iv) the accrued and
unpaid Servicing Fee and Trustee Fee, (v)
the unreimbursed Servicer Advances, if any,
and (vi) any other amounts owed under the
Indenture, the amount on deposit in the
Reserve Account will be deposited in the
Distribution Account and be used to repay
the Notes.
Events of Default................. "Event of Default" under the Indenture with
respect to the Notes shall include any one
or more of the following:
(i) the failure to pay interest on any
Note within four (4) days of when due
or principal on any Note by its Stated
Maturity Date;
(ii) the failure of the Seller, the
Transferor or the Servicer to make
payments or deposits required under
the Transaction Documents within three
(3) Business Days;
(iii) the failure of the Seller, the
Servicer, the Transferor, the Issuer,
or the Trustee to perform any covenant
with respect to the Transaction
Documents, which failure has a
material adverse effect on the
Noteholders and which continues
unremedied for a period of 60 days
after discovery or notice of such
failure (provided no such cure period
shall apply to the Seller's failure to
accept the reassignment of
16
<PAGE>
any Lease that is not an Eligible Lease,
and further provided, only a five (5) day
cure period will apply to the Seller's, the
Transferor's, the Issuer's or the Trustee's
covenant not to grant a security interest
in or otherwise create a lien on the
Leases);
(iv) any representation or warranty by the
Seller, the Transferor, the Trustee or
the Issuer is not correct in any
material respect and continues for a
period of 60 days after discovery or
notice of such failure (provided that
the Transferor and/or the Seller can
"cure" such misrepresentation by
purchasing the Leases related
thereto);
(v) the insolvency of the Seller, the
Transferor or the Issuer; or
(vi) the Issuer becomes an "Investment
Company."
Registration of Notes............. Notes will be represented by global Notes
registered in the name of Cede, as nominee
of The Depository Trust Company ("DTC"), or
another nominee. In such case, Noteholders
will not be entitled to receive definitive
Notes representing such Noteholders'
interests, except in certain limited
circumstances described herein. See
"Description of the Notes -- Book Entry
Registration" herein.
Reacquisition of Lease
Receivables....................... The Transferor and/or the Seller will be
obligated to acquire any Lease Receivable
transferred pursuant to a Transaction
Document or pledged pursuant to the
Indenture if the interest of the
Noteholders therein is materially adversely
affected by a breach of any representation
or warranty made by the Transferor or the
Seller with respect to such Lease, which
breach has not been cured. To the extent
that the Transferor so acquires any Lease
Receivables, the Seller will be obligated
to acquire such Lease Receivables from the
Transferor pursuant to the Seller
Contribution and Sale Agreement
contemporaneously with the Transferor's
acquisition of such Lease Receivables from
the Issuer and the Trustee. The obligation
of the Transferor to acquire any such Lease
Receivables with respect to which the
Seller has breached a representation or
warranty is subject to the Seller's
acquisition of such Lease Receivables from
the Transferor. In addition, the Transferor
may from time to time reacquire certain
Lease Receivables or substitute other Lease
Receivables for such Lease Receivable held
as part of the Pool of Assets, subject to
specified conditions set forth in the
related Transaction Documents. Each of the
Seller, the Transferor, the Issuer, and the
Servicer are bound by the terms of the
respective Transaction Documents to act
with respect to the Leases in a manner
consonant with the grant under the
Indenture of a security interest in the
Leases, the Lease Receivables and the
related Equipment to the Trustee, for the
benefit of the Holders of the Notes. Any
attempted sale, pledge or delivery of the
Leases to a third party in violation of the
terms of the Transaction Documents by any
of the Seller, the Transferor, the Issuer,
or the Servicer would be actionable by the
Trustee on behalf of the Holders of the
Notes against any such wrongful party for
breach of conduct and for negligence or
wrongful misconduct, as the case may be,
and any such wrongful party shall be liable
for damages occasioned by any such
wrongdoing.
Servicing......................... The Servicer will be responsible for
servicing, making collections on and
otherwise enforcing the Leases. The
Servicer will be required to exercise the
degree of skill and care in performing
these functions that it customarily
exercises with respect to similar contracts
owned by the Servicer. On each Payment
Date, the Servicer will be entitled to
receive a monthly fee for the related
Collection Period (the "Servicing Fee")
equal to the product of (i) one-
17
<PAGE>
twelfth, (ii) 0.50% (the "Servicing Fee
Rate") and (iii) the Aggregate Discounted
Lease Balance as of the first day of such
Collection Period, payable out of the
Distribution Account (as defined herein),
as compensation for acting as Servicer.
Except as hereinafter provided, on the day
prior to any Payment Date, the Servicer may
make an advance (a "Servicer Advance") to
the Trustee in an amount sufficient to
cover all amounts due and unpaid on any
Delinquent Lease as of the previous
Calculation Date ("Delinquency Amounts"). A
"Delinquent Lease" will mean, as of any
Calculation Date, any Lease (other than a
Lease which became a Defaulted Lease prior
to such Calculation Date) with respect to
which the Lessee has not paid all Lease
Payments then due. With respect to any
Delinquent Lease, whenever the Servicer
shall have determined that it will be
unable to recover a Delinquency Amount or
portion thereof on such Delinquent Lease,
the Servicer shall not make a Servicer
Advance on such unrecoverable Delinquency
Amount or portion thereof, but will be
required to enforce its remedies (including
acceleration) under such Lease. In the
event that the Servicer reasonably
determines that any Servicer Advances
previously made will not ultimately be
recovered from the related Lease and, thus,
are "Nonrecoverable Advances," or any
Delinquent Leases for which the Servicer
has made advances of Delinquency Amounts in
respect thereof become Defaulted Leases,
then the Trustee shall have the right to
draw on the Distribution Account to repay
such Servicer Advances.
Under the Servicing Agreement, a Lease will
constitute a "Defaulted Lease" at the
earlier of the date on which (i) Lease
Payments are due and unpaid for more than
120 days or (ii) such Lease has been
charged off by the Servicer in accordance
with its standard servicing procedures.
Under certain limited circumstances, the
Servicer may resign or be removed, in which
event the Trustee or a qualified successor
servicer designated by the Trustee will be
appointed as successor Servicer (the
"Successor Servicer").
The Servicer will be required to cause
amounts collected on the Lease Receivables
on behalf of the Issuer to be deposited in
a distribution account (the "Distribution
Account") maintained in the name of the
Trustee, within two Business Days of their
receipt by the Servicer.
On the third Business Day prior to each
Payment Date (each, a "Reporting Date"),
the Servicer shall be required to deliver a
monthly Servicer Report to (i) the Trustee
on behalf of the Noteholders, (ii) each
Rating Agency (as defined herein) and (iii)
the Underwriter (as defined herein)
detailing amounts received on the Leases in
respect of the immediately preceding
Collection Period and available for
distribution on the Payment Date.
In order to avoid excessive administrative
expense, the Servicer will be permitted, at
its option, to purchase from the Pool of
Assets, as of the end of any Collection
Period immediately preceding a Payment
Date, if the Discounted Lease Balance of
the Leases is less than ten percent (10%)
of the Initial Aggregate Discounted Lease
Balance in respect of the Lease
Receivables, all such remaining Leases and
Lease Receivables at a price equal to the
sum of the Discounted Lease Balances of
such remaining Leases as of the such
Payment Date (a "Clean-Up Call"). The Notes
will be redeemed following such purchase.
Lease Substitution................ The Seller shall have the right (but not
the obligation) to substitute a Lease (a
"Substitute Lease') for any Lease which
defaults, is the subject of a
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Casualty Loss or is subject to a Warranty
Event. The Issuer shall have the right (but
not the obligation) to substitute a Lease
Receivable (an "Additional Lease") for any
Lease Receivable which becomes an Early
Termination Lease as a result of a
prepayment. Substitute Leases and
Additional Leases, as applicable, must be
at least equal in Discounted Lease Balance
and comparable in terms of credit quality,
periodic payment, and other
characteristics; provided, that in no event
shall the maturity date of any Lease
substituted for a Lease removed from the
Pool of Assets in accordance with the
Indenture and the related Transaction
Documents be later than the last maturity
date of any Lease then in the Pool of
Assets.
Legal Aspects
of the Leases..................... With respect to the transfer of the Leases
to the Issuer pursuant to the Transferor
Contribution and Sale Agreement or the
pledge of the Issuer's right, title and
interest in and to such Leases on behalf of
Noteholders pursuant to the Indenture, the
Transferor will warrant, in each case, that
such transfer is either a valid transfer
and assignment of the Leases to the Issuer
or the grant of a security interest in the
Leases. The Transferor shall warrant that,
if the transfer or assignment by it to the
Issuer or to the Noteholders is deemed to
be a grant to the Issuer or to the
Noteholders of a security interest in the
Leases, then the Issuer or the Noteholders
will have a first priority perfected
security interest therein, except for
certain liens which have priority over
previously perfected security interests by
operation of law, and, with certain
exceptions, in the proceeds thereof.
Optional Redemption............... The Issuer will have the option, subject to
certain conditions set forth in the
Indenture, to prepay all of the Notes on
any Payment Date on which the Aggregate
Discounted Lease Balance is less than 10%
of the Initial Aggregate Discounted Lease
Balance (an "Optional Redemption"). In the
event such option is exercised, the entire
outstanding principal balance of the Notes,
together with accrued interest thereon at
the respective Note Interest Rate, as
applicable, will be required to be paid to
the Noteholders on such Payment Date.
Limited Repurchase
Obligation........................ In the Seller Contribution and Sale
Agreement, the Seller will make certain
representations and warranties with respect
to, among other things, the Lease
Receivables. The Seller will be obligated
to repurchase a Lease Receivable within
three Business Days of the Calculation Date
which follows the occurrence of such
Warranty Event, unless it has otherwise
substituted a Substitute Lease therefor, if
the interest of the Issuer, the Trustee,
the Transferor or the Noteholders is
materially adversely affected by a breach
of such a representation or warranty made
by the Seller with respect to such Lease
Receivable and if such breach has not been
cured as of 30 days following the Seller's
discovery or receipt of notice of such
breach.
In the Transferor Contribution and Sale
Agreement, the Transferor will make certain
representations and warranties with respect
to, among other things, the Lease
Receivables. The Transferor will be
obligated to repurchase a Lease Receivable
within three Business Days of the
Calculation Date which follows the
occurrence of such Warranty Event unless it
has otherwise substituted a Substituted
Lease therefor, if the interest of the
Issuer, the Trustee or the Noteholders is
materially adversely affected by a breach
of such a representation or warranty made
by the Transferor with respect to such
Lease Receivable and if such breach has not
been cured as of 30 days following the
Transferor's discovery or receipt of notice
of such breach.
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Tax Considerations................ Subject to the discussion below, under the
Internal Revenue Code of 1986 (the "Tax
Code"), as amended, and existing
regulations, administrative rules and
judicial decisions, Tax Counsel (as defined
herein) is of the opinion that under
existing law the Offered Notes will be
characterized as indebtedness for federal
income tax purposes. Under the Transaction
Documents, the Transferor, the Issuer, the
Seller, the Servicer, the Noteholders and
other parties will agree to treat the Notes
as debt for all income tax purposes. As a
result, a portion of each payment on the
Notes will be treated as interest. Holders
of the Offered Notes will be required to
include interest paid or accrued on the
Offered Notes in gross income. Principal
Payments on the Offered Notes should, to
the extent of the Noteholder's basis in the
Offered Notes allocable thereto, be treated
as a return of capital. See "Material
Federal Income Tax Consequences" herein for
additional information concerning the
application of federal income tax laws.
ERISA Considerations.............. The acquisition of Notes by an employee
benefit plan subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA") or the provisions of
Section 4975 of the Tax Code (a "Plan"),
could result in a prohibited transaction
under "ERISA" or Section 4975 of the Tax
Code, unless such acquisition is subject to
a statutory or administrative exemption.
Therefore, the acquisition and transfer of
the Notes are subject to certain
restrictions. See "ERISA Considerations."
Ratings........................... It is a condition to the issuance of the
Notes that the Class A-1 Notes be rated
"A-1+" by Standard and Poor's Ratings
Services, a Division of McGraw Hill
Companies ("S&P") and "D-1+" by Duff &
Phelps Credit Rating Co. ("DCR"), the Class
A-2 Notes be rated "AAA" by S&P and "AAA"
by DCR, the Class A-3 Notes be rated "AAA"
by S&P and "AAA" by DCR, the Class A-4
Notes be rated "AAA" by S&P and "AAA" by
DCR, the Class B Notes be rated "A" by S&P
and "A" by DCR, the Class C Notes be rated
"BBB" by S&P and "BBB" by DCR, and the
Class D Notes be rated "BB" by S&P and "BB"
by DCR (each of S&P and DCR are referred to
herein as a "Rating Agency," and
collectively as the "Rating Agencies"). A
security rating is not a recommendation to
purchase, hold or sell Notes inasmuch as
such rating does not comment as to market
price or suitability for a particular
investor. Ratings address the likelihood of
timely payment of interest and the ultimate
payment of principal on the Notes pursuant
to their terms. Ratings will not address
the likelihood of an early return of
invested principal. There can be no
assurance that any rating will remain for a
given period of time or that a rating will
not be lowered or withdrawn entirely if, in
the judgment of any Rating Agency,
circumstances in the future so warrant. See
"Ratings " herein.
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RISK FACTORS
Prospective Noteholders should consider, among other things, the following
factors in connection with the purchase of the Notes:
You May Not Be Able to Sell Your Notes. There can be no assurance that a
secondary market for the Notes of any Class will develop or, if it does develop,
that it will provide Noteholders with liquidity of investment or that it will
continue for the life of such Notes. Although the Underwriter intends to
establish and maintain a secondary market in such Notes, it shall not be
obligated to do so. The Notes will not be listed on any securities exchange.
A Third Party May Acquire the Leases and/or Competing Claims to Ownership
of the Leases. In connection with the issuance of any Notes, the Seller will
transfer Leases to the Transferor. The Seller will warrant in the Seller
Contribution and Sale Agreement that the transfer of the Leases by it to the
Transferor is a valid assignment, transfer and conveyance of such Leases. The
Transferor will warrant in the Transferor Contribution and Sale Agreement that
the transfer of the Leases to the Issuer is a valid assignment, transfer and
conveyance of the Leases to the Issuer, and that upon the Issuer's pledge of the
Leases to Trustee, that the Trustee for the benefit of the Noteholders will have
a valid security interest in such Leases. The Transaction Documents provide that
the Servicer will be required to maintain possession of the original copies of
all Leases that constitute chattel paper. If the Transferor, the Servicer, the
Issuer, or the Seller, while in possession of the Leases, sells or pledges and
delivers such Leases to another party, in violation of a Transaction Document,
such violating party will be fully responsible to the Noteholders for its
conduct or intentional wrongdoing, but there is a risk that such other party
could acquire an interest in such Leases having a priority over the Issuer's
interest. Furthermore, if the Transferor, the Servicer, or the Seller, while in
possession of the Leases, is rendered insolvent, such event of insolvency may
result in competing claims to ownership or security interests in the Leases.
Such an attempt, even if unsuccessful, could result in delays in payments on the
Notes. If successful, such attempt could result in losses to the Noteholders or
an acceleration of the repayment of the Notes, or both. The Seller and the
Transferor will make certain representations and warranties with respect to the
ownership of the Leases as of the date of the transfer to the Transferor, the
Issuer and the pledge to the Trustee, respectively. The Seller will be obligated
to acquire any Lease if there is a breach of such representations and warranties
that materially adversely affects the interests of the Transferor, the Issuer or
the Trustee on behalf of the Noteholders in such Lease and such breach has not
been cured.
Certain Security Interests Are Not Perfected and Other Creditors May Have
Rights to the Equipment. The Seller will also contribute all of its right, title
and interest in and to the related Equipment to the Transferor or to the Issuer.
The Seller Contribution and Sale Agreement shall require the Seller to make
certain representations and warranties with respect to the transfer of title
and, in the alternative, perfection and priority of a security interest, if any,
in the Equipment. The Transferor may also transfer the Equipment to the Issuer
and/or may pledge all of its right, title and interest in and to such Equipment
to the Issuer. Pursuant to the Transferor Contribution and Sale Agreement, the
Transferor may warrant (a) if the Transferor transfers such Equipment to the
Issuer, that such transfer is either a valid assignment, transfer and conveyance
of such Equipment to the Issuer or it has granted to the Issuer a security
interest in such Equipment, or (b) if the Transferor retains title, that it has
granted to the Issuer a valid security interest in such Equipment. The Issuer
may pledge all of its right, title and interest in and to such Equipment to the
Trustee under an Indenture. If the Issuer were to grant a security interest in
such Equipment to the Trustee, the Issuer would make or assign certain similar
representations and warranties with respect to the transfer of title and the
perfection and priority of a security interest in the Equipment.
As specified herein, because of the administrative burden and expense that
would be entailed in so doing, neither the Seller nor the Transferor will file,
or necessarily will be required to file, UCC financing statements identifying
the Equipment as collateral pledged in favor of the Issuer or the Trustee for
the benefit of the Noteholders. In the absence of such filings any security
interest in the Equipment will not be perfected in favor of the Issuer, or the
Trustee. As a result the Issuer or the Trustee could lose priority of its
security interest in such Equipment. Neither the Seller nor the Transferor will
have any obligation to reacquire Equipment as to which such aforementioned
occurrence results in the loss of lien priority after the date the Issuer
receives an interest in such Equipment. See "Legal Aspects of the Leases ."
The Issuer may not Realize the Full Amount Due on a Lease After
Repossession and Disposition of Equipment. All Leases will provide that the
obligations of the Lessees thereunder are absolute and
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unconditional, regardless of any defense, set-off or abatement which the Lessee
may have against the Seller or any other person or entity whatsoever. The Seller
and the Transferor will warrant, to the best of its knowledge, that no claims or
defenses have been asserted or threatened with respect to the Leases and that
all requirements of applicable law with respect to the Leases have been
satisfied.
In the event that the Transferor or the Issuer must rely on repossession
and disposition of Equipment to recover scheduled payments due on Defaulted
Leases, the Issuer may not realize the full amount due on a Lease (or may not
realize the full amount on a timely basis). Other factors that may affect the
ability of the Issuer to realize the full amount due on a Lease include whether
financing statements to perfect the security interest in the Equipment had been
filed, 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
suffer loss of their investment in the Notes.
Insolvency of the Transferor May Reduce Payments to Noteholders. The
Transferor will take steps in structuring the transactions contemplated hereby
that are intended to ensure that the voluntary or involuntary application for
relief by the Seller or the Transferor (the Seller and the Transferor,
collectively for these purposes, "Debtors") under the United States Bankruptcy
Code or similar applicable state laws ("Insolvency Laws") will not result in the
assets of the Pool of Assets becoming property of the estate of a Debtor within
the meaning of such Insolvency Laws. The Transferor is a limited-purpose
subsidiary of Charter created pursuant to articles of incorporation containing
certain limitations (including restrictions on the nature of the Transferor's
business and a restriction on the Transferor's ability to commence a voluntary
case or proceeding under any Insolvency Law without the prior unanimous
affirmative vote of all its directors). However, there can be no assurance that
the activities of the Transferor would not result in a court's concluding that
the assets and liabilities of the Transferor should be consolidated with those
of the Seller in a proceeding under any Insolvency Law.
The Seller Contribution and Sale Agreement, the Transferor Contribution and
Sale Agreement and the Indenture will generally require that the Seller
contribute the Lease Receivables to the Transferor which in turn will transfer
such Lease Receivables to the Issuer, and the Issuer will pledge the Lease
Receivables to the Trustee on behalf of the Noteholders.
With respect to the Lease Receivables, the Trustee and all Noteholders will
covenant that they will not at any time institute against the Transferor any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
While the Seller is the Servicer, cash collections held by the Seller may,
subject to certain conditions, be commingled and used for the benefit of the
Seller prior to their deposit into the Distribution Account and, in the event of
the bankruptcy of the Seller, the Transferor, the Issuer, or the Trustee may not
have a perfected interest in such collections.
The Transferor believes that the transfer of the Lease Receivables by the
Seller to the Transferor should be treated as a valid assignment, transfer and
conveyance of such Lease Receivables. However, in the event of an insolvency of
the Seller, a competing creditor or a trustee in bankruptcy, among other
remedies, could attempt to have a court recharacterize the transfer of the Lease
Receivables by the Seller to the Transferor as a borrowing by the Seller from
the Transferor or the related Noteholders, secured by a pledge of the Lease
Receivables. Such an attempt, even if unsuccessful, could result in delays in
payments on the Notes. If such an attempt were successful, a court, among other
remedies, could elect to accelerate payment of the Notes and liquidate the Lease
Receivables, with the Noteholders entitled to the then outstanding principal
amount thereof and interest thereon at the applicable Note Interest Rate to the
date of payment. Thus, the Noteholders could lose the right to future payments
of interest and might incur reinvestment losses. In the event the Issuer is
rendered insolvent, the Trustee, in accordance with the Indenture, will promptly
sell, dispose of or otherwise liquidate the Lease Receivables in a commercially
reasonable manner on commercially reasonable terms.
The proceeds from any such sale, disposition or liquidation of the Lease
Receivables will be treated as collections on the Lease Receivables. If the
proceeds from the liquidation of the Lease Receivables and any amount available
from any credit enhancement, if any, are not sufficient to pay Notes in full,
the amount of principal returned to the Noteholders will be reduced and the
Noteholders will incur a loss.
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Lessees of the Equipment may be entitled to assert against the Seller, the
Transferor, or the Issuer claims and defenses which they have, if any, against
the Seller with respect to the Lease Receivables. The Seller will warrant that
no such claims or defenses have been asserted or threatened with respect to the
Lease Receivables and that all requirements of applicable law with respect to
the Lease Receivables have been satisfied.
Technological Obsolescence of the Equipment May Reduce Value of the
Collateral. In the event a Lease becomes a Defaulted Lease and the Lessee (and
any guarantor) has insufficient assets available to pay the Lease payments on
the scheduled payment dates, the only other source of moneys (other than the
applicable credit enhancements, if any) for such amounts will be the income and
proceeds from the disposition of the related Equipment. Because the market value
of equipment generally declines with age and may be subject to sudden,
significant declines in value because of technological advances, in the event of
a repossession and sale of Equipment subject to a Defaulted Lease, the Issuer
may not recover the entire amount due on such Lease. As a result, the
Noteholders may be subject to delays in receiving payments and suffer loss of
their investment in the Notes.
The Pool of Assets is the Sole Source of Support for the Notes and There is
No Recourse Against the Affiliates of the Issuer. As described more fully
herein, distributions of interest and principal on certain Classes of Notes will
be subordinated in priority of payment to interest and principal due on other
Classes of Notes. Moreover, the Issuer will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
related Lease Receivables. The Notes represent solely debt secured by the Pool
of Assets, and will not represent a recourse obligation to other assets of the
Seller or of the Transferor. No Notes will be insured or guaranteed by the
Seller, the Transferor, the Servicer, or the Trustee. Consequently, Holders of
the Notes must rely for repayment primarily upon payments on the Lease
Receivables.
Prepayments and Related Reinvestment Risk May Reduce Yield to Noteholders.
Because the rate of payment of principal on the Notes will depend, among other
things, on the rate of payment on the related Leases, the rate of payment of
principal on the Notes cannot be predicted. Payments on the Leases will include
scheduled payments as well as partial and full prepayments (to the extent not
replaced with substitute Leases), payments upon the liquidation of Defaulted
Leases, payments upon acquisitions by the Seller, the Servicer or the Transferor
of Leases from the Pool of Assets on account of a breach of certain
representations and warranties in the related Transaction Document, and payments
upon an optional acquisition by the Seller, the Servicer or the Transferor of
Leases from the Pool of Assets (any such voluntary or involuntary prepayment or
other early payment of a Lease, a "Prepayment"). The rate of early terminations
of Leases due to Prepayments and defaults may be influenced by a variety of
economic and other factors, including, among others, obsolescence, then current
economic conditions and tax considerations. The risk of reinvesting
distributions of the principal of the Notes will be borne by the Noteholders.
The Transferor does not have available to it any statistics as to
prepayment rates historically experienced in the equipment leasing industry. The
rate of Prepayments of Leases cannot be predicted and is influenced by a wide
variety of economic and other factors, including prevailing interest rates, the
availability of alternate financing and local and regional economic conditions.
Therefore, no assurance can be given as to the level of Prepayments that the
Pool of Assets will experience. The Noteholders will bear all reinvestment risk
resulting from the timing of payments in the Notes.
Further, the Issuer will have the option to prepay all of the Notes on any
Payment Date on which the Aggregate Discounted Lease Balance is less than 10% of
the Initial Aggregate Discounted Lease Balance. In addition, the Servicer will
be permitted, at its option, to purchase all of the remaining Lease Receivables
in the Pool of Assets as of the end of any Collection Period on which the
Aggregate Discounted Lease Balance is less than 10% of the Initial Aggregate
Discounted Lease Balance pursuant to a Clean-Up Call for an amount equal to the
sum of all amounts which remain to be paid under the Indenture. The Noteholders
will bear all reinvestment risk resulting from an early redemption occasioned by
an Optional Redemption or a Clean-Up Call.
Noteholders should consider, in the case of Offered Notes purchased at a
discount, the risk that a slower than anticipated rate of Prepayments on the
Lease Receivables could result in an actual yield that is less than the
anticipated yield and, in the case of any Offered Notes purchased at a premium,
the risk that a faster than anticipated rate of Prepayments on the Lease
Receivables or an Optional Redemption of the Notes by the Issuer
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or the exercise of a Clean-Up Call by the Servicer could result in an actual
yield that is less than the anticipated yield.
State Law and Other Factors May Impede Recovery Efforts and Affect the
Ability of the Issuer to Recoup the Full Amount Due on the Leases. Certain
states have adopted a version of Article 2A of the Uniform Commercial Code
("Article 2A"). Article 2A purports to codify many provisions of existing common
law. Article 2A may, among other things, limit enforceability of any
"unconscionable" lease or "unconscionable" provision in a lease, provide a
lessee with remedies, including the right to cancel the Lease, for certain
lessor breaches or defaults, and may add to or modify the terms of "consumer
leases" and leases where the lessee is a "merchant lessee." Article 2A, however,
recognizes typical commercial lease "hell or high water" rental payment clauses
and validates reasonable liquidated damages provisions in the event of lessor or
lessee defaults. Article 2A also recognizes the concept of freedom of contract
and permits the parties in a commercial context a wide degree of latitude to
vary provisions of the law.
If a Lease Relating to "Soft Items" Becomes a Defaulted Lease, the Recovery
of Proceeds from the Soft Items may be Negligible. Certain Leases may relate to
software and services that are not owned by the Seller and/or other items which
have little or no collateral value ("Soft Items") and in which no related
interest will be transferred to the Issuer. Accordingly, if any such Lease
becomes a Defaulted Lease, the recovery of any proceeds from the related
software, services and Soft Items from which to satisfy any unpaid payments
under such Leases may be negligible. Such Leases may be susceptible to
prepayment risk due to obsolescence or technological change which may cause the
Notes to prepay somewhat earlier, which may expose the related Noteholders to a
greater investment risk.
The Inability Of the Seller to Reacquire Lease Receivables may Result in
Losses and Payment Delays to the Noteholders. The Seller will make
representations and warranties with respect to certain matters relating to the
Lease Receivables. In certain circumstances, the Seller will be required to
reacquire the Lease Receivables with respect to which such representations and
warranties have been breached. In the event that the Seller is incapable of
complying with its reacquisition obligations and no other party is obligated to
perform or satisfy such obligations, the Noteholders may be subject to delays in
receiving payments and suffer loss of their investment in the Notes.
Risks Associated with Year 2000 Compliance. Many computer systems in use
today were designed and developed using two digits, rather than four, to specify
the year. As a result, such systems will recognize the year 2000 as "00." This
could cause many computer applications to fail completely or create erroneous
results unless corrective measures are taken. The Servicer utilizes some
software and related computer hardware technologies essential to its operations
that may be affected by the Year 2000 issues. To evaluate its state of readiness
to Year 2000 issues, the Servicer has performed software and hardware testing on
all of its existing systems. As of the date of this statement, the Servicer
believes that all of its computer applications are Year 2000 compliant. The
Servicer has received verbal confirmation from each of its third party software
vendors that their systems are Year 2000 compliant and the Servicer is currently
in the process of submitting requests to third party software vendors requesting
written confirmation of Year 2000 compliance. It is planned that all new
software contracts will require a stipulation of Year 2000 compliance and
written certification thereof from the vendor.
The Substitution of Leases May Adversely Affect Cashflow and May Decrease
the Yield on the Notes. The Seller shall have the right (but not the obligation)
to substitute a Lease Receivable for any Lease Receivable which defaults,
prepays or is subject to a Warranty Event. Substitute Lease Receivables must be
at least equal in Discounted Lease Balance and comparable in terms of credit
quality, monthly payment, and other characteristics for the Lease Receivables
for which they are substituted, provided, that in no event shall the maturity
date of any Lease Receivable substituted for a Lease Receivable removed from the
Pool of Assets in accordance with the Indenture and the related Transaction
Documents be later than the last maturity date of any Lease Receivable. In the
event (and only to the extent) that the Seller makes such a substitution, the
amount (or portion thereof) received by the Issuer with respect to a Prepayment
will be allocated directly to the Seller and the payments with respect to the
related Notes will be dependent upon the scheduled payments received on such
Substitute Lease Receivables. Accordingly, payments of principal of and interest
on the Notes may be dependent, in part, upon payments received on such
Substitute Lease Receivables. In addition, with respect to the Notes, to the
extent that the Seller does not substitute one or more Lease Receivables as
Substitute Lease Receivables in connection with the prepayment of a Lease
Receivable, the Aggregate Discounted Lease Balance will be decreased, causing
the
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weighted average life of the Notes to be decreased. As such Noteholders may
receive principal earlier than they may otherwise anticipated on the Notes, and,
therefore, Noteholders may be faced with reinvestment alternatives which yield
returns on investments may be significantly lower than obtained from the Notes.
Geographic and Other Concentrations of the Leases May Adversely Affect the
Leases. As of the Cut-Off Date, Obligors with respect to 20.30% and 17.71% of
the Leases (based on Aggregate Discounted Lease Balance and mailing addresses as
of the Cut-Off Date) were located in California and New York, respectively.
Accordingly, adverse economic conditions or other factors particularly affecting
any of these states could adversely affect the delinquency, loan loss or
repossession experience of the Issuer with respect to the Leases.
In addition, prospective investors should note that as Substitute Leases
are transferred into the Pool of Assets any payments in respect of principal
(including payments in the form of voluntary prepayments and the repurchase
prices for any Leases repurchased due to breaches of representations and
warranties) are received with respect to Leases, the remaining Leases as a group
may exhibit increased concentration with respect to the type of Leases, Lease
characteristics, number of Obligors and affiliated Obligors and geographic
location. Because principal on the Notes is payable in sequential order, Classes
that have a lower priority with respect to the payment of principal are
relatively more likely to be exposed to any risks associated with changes in
concentrations.
THE POOL OF ASSETS
The property of the Issuer (the "Pool of Assets") will consist of a
portfolio and related property of finance leases, leases intended as security
agreements, installment sale contracts, loan contracts, synthetic leases and/or
rental stream obligations, together with all monies (including accrued interest)
due thereunder on or after the Cut-Off Date or, in the case of Substitute
Leases, the related Transfer Date, received relating thereto (the "Leases") and
the ownership or security interests, if any, held by the Transferor in the
Equipment originated by the Seller and underwritten to Charter's credit and
collections policies. In addition, the Pool of Assets will include (i) funds on
deposit in any Trust Accounts established and maintained by the Servicer
pursuant to the Indenture or the Servicing Agreement; (ii) the rights to
proceeds from certain insurance policies covering the Equipment; (iii) the
interest of the Transferor in any proceeds from recourse to Vendors on Lease
payments; (iv) other rights of the Transferor under the Seller Contribution and
Sale Agreement conveyed under the Transferor Contribution and Sale Agreement;
and (v) all proceeds of the foregoing.
The Lease Receivables included in the Pool of Assets will be either (i)
originated by the Seller, (ii) originated by various Vendors and acquired by the
Seller or (iii) acquired by the Seller from sellers or other originators of
Lease Receivables.
The Equipment underlying the Lease Receivables included in the Pool of
Assets generally will be limited to personal property which is leased or
financed by the Seller or the originator from which the Seller acquired the
Lease Receivables to the Lessee pursuant to Leases which either are "chattel
paper" (as defined in the Uniform Commercial Code) or are Leases that are not
treated materially differently from "chattel paper" for purposes of title
transfer, security interests or remedies on default. However, certain Leases may
also have as additional security a security interest in related fixtures or be
additionally secured by mortgages on related real property. The Issuer will not
have any residual interest in the Equipment after the related Lease Receivable
has been paid in full.
The Lease Receivables will be acquired by the Transferor from the Seller
pursuant to the Seller Contribution and Sale Agreement. The Lease Receivables
included in the Pool of Assets will be selected from those lease receivables
held by the Seller based on the criteria specified in the applicable Transaction
Document and described herein.
On or prior to the Closing Date on which the Notes are delivered to
Noteholders, the Transferor will transfer the Pool of Assets to the Issuer
pursuant to the Transferor Contribution and Sale Agreement between the
Transferor and the Issuer. Thereupon, the Issuer shall enter into the Indenture
with the Trustee, relating to the issuance of the Notes that will be secured by
the Lease Receivables.
25
<PAGE>
The Lease Receivables comprising the Pool of Assets will generally have
been originated by the Seller or acquired by the Seller from Vendors or from
other obligees in accordance with the Seller's specified underwriting criteria.
Charter's Lease underwriting procedures focus primarily upon the credit quality
of the related obligor. As such, the underwriting procedure does not principally
depend upon a credit support analysis which is based upon the estimated
liquidation value of any related Equipment. Accordingly, when making investment
decisions with respect to the Notes, potential investors and Holders of the
Notes should not rely upon the value of any of the related Equipment in the
event of the liquidation of any Leases hereunder.
THE ISSUER
The Issuer is a limited purpose bankruptcy-remote limited liability company
organized under the laws of the State of Delaware. The Issuer was organized for
the limited purpose of engaging in the transactions described herein,
particularly to acquire the Pool of Assets from the Transferor pursuant to the
Transferor Contribution and Sale Agreement, to issue the securities pursuant to
the Indenture, and any activities incidental to and necessary or convenient for
the accomplishment of such purposes. The Issuer is restricted by the LLC
Agreement from engaging in other activities. In addition, its organizational
documents require the Issuer to operate in a manner intended to minimize the
risk that it would be consolidated in the bankruptcy estate of Charter or its
Affiliates in the event that Charter or any of its Affiliates becomes subject to
bankruptcy or insolvency proceedings. The Issuer's address is 530 Fifth Avenue,
New York, New York 10036.
The Issuer was established pursuant to a Certificate of Formation dated as
of September 21, 1998, as amended as of May 17, 1999. The Issuer is governed
pursuant to that certain Limited Liability Company Operating Agreement dated as
of September 21, 1998, as amended as of May 17, 1999 and as of August 8, 1999
(the "LLC Agreement"), which describes the administration of the Issuer.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
As of the date of this Prospectus, the Issuer has had no operating history.
The net proceeds of the sale of the Offered Notes will be distributed to the
owners of the Issuer. See "Use of Proceeds." The Issuer is prohibited by the LLC
Agreement from engaging in business other than (i) the purchase of equipment
leases and lease receivables (including equipment) from Charter Financial, Inc.
and its affiliates, (ii) the issuance of notes collateralized by its assets and
(iii) engaging in acts incidental, necessary or convenient to the foregoing and
permitted under Delaware law. The Issuer's ability to incur, assume or guaranty
indebtedness for borrowed money is also restricted by the LLC Agreement to only
such activities that relate to the leases and lease receivables. The Leases
which secure the Notes under the Indenture will be acquired from Charter.
Information concerning the general delinquency and loss experience of Charter's
lease portfolio is set forth under "Charter's Leasing Business-Delinquency
Procedures and Loss Experience". Charter's loss experience is statistically
limited in absolute numbers. As such, the Issuer is unable to discern any
material trends when evaluating Charter's loss experience on the basis of the
equipment type associated with the Leases.
THE LEASES
The Lease Receivables consist of the Leases and a security interest in the
Equipment. The Issuer will not have any residual interest in the related
Equipment after the Lease Receivable has been paid in full.
No one vendor or group of vendors accounted for a material portion of the
Leases.
Eligible Leases
The following eligibility requirements apply to all Leases purchased by the
Transferor on or prior to the Cut-Off Date and all Substitute Leases (any Lease
meeting such requirements, an "Eligible Leases"). All Eligible Leases have been
originated in the ordinary course of the Seller's business and comply with the
Seller's credit and collections policies.
26
<PAGE>
As of the Cut-Off Date, or if a Lease is substituted or added, on the day
of such substitution or addition (the related "Transfer Date"), the Seller will
represent and warrant that each of the Leases shall comply with the following:
(i) the Lease is a valid and binding obligation of the Lessee
enforceable against such Lessee in accordance with its terms (except as may
be limited by bankruptcy laws, other laws affecting creditor's rights in
similar transactions generally, and judicial powers of equity);
(ii) the Lease constitutes a non-cancellable, "hell or high water"
obligation of the Lessee and requires the Lessee to make all Lease Payments
thereon regardless of the condition of the Equipment to which the Lease
relates;
(iii) the Lease is non-cancellable by the Lessee and does not contain
early termination options (except for a Lease which contains early
termination or prepayment clauses, which requires the Lessee to pay the
Prepayment Amount under such Lease upon such cancellation or prepayment);
(iv) all payments payable under the Lease are absolute, unconditional
obligations of the Lessee without right to offset for any reason;
(v) the Lease requires the Lessee or a third party to maintain the
Equipment in good working order, to bear all the costs of operating the
Equipment, including taxes and insurance relating thereto;
(vi) the Lease does not materially violate any U.S. or state laws;
(vii) the Lease provides for periodic payments;
(viii) in the event of a Casualty Loss with respect to the Lease, the
Lessee, at the Lessee's expense, is required to replace the Equipment with
like equipment in good repair, acceptable to the Servicer or pay at a
minimum the outstanding principal or net book value of the Leases and any
applicable make whole premium, if any;
(ix) the Lease was originated by the Seller, or was acquired by the
Seller in a "true sale" in the ordinary course of its business and in a
manner which satisfies the underwriting practices set forth in the Credit
and Collection Policy as in effect from time to time;
(x) the Lease has been sold to the Seller free and clear of any Liens
other than Permitted Encumbrances;
(xi) the Lease is assignable without prior written consent of the
Lessee;
(xii) the Lease is denominated and payable only in U.S. dollars, the
Lessor is located in the United States and one or more Lessees who are
fully liable under the Lease are located in the United States;
(xiii) the Lease is not a "consumer lease" within the meaning of
Article 2A of the UCC in any jurisdiction where such Article 2A has been
adopted and governs the construction thereof;
(xiv) the Lease, to the extent such Lease was reacquired by the Seller
from an affiliate prior to its conveyance in this transaction, was acquired
by the Seller in a "true sale";
(xv) no adverse selection was used in selecting the Lease for transfer
to the Transferor;
(xvi) the Lessee has represented to the Seller or Vendor that it has
accepted the Equipment;
(xvii) the Lessee is not a subject of an insolvency or bankruptcy
proceeding at the time of the transfer;
27
<PAGE>
(xviii) the Lease is not a Defaulted Lease;
(xix) the maximum remaining term of the Lease does not exceed 84
months;
(xx) the Lease is not more than 60 days past due at time of transfer
to the Transferor;
(xxi) at least one Lease Payment has been paid by the Lessee on such
Lease;
(xxii) at the time that the Seller conveyed its right, title and
interest in the Lease and the related Equipment, the Seller had no
knowledge that any item of such Equipment had suffered any loss or damage
which has not been repaired;
(xxiii) at the time that the Seller conveyed its right, title and
interest in the Lease and the related Equipment, such Lease shall not have
been amended, altered or modified in any respect, except in writing and all
such writings shall be contained in the Lease File in which the Lease
itself is contained;
(xxiv) at the time that the Seller conveyed its right title and
interest in the Lease and the related Equipment, (A) except to the extent
that payments have been previously received on such Lease, the Lessee will
not have been released, in whole or in part, from any of its obligations in
respect of such Lease, (B) except as shown in the Lease File, no Equipment
related to such Lease will have been released, in whole or in part, from
such Lease, and (C) except as shown in the Lease File, neither the
operation of the Lease nor the exercise of any rights thereunder, nor the
execution of any instrument, nor the occurrence of any facts or
circumstances, has rendered or will render such Lease unenforceable, in
whole or in part, or subject such Lease or any related Equipment to any
right of rescission, setoff, counterclaim or defense (including, without
limitation, the defense of usury);
(xxv) with respect to a Lease which had been acquired by Charter
Financial, Inc. from a third party originator, other than an affiliate of
Charter Financial, Inc., UCC filings have been filed to reflect the
assignment of the security interest from the third party originator to
Charter Financial, Inc.; and
(xxvi) with respect to a Lease which is a Finance Lease, Charter
Financial, Inc. has made all necessary UCC filings in all states where the
related Equipment is located, naming the Lessee as debtor and Charter
Financial, Inc. as secured party, to perfect the security interest of
Charter Financial, Inc. in such Equipment.
The Seller also represents and warrants that as of the Cut-Off-Date:
(i) no more than 2.5% of the Leases by Discounted Lease Balance have
Equipment which is subject to certificate of title regulations in any
jurisdiction;
(ii) the information set forth in the Schedule of Leases is true and
correct;
(iii) no less than 98% of the Leases by Discounted Lease Balance are
Finance Leases;
(iv) no less than 96% of the Leases by Discounted Lease Balance
provide that by the end of the lease term, the Lessee may elect to purchase
the related Equipment upon the exercise of a nominal purchase option; and
(v) no less than 98% of the Leases by Discounted Lease Balance have
Lease Payments which are scheduled to be paid in monthly intervals.
"Credit and Collection Policies" means those credit and collection policies
and practices of Charter relating to leases and lease receivables generally as
in effect from time to time.
28
<PAGE>
"Finance Lease" means a Lease whereby the originator is deemed to have made
a loan to the Lessee, which loan is secured by the Lessee's ownership interest
in the related Equipment, and the lease or installment payments thereon
represent repayment on such loan.
"Permitted Encumbrance" means any of the following: (a) liens, charges or
other encumbrances for taxes and assessments which are not yet due and payable;
(b) liens, charges or other encumbrances or priority claims incidental to the
conduct of business or the ownership of properties and assets (including
warehousemen's and attorneys' liens and statutory landlords' liens) and
deposits, pledges or liens to secure statutory obligations, surety or appeal
bonds or other liens of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money, provided in each
case, the obligation secured is not overdue or, if overdue, is being contested
in good faith by appropriate actions or proceedings; (c) liens, charges or
encumbrances in favor of the Trustee under the Indenture; (d) with respect to
Equipment, the interest of a Lessee in such Equipment under the related Lease;
or (e) interests of third parties in any Lease, Lease Receivables, Equipment
and/or related security subject to a lease participation or a rent stream
obligation.
"Prepayment Amount" means (a) with respect to any Lease other than a
Synthetic Lease as of any date of determination, the present value (as
determined in such Lease) of all remaining unpaid Lease Payments under such
Lease as of such date of determination, and (b) with respect to any Synthetic
Lease (as defined herein) as of any date of determination, an amount as
specified in such Lease which is no less than 79% of the present value (as
determined in such Lease) of all remaining unpaid Lease Payments under such
Lease as of such date of determination. To the extent that the amounts received
in the liquidation of a Synthetic Lease and the related Equipment together with
the Prepayment Amount thereon exceeds all remaining unpaid Lease Payments under
such Synthetic Lease, the Prepayment Amount for such Synthetic Lease is reduced
by such excess.
"Schedule of Leases" means the schedule of Leases which lists the Leases
conveyed under Seller Contribution and Sale Agreement and under the Transferor
Contribution and Sale Agreement and pledged under the Indenture.
"Synthetic Lease" means a Lease with respect to which the Equipment related
thereto (a) is owned by the Lessor thereof for accounting purposes, and (b) is
owned by the Lessee for tax purposes.
Lease Payments and Valuation
In connection with all calculations required to be made pursuant to the
Transaction Documents with respect to the determination of Aggregate Discounted
Lease Balances, on any Calculation Date the Discounted Lease Balance for each
Lease shall be calculated assuming:
(i) Lease Payments are due on the last day of each Collection Period
in which a payment is due; and
(ii) Lease Payments are discounted on a monthly basis using a 30 day
month and a 360 day year.
All of the Leases require the periodic, scheduled payment of rent or other
payments on a monthly, quarterly, semi-annual or annual basis, in arrears or in
advance. Such periodic payments are referred to herein as "Lease Payments."
Maturity and Prepayment Considerations
If a Lease permits a Prepayment, such Prepayment, together with accelerated
payments resulting from defaults, will shorten the weighted average life of the
pool of Lease Receivables and the weighted average life of the Notes. The rate
of Prepayments on the Lease Receivables may be influenced by a variety of
economic, financial and other factors. In addition, under certain circumstances,
the Transferor or the Seller will be obligated to reacquire Lease Receivables
from the Pool of Assets pursuant to the applicable Transaction Documents as a
result of breaches of representations and warranties. Any reinvestment risks
resulting from a faster or slower amortization of the Notes which results from
Prepayments will be borne entirely by the Noteholders.
29
<PAGE>
Further, if the Lessees of all Synthetic Leases elect to prepay their
Leases, the Aggregate Discounted Lease Balance of the Leases may decrease by an
amount which exceeds the sum of Prepayment Amounts so received by approximately
$121,000.
Acquisition of Lease Receivables from the Seller
The Lease Receivables underlying the Notes will be acquired by the
Transferor from the Seller pursuant to the Seller Contribution and Sale
Agreement between the Transferor and the Seller.
The Transferor expects that each Lease Receivable so acquired will have
been originated or acquired by the Seller thereof in accordance with the
Seller's underwriting criteria. The Seller pursuant to the Seller Contribution
and Sale Agreement will make certain representations and warranties to the
Transferor in respect of the related Lease Receivables; the material terms of
such representations and warranties will be set forth herein under the heading
"Definition of the Notes-- Representations and Warranties." The Transferor will
assign all of its rights (except certain rights of indemnification) and interest
in the Seller Contribution and Sale Agreement to the Issuer, which in turn will
assign all its rights to the Trustee for the benefit of the Noteholders, and the
Seller shall thereupon be liable to the Issuer and the Trustee for defective or
missing documents or an uncured breach of such Seller's representations or
warranties.
The Leases
As of the initial Calculation Date, the Leases had an Aggregate Discounted
Lease Balance (calculated using an assumed discount rate of 7.23% (the
"Statistical Discount Rate") of approximately $175,841,202. The statistical
information concerning the pool of Leases set forth herein is based upon
information as of the initial Calculation Date and using the Statistical
Discount Rate. The actual Discount Rate of [ ]% applicable to the Closing Date
is a per annum rate equal to the sum of (i) the weighted average Note Interest
Rates of the Notes, (ii) the Servicing Fee Rate and (iii) the Trustee Fee Rate,
and shall be used to calculate the actual Initial Note Principal Balances and
the actual Initial Aggregate Discounted Lease Balance. The Initial Aggregate
Discounted Lease Balance of the Leases as of the Cut-Off Date calculated using
the Discount Rate is $[ ]. While the statistical distribution of the
characteristics as of the Closing Date for the final Lease Receivable pool and
calculated at the Discount Rate will vary somewhat from the statistical
distribution of such characteristics as of the Cut-Off Date and calculated at
the Statistical Discount Rate as presented in this Prospectus, such variance
will not be material.
The Leases have the characteristics specified in the Seller Contribution
and Sale Agreement and described herein, and the Leases eligible to be
designated as Substitute Leases will conform to the characteristics specified in
the Seller Contribution and Sale Agreement and herein.
The final scheduled payment date on the Lease with the latest maturity is
May, 2006. As of the initial Calculation Date, all of the Leases had (i)
original terms to maturity of 9 months to 98 months, with a weighted average
original term to maturity of approximately 58.85 months; and (ii) a remaining
term to maturity of not less than 2 months and not more than 83 months, with a
weighted average remaining term to maturity of approximately 45.91 months.
References herein to percentages of Lessees refer in each case to the
percentage of the Aggregate Discounted Lease Balance of the Leases as of the
Calculation Date.
As of the initial Calculation Date, the Discounted Lease Balance of the
Leases ranged from approximately $274 to approximately $2,646,908. No more than
1.51% of the Aggregate Discounted Lease Balance is attributable to any one
Lessee, and the average Discounted Lease Balance is approximately $254,106. As
of the Cut-Off Date, no more than 1.03% of the Leases by Aggregate Discounted
Lease Balance were 31 to 60 days delinquent.
Under the Servicing Agreement, the Servicer is permitted to allow a Lessee
to prepay a Lease in an amount not less than the related Prepayment Amount. In
addition, in the event that a Lessee requests an upgrade or trade-in of
Equipment, the Servicer may remove such Equipment and related Lease from the
Pool of Assets, but only upon payment of an amount equal to the sum of (i) the
related Discounted Lease Balance as of the first day of the Collection Period
preceding such removal, (ii) one month's interest thereon at the Discount Rate,
and (iii) any
30
<PAGE>
Lease Payments due and outstanding under such Lease that have not been paid by
the Lessee (collectively, the "Repurchase Amount").
Substitutions
Pursuant to the Transferor Contribution and Sale Agreement, the Transferor
shall have the option to substitute Eligible Leases for (a) either a Defaulted
Lease, or a Lease subject to a Casualty Loss, up to a maximum of 10% of the
Aggregate Discounted Lease Balance of the Leases contributed to the pool, or (b)
a Lease subject to a Warranty Event, provided the following conditions are met:
(i) At the time of substitution, the substituted Eligible Leases have
in the aggregate Discounted Lease Balances of not less than the aggregate
of the Discounted Contract Balance of the Leases being replaced;
(ii) Substitutions by the Transferor shall be approximately the same
weighted average life of the remaining originally scheduled Lease payments
in the pool and shall not extend the final maturity of the pool beyond the
original maturity of the initial Leases in the pool.
Each substitute Lease shall be a Lease satisfying certain representations
and warranties set forth in the Servicing Agreement, the Indenture and the
Transferor Contribution and Sale Agreement (a "Substitute Lease") as of the
related Transfer Date In addition, the following conditions must be satisfied:
(a) on a cumulative basis from the Cut-Off Date, the sum of the Discounted
Lease Balance (as of the related Transfer Date) of such Substitute Leases (other
than those substituted for leases subject to Warranty Events) would not exceed
10% of the Initial Aggregate Discounted Lease Balance of all Leases as of the
Cut-Off Date;
(b) as of the related Transfer Date, the Substitute Leases then being
transferred have in the aggregate Discounted Lease Balances that are not less
than the aggregate of the Discounted Lease Balances of the Leases being
replaced; and
(c) no substitution shall be permitted if, after giving effect to such
substitution, (i) the sum of the Lease Payments (as defined below) on all Leases
due in any Collection Period thereafter would be less than (ii) the sum of the
Lease Payments which would otherwise be due in such Collection Period.
Delinquencies, Repossessions, and Net Losses
Certain information relating to the Seller's delinquency, repossession and
net loss experience with respect to Leases it has originated or acquired is set
forth below. This information may include, among other things, the experience
with respect to all Leases in the Seller's portfolio during certain specified
periods, including Leases which may not meet the criteria for selection as a
Lease Receivable for the Pool of Assets. There can be no assurance that the
delinquency, repossession and net loss experience on the Pool of Assets will be
comparable to the Seller's prior experience.
The Lease Receivable Statistical Information
Following is certain statistical information relating to the Lease
Receivable pool, calculated as of the Cut-Off Date and at the Statistical
Discount Rate. Certain columns may not total 100% due to rounding. Finance
Leases represent approximately 98% of the Initial Aggregate Discounted Lease
Balance of all Leases as of the Cut-Off Date. Synthetic Leases represent
approximately 2% of the Initial Aggregate Discounted Lease Balance of all Leases
as of the Cut-Off Date.
31
<PAGE>
DISTRIBUTION OF LEASES BY DISCOUNTED LEASES BALANCE
<TABLE>
<CAPTION>
Percentage of
Aggregate
Number of Percentage of Sum of Discounted Discounted Lease
Discounted Lease Balances Leases Total Leases Lease Balances Balance
------------------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$0 - 100,000 337 48.70% $14,194,544 8.07%
100,001 - 200,000 135 19.51 19,182,685 10.91
200,001 - 350,000 70 10.12 18,945,892 10.77
350,001 - 500,000 40 5.78 16,196,012 9.21
500,001 - 600,000 30 4.34 16,501,202 9.38
600,001 - 800,000 27 3.90 18,755,471 10.67
800,001 - 1,000,000 16 2.31 14,413,441 8.20
1,000,001 - 1,400,000 18 2.60 21,826,424 12.41
1,400,001 - 1,700,000 9 1.30 13,682,549 7.78
1,700,001 - 3,500,000 10 1.45 22,142,984 12.59
- ------------------------------------------------------------------------------------------------------------------
Total 692 100.00% $175,841,202 100.00%
==================================================================================================================
</TABLE>
32
<PAGE>
DISTRIBUTION OF THE LEASES BY DEFINED OBLIGOR INDUSTRY
<TABLE>
<CAPTION>
Percentage of
Aggregate
Number of Percentage of Sum of Discounted Discounted Lease
Industry Type Leases Total Leases Lease Balances Balance
- ------------- --------- ------------ -------------- -----------------
<S> <C> <C> <C> <C>
Advertising 11 1.59% $1,350,990 0.77%
Agriculture 3 0.43 443,918 0.25
Air Transport 3 0.43 2,038,125 1.16
Automotive 4 0.58 895,877 0.51
Beverage 2 0.29 528,789 0.30
Broadcast 1 0.14 27,167 0.02
Build/Development 7 1.01 780,713 0.44
Business Service 117 16.91 15,938,855 9.06
Cloth/Textiles 16 2.31 5,167,233 2.94
Coal 1 0.14 69,387 0.04
Containers 6 0.87 6,299,269 3.58
Cosmet/Toiletries 3 0.43 555,088 0.32
Drugs 12 1.73 7,826,442 4.45
Education 2 0.29 1,141,100 0.65
Electronics 15 2.17 6,088,301 3.46
Equipment Leasing 38 5.49 2,655,127 1.51
Finance 9 1.30 775,618 0.44
Food 28 4.05 2,719,985 1.55
Food Service 10 1.45 1,542,567 0.88
Foresting 2 0.29 656,856 0.37
Industrial Equipment 21 3.03 2,347,258 1.33
Insurance 2 0.29 75,881 0.04
Leisure 42 6.07 23,039,329 13.10
Marine 3 0.43 2,272,356 1.29
Medical 34 4.91 10,968,247 6.24
Metals 7 1.01 1,061,035 0.60
Non-Ferrous Metals 2 0.29 48,752 0.03
Other 11 1.59 3,075,567 1.75
Paper 1 0.14 2,121,431 1.21
Plastic/Chemicals 92 13.29 28,958,449 16.47
Publishing 2 0.29 911,914 0.52
Rail 9 1.30 4,012,931 2.28
Retail 12 1.73 3,552,894 2.02
Sports 1 0.14 556,541 0.32
Steel 3 0.43 276,301 0.16
Teleproduction 125 18.06 24,832,294 14.12
Telecommunication 26 3.76 7,185,110 4.09
Transport 4 0.58 2,709,583 1.54
Wholesale 5 0.72 333,920 0.19
- ------------------------------------------------------------------------------------------------------------------
Total 692 100.00% $175,841,202 100.00%
==================================================================================================================
</TABLE>
33
<PAGE>
DISTRIBUTION OF THE LEASES BY OBLIGOR BILLING ADDRESS
<TABLE>
<CAPTION>
Percentage of
Aggregate
Number of Percentage of Sum of Discounted Discounted Lease
State Leases Total Leases Lease Balances Balance
- ----- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama 7 1.01% $1,030,169 0.59%
Alaska 1 0.14 20,082 0.01
Arizona 2 0.29 1,112,586 0.63
Arkansas 5 0.72 2,356,698 1.34
California 135 19.51 35,688,205 20.30
Colorado 12 1.73 2,376,587 1.35
Connecticut 19 2.75 2,212,693 1.26
Delaware 1 0.14 304,587 0.17
District of Columbia 4 0.58 334,219 0.19
Florida 38 5.49 7,160,396 4.07
Georgia 19 2.75 2,160,410 1.23
Idaho 2 0.29 2,610,351 1.48
Illinois 30 4.34 6,189,563 3.52
Indiana 8 1.16 1,263,852 0.72
Iowa 6 0.87 990,115 0.56
Kentucky 1 0.14 33,274 0.02
Louisiana 5 0.72 2,336,227 1.33
Maine 7 1.01 1,527,822 0.87
Maryland 17 2.46 3,215,846 1.83
Massachusetts 30 4.34 9,362,179 5.32
Michigan 6 0.87 1,022,608 0.58
Minnesota 11 1.59 4,961,479 2.82
Missouri 2 0.29 1,455,888 0.83
Nebraska 2 0.29 1,436,407 0.82
Nevada 3 0.43 1,462,118 0.83
New Hampshire 4 0.58 3,877,615 2.21
New Jersey 26 3.76 4,970,726 2.83
New Mexico 3 0.43 924,513 0.53
New York 98 14.16 31,139,227 17.71
North Carolina 42 6.07 6,365,595 3.62
Ohio 13 1.88 4,642,847 2.64
Oklahoma 1 0.14 32,732 0.02
Oregon 1 0.14 95,000 0.05
Pennsylvania 52 7.51 11,510,962 6.55
Rhode Island 1 0.14 96,454 0.05
South Carolina 1 0.14 1,598,676 0.91
Tennessee 4 0.58 1,812,327 1.03
Texas 25 3.61 3,123,267 1.78
Utah 3 0.43 1,946,663 1.11
Vermont 4 0.58 368,313 0.21
Virginia 24 3.47 6,036,743 3.43
Washington 8 1.16 1,577,402 0.90
West Virginia 1 0.14 35,467 0.02
Wisconsin 8 1.16 3,062,313 1.74
- ------------------------------------------------------------------------------------------------------------------
Total 692 100.00% $175,841,202 100.00%
==================================================================================================================
</TABLE>
34
<PAGE>
DISTRIBUTION OF THE LEASES BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
Percentage of
Aggregate
Number of Percentage of Sum of Discounted Discounted Lease
Equipment Type Leases Total Leases Lease Balances Balance
- -------------- --------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Aircraft 2 0.29% $1,998,916 1.14%
Cinema 2 0.29 1,468,325 0.84
Computers 94 13.58 15,749,221 8.96
Construction 1 0.14 586,994 0.33
Earth Moving 2 0.29 268,835 0.15
Electronic Manufacturing 8 1.16 2,627,697 1.49
Extrusion/Injection/Molding 93 13.44 30,302,256 17.23
Film/TV/Video/Audio Production 149 21.53 34,066,384 19.37
Food/Agriculture Processing 4 0.58 1,053,167 0.60
Forestry 1 0.14 82,621 0.05
Furniture & Fixtures 52 7.51 5,307,699 3.02
Graphic Arts 4 0.58 728,545 0.41
Heating/Ventilation and Air Conditioning 1 0.14 226,901 0.13
Leaseholds 2 0.29 1,230,263 0.70
Machining 6 0.87 2,294,776 1.31
Medical 17 2.46 7,815,471 4.44
Manufacturing 1 0.14 310,788 0.18
Metal Processing 10 1.45 2,704,722 1.54
Oil & Gas 1 0.14 1,421,298 0.81
Other-Miscellaneous 47 6.79 17,615,077 10.02*
Packaging 1 0.14 212,182 0.12
Printing 30 4.34 16,064,611 9.14
Railroad 11 1.59 4,006,163 2.28
Real Estate 1 0.14 2,646,908 1.51
Recycling 1 0.14 175,083 0.10
Point of Sale 1 0.14 315,762 0.18
Sewing/Knitting 2 0.29 473,903 0.27
Software 4 0.58 1,094,634 0.62
Telecommunications 25 3.61 8,112,851 4.61
Telephone Systems 4 0.58 693,343 0.39
Textile 7 1.01 3,112,254 1.77
Transportation 5 0.72 4,539,204 2.58
Trucks 36 5.20 3,298,549 1.88
Video Conferencing 67 9.68 3,235,797 1.84
- ------------------------------------------------------------------------------------------------------------------
Total 692 100.00% $175,841,202 100.00%
==================================================================================================================
</TABLE>
*No one type of equipment represents one percent or more of the Aggregate
Discounted Lease Balance
35
<PAGE>
DISTRIBUTION OF THE LEASES BY REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
Percentage of
Number of Percentage of Total Sum of Discounted Aggregate Discounted
Months Leases Leases Lease Balances Lease Balance
------ --------- ------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
1-- 12 29 4.19% $3,066,839 1.74%
13-- 24 178 25.72 19,697,904 11.20
25-- 36 146 21.10 32,520,139 18.49
37-- 48 185 26.73 47,440,344 26.98
49-- 60 114 16.47 31,550,559 17.94
61-- 72 23 3.32 21,009,638 11.95
73-- 84 17 2.46 20,555,778 11.69
- --------------------------------------------------------------------------------------------------------------------
Total 692 100.00% $175,841,202 100.00%
====================================================================================================================
</TABLE>
DISTRIBUTION OF THE LEASES BY ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
Percentage of
Number of Percentage of Total Sum of Discounted Aggregate Discounted
Months Leases Leases Lease Balances Lease Balance
------ --------- ------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
1-- 12 2 0.29% $83,297 0.05%
13-- 24 13 1.88 716,529 0.41
25-- 36 227 32.80 28,021,588 15.94
37-- 48 95 13.73 23,887,818 13.58
49-- 60 273 39.45 66,696,340 37.93
61-- 72 43 6.21 16,650,103 9.47
73-- 84 37 5.35 37,676,809 21.43
85-- 96 1 0.14 598,876 0.34
97-- 108 1 0.14 1,509,842 0.86
- --------------------------------------------------------------------------------------------------------------------
Total 692 100.00% $175,841,202 100.00%
====================================================================================================================
</TABLE>
36
<PAGE>
CHARTER'S LEASING BUSINESS
Charter, a New York Corporation, is a specialty capital equipment finance
and leasing company which originates and services medium-term, fixed-rate,
full-payout leases and equipment financings to a wide variety of middle-market
clients in targeted industries throughout the United States and Canada. Charter
was founded in 1985 and is privately owned by members of its senior management
group and Warburg, Pincus Investors, L.P. Charter's address is 530 Fifth Avenue,
New York, New York 10036. Charter's telephone number is (212) 805-1000.
As of December 31, 1998, Charter's most recent fiscal year end, total
assets equaled approximately $145 million compared with approximately $155
million on December 31, 1997. Shareholder's equity equaled approximately $40
million on December 31, 1998 compared with $36 million on December 31, 1997.
Operating revenues and net income for the 12-month period ending December 31,
1998 equaled approximately $27 million and approximately $4 million
respectively, and for the 12-month period ending December 31, 1997 equaled
approximately $20 million and approximately $4.4 million respectively.
Charter provides financing for a range of middle-market companies in
specialized segments having annual sales volume generally between $2.5 million
and $50 million. Charter finances a broad range of equipment used by its clients
including medical equipment, film and video production equipment, plastic
manufacturing equipment, data processing equipment, office equipment, and
furniture. Charter currently operates 12 offices throughout the United States
and Canada. In addition to its New York headquarters, sales offices are
maintained in Portsmouth, NH; Danbury, CT; Charlotte, NC; Cleveland, OH;
Portland, OR; Chicago, IL; Los Angeles, CA and Bethesda, MD in the U.S. as well
as in Toronto and Winnipeg in Canada.
The following table briefly describes Charter's major industry segments.
Overview of Industry Segments
<TABLE>
<CAPTION>
Segment Description Equipment Type
====================================================================================================================================
<S> <C> <C>
Plastics/Packaging Provide equipment financing to companies involved in Aircraft, CD Replication, Computers,
all facets of the plastics industry as well as Extrusin/Injection Molding, Furniture &
recent entries into packaging, and compact discs. Fixtures, Machining,Manufacturing, Metal
Processing, Other-Miscellaneous, Packaging,
Real Estate, Recycling, Telephone Systems
- ------------------------------------------------------------------------------------------------------------------------------------
Media Provide equipment financing to companies involved Computers, Electronic Manufacturing,
with film and video production and postproduction, Film/TV/Video/Audio Production; Furniture
printing and graphic arts and other related media & Fixtures; Graphic Arts, Other-
business. Miscellaneous, Printing, Software,
Telephone Systems.
- ------------------------------------------------------------------------------------------------------------------------------------
Specialty Markets Provide equipment financing to a variety of industry Aircraft, Automobiles, Buses, Cinema,
segments based upon market opportunities. End users Computers, Construction, Construction-Heavy
include business services, electronics, leisure and Equipment, Earth Moving, Electronic
communications, among others. This segment also Manufacturing, Film/TV/Video/Audio
includes (i) Charter's capital markets industry Production, Food/Agricultural Processing,
segment which provides equipment financing to Forestry, Heavy Equipment, Furniture &
high-growth, late stage venture capital sponsored Fixtures, Graphic Arts, Holdback,
companies in structured transactions, and (ii) Heating/Ventilation and Air Conditioning,
Charter's healthcare industry segment which provides Leaseholds, Machining, Manufacturing,
equipment financing to leading hospitals in the New Materials Handling, Medical, Metal
York area. Processing, Other-Miscellaneous, Point of
Sale, Railroad, Real Estate, Recycling,
Security Deposit, Sewing/Knitting,
Software, Telecommunication, Telephone
Systems, Textile, Transportation, Tractors.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Segment Description Equipment Type
====================================================================================================================================
<S> <C> <C>
Wholesale Acquire lease portfolios and individual transactions Aircraft, Automobiles, Buses, Computers,
from other institutions. Construction, Construction-Heavy Equipment,
Earth Moving, Electronic Manufacturing,
Food/Agricultural Processing, Furniture &
Fixtures, Heating/Ventilation and Air
Conditioning, Machining, Manufacturing,
Metal Processing, Oil & Gas Equipment,
Other-Miscellaneous, Point of Sale, Real
Estate, Recycling, Sewing/Knitting,
Software, Telecommunications, Telephone
Systems, Textile, Transportation, Trailers,
Trucks
- ------------------------------------------------------------------------------------------------------------------------------------
Vendor Finance Originate dealer/manufacturer referred Furniture & Fixtures, Other-Miscellaneous,
leases in selected industries. Video Conferencing.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ORIGINATION VOLUME OF LEASES BY INDUSTRY SEGMENT
<TABLE>
<CAPTION>
For Year For Year For Year For Year For Year
Ending Ending Ending Ending Ending For Six
December 31, December 31, December 31, December 31, December 31, Months Ending
Segment 1994 1995 1996 1997 1998 June 30, 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Specialty Markets 52.92% 37.32% 38.99% 37.19% 32.68% 31.42%
Media 35.16% 35.84% 30.81% 22.69% 19.74% 25.74%
Wholesale 11.92% 26.84% 30.20% 17.24% 17.76% 9.94%
Plastics/ 22.87% 27.72% 26.39%
Packaging
Vendor Finance 2.10% 6.51%
------------------------------------------------------------------------------------------------
Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
</TABLE>
The above stated percentages are calculated based upon the original lease
balances at origination.
38
<PAGE>
As of December 31, 1998, Charter had approximately 116 full time employees
of which approximately 65 are located in the New York Headquarters,
approximately 22 are located in the Plastics/Packaging divisional office in
Portsmouth, NH, approximately 19 are located at Charter's Canadian subsidiary in
Toronto, Ontario (Canada) and approximately 10 are located in field sales
offices throughout the United States and Canada.
Charter services all leases originated in the US at its Headquarters in New
York. Leases originated in Canada are serviced at its office in Toronto,
Ontario. At December 31, 1998, Charter was responsible for servicing a total of
approximately 2,500 leases in the US and an additional 1,300 leases in Canada
representing gross receivables balances of approximately $802 million and $87
million respectively. Included in the total of managed leases in the United
States are approximately 300 leases having a gross receivables balance of
approximately $184 million which were originated by Charter and sold to various
third parties on a non-recourse basis.
Charter originates leases primarily through its direct sales force located
in either its main office or regional offices. Transactions are also originated
by referrals under both formal and informal relationships with various equipment
manufacturers and vendors. In addition, Charter's wholesale division purchases
leases or other financing transactions which were originated by other
lessors/lenders provided that the creditworthiness and procedures of such seller
meet the approval of Charter and further provided that Charter approves the
creditworthiness of the client and all of the documentation in such
transactions.
Each client who wishes to enter into a lease/financing transaction with
Charter provides Charter with information required by Charter in order to make a
credit determination with respect to a particular transaction. This information
will generally consist of a complete copy of financial statements including all
notes thereto for the latest two fiscal years and current and prior period
interim statements, tax returns, credit and trade references, a description of
the equipment to be financed and the cost thereof and any other financial and
credit information deemed necessary by Charter to make a credit decision.
Credit approval authority is vested in Charter's credit officers and
divisional managers. Charter has established risk asset acceptance criteria
("RAACs") for each of the company's major industry segments which include
certain financial ratios such as leverage, working capital and cash flow, as
well as transaction terms such as maximum maturity, amortization and size of
exposure, and other qualitative criteria such as number of years in business,
credit history, reputation and business mix. Credit evaluation is weighted
toward the prospective lessee's ability to pay its obligations from historical
cashflow generated in its ordinary course of business and a "strong" balance
sheet as evidenced by conventional balance sheet ratios consistent with
comparable companies in the industry. Other considerations include strength of
management, clientele, business reputation, credit history, industry trends and
the current and projected value of the assets financed.
Credit approval for all transactions requires the approval of at least two
credit officers or a credit officer and division manager. For transactions
falling within approved RAACs, credit officers who have been designated as team
leaders have credit approval authority for exposures of up to $750,000.00 and
division managers have credit approval authority for exposures of up to
$1,500,000.00. The chief credit officer has approval authority for exposures of
up to $3,000,000.00 regardless of RAAC compliance. Exposures in excess of these
authority limits or outside the RAACs require the additional signature of the
next highest level of credit approval authority. Credit applications which fall
outside the established RAACs are considered on an exception basis. In the
credit analysis of prospective transactions, Charter's personnel utilize
independent credit agency reports, bank and trade references,
39
<PAGE>
prior payment history, if any, and/or financial statements in making a
determination whether to approve or decline a particular transaction. For any
applicant which does not meet the applicable RAACs, Charter may require credit
enhancement such as additional collateral in the form of unencumbered equipment,
accounts receivable or inventory, a letter of credit, a certificate of deposit
or a third-party guarantee as a prerequisite to approving a transaction.
Concurrent with the credit approval of a transaction, a contract
administrator is assigned to prepare standard transaction documents to be
submitted to the client for execution. All non-standard documents or
non-standard terms and conditions are reviewed and approved by one of the
company's in-house attorneys. The assigned contract administrator is responsible
for obtaining all required executed documents, insurance certificates, UCC
financing statements, appropriate invoices covering the equipment and for
initiating payment of the equipment costs to the vendor and/or reimbursing the
client for any payments previously made to the vendor on account of such
equipment. Prior to releasing funds, the documents are subject to a second
review by an authorized senior contract administrator, who verifies the accuracy
of the documents, and are then approved by the credit team leader who verifies
that all of the terms of the credit approval have been met and that the lessee
is current with all payments on outstanding leases with Charter. The transaction
is then entered into Charter's Lease Administration system as the final step
prior to funding.
Charter generally requires clients to maintain property insurance on the
lease/financed equipment covering the property against damage, fire, theft and
other risk of loss for the replacement value of the equipment with Charter named
as loss payee as appropriate. The client is also generally required to obtain
public liability insurance covering both personal injury and property damage,
naming Charter as additional insured as appropriate. The clients generally
obtain the required insurance through its own carrier, or in selected cases
where Charter is satisfied with the client's creditworthiness, through self
insurance.
Delinquency Procedures and Loss Experience
Collection activities with respect to delinquent leases are performed by
the Servicer's staff at its headquarters in New York and Toronto under the
supervision of the Senior Credit Officer, Vice Chairman and General Counsel.
Under current practices, collection activity generally begins when an account
becomes ten days past due, with telephone contact. However, on a case by case
basis, initial contact may be made at an even earlier time. A report is
circulated each week to the appropriate officers, setting forth the payment
status of every transaction held by the Servicer in its portfolio. Generally, if
a transaction continues to be delinquent for more than one week following the
initial telephone contact, a collection officer or administrator makes
additional telephone contact with the client. If an account remains past due
after such telephone contact, Charter generally notifies the client in writing
at approximately twenty days past due. If a transaction continues to be
delinquent, Charter may exercise any remedies available to it under the terms of
the transaction, including termination, acceleration and/or repossession. The
current policy of Charter is that a transaction is written off when it is deemed
to be uncollectible. Generally, Charter does not deem an account to be
uncollectible unless and until it has taken reasonable steps to enforce its
rights and remedies under the transaction and it has determined that a client
does not have sufficient assets with which to satisfy the indebtedness. Upon
repossession and disposition of any equipment, any deficiency remaining will be
pursued to the extent deemed practicable. The servicing and charge-off policies
and collection practices of Charter may change over time in accordance with
Charter's business judgment.
Day-to-day collections are processed through Charter's lockbox account
which is currently at Bank of New York. The Bank of New York reviews the
customer payment coupons which accompany the remittance received and the
payments are earmarked to the specific pool where the Lease is funded.
40
<PAGE>
Delinquency/Loss Statistics
($ in thousands)
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending Year Ending Year Ending Six
December 31, December 31, December 31, December 31, December Months Ending
1994 1995 1996 1997 31, 1998 June 30, 1999
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio (includes
receivables sold non-
recourse)
Number of Leases 286 699 1,194 1,805 2,772 2,845
Gross
Receivables($) 110,214,685 293,961,373 472,427,121 681,395,480 802,083,359 773,398,930
31-60 Days 0.00% 0.55% 0.14% 0.29% 1.61% 2.30%
Delinquent
61-90 Days Delinquent 0.00% 0.00% 0.12% 0.09% 0.09% 0.13%
91-120 Days Delinquent 0.00% 0.00% 0.07% 0.03% 0.27% 1.01%
121 Days or more Delinquent 0.00% 0.10% 0.00% 0.38% 0.63% 1.23%
*Annual Net 0.00% 0.05% 0.14% 0.24% 0.25% 0.01%
Charge-Offs (Losses)
</TABLE>
* Note -- Annual Net Charge-Offs (Losses) are net of recoveries and are based
upon annual average gross receivables balances for the applicable period.
While the above delinquency experiences reflect Charter's experiences at
the period indicated, there can be no assurance that the delinquency experiences
on the Leases will be similar. Accordingly, the information should not be
considered to reflect the credit quality of the Leases owned by the Issuer, or
as a basis of assessing the likelihood or amount of severity of losses on the
Leases. The Leases, in general, may have characteristics which distinguish them
from the majority of the leases in Charter's existing portfolio. Charter's lease
origination business has developed and changed over the time period shown in the
above table. See "Charter's Leasing Business - Overview of Industry Segments"
and "-Origination Volume of Leases by Industry Segment".
41
<PAGE>
TRANSFEROR
The Transferor is a wholly-owned bankruptcy remote subsidiary of Charter.
The Transferor was organized for the limited purpose of engaging in transactions
described herein and any activities incidental to and necessary or convenient
for accomplishment of such purposes and is restricted by its organizational
documents and under the Transferor Contribution and Sale Agreement from engaging
in other activities. In addition, its organizational documents and the
Transferor Contribution and Sale Agreement require that it operates in a manner
such that it should not be consolidated in the bankruptcy estate of Charter or
its affiliates in the event that one of them becomes subject to bankruptcy or
insolvency proceedings. The Transferor's address is 530 Fifth Avenue, New York,
New York 10036. The Transferor's telephone number is (212) 805-1000.
As described herein under "The Pool of Assets," the only obligations, if
any, of the Transferor with respect to the Notes may be pursuant to certain
limited representations and warranties and limited undertakings to repurchase or
substitute Lease Receivables under certain circumstances. The Transferor will
have no servicing obligations or responsibilities with respect to the Lease
Receivables. The Transferor does not have, nor is it expected in the future to
have, any significant assets.
DESCRIPTION OF THE NOTES
The Notes will be issued pursuant to the Indenture to be entered into by
the Issuer and the Trustee. The Servicer will provide a copy of the Indenture to
subsequent Noteholders without charge on written request addressed to it at 530
Fifth Avenue, New York, New York 10036.
The following summary describes all material terms of the Seller
Contribution and Sale Agreement, the Transferor Contribution and Sale Agreement,
the Servicing Agreement, and the Indenture. The following summary does not
purport to be complete and is subject to the Seller Contribution and Sale
Agreement, the Transferor Contribution and Sale Agreement, the Servicing
Agreement, and the Indenture. Wherever provisions of the Seller Contribution and
Sale Agreement, the Transferor Contribution and Sale Agreement, the Servicing
Agreement and the Indenture are referred to, such provisions are hereby
incorporated herein by reference.
General
The obligations evidenced by the Notes are recourse to the assets of the
Issuer only and are not recourse to, or guaranteed by, the Transferor, the
Seller, Charter, the Servicer, the Trustee, or any other Person.
The Issuer will agree in the Indenture and in the respective Notes to pay
to the Noteholders (i) an amount of principal equal to the Outstanding Principal
Amount of such Notes and (ii) monthly interest at the times, from the sources
and on the terms and conditions set forth in the Indenture and in the respective
Notes.
The Notes in the initial principal amount of approximately $171,445,172
(the "Initial Outstanding Principal Amount"), will be issued pursuant to the
Indenture. The Initial Outstanding Principal Amount to be issued thereunder is
equal to approximately 97.50% of the Initial Aggregate Discounted Lease Balance
of the Leases. The Offered Notes will initially be issued in book-entry form
only through DTC in minimum denominations of $1,000 and integral multiples
thereof. Payments on the Notes are required to be made by the Trustee on each
Payment Date to the extent that funds are available therefor.
The first Payment Date for distributions to the Noteholders will be August
25, 1999. Payments are required to be made by the Trustee, by check mailed or,
if requested by the Noteholder, by wire transfer of immediately available funds,
to Noteholders entitled thereto at the address appearing on the certificate
register on the Record Date, which, for so long as the Offered Notes are in
book-entry form through DTC, will be Cede.
42
<PAGE>
Conveyance of Lease Receivables
On the Closing Date, the Issuer will acquire from the Transferor, by means
of an assignment of the rights acquired under the Seller Contribution and Sale
Agreement, of all of the right, title, and interest of the Seller in and to
(a)(i) any Equipment that is owned by the Seller and any and all income and
proceeds from such Equipment, but subject to the rights of the Lessee to quiet
enjoyment of such Equipment under the related Lease and (ii) any security
interest of the Seller in any of the Equipment that is not owned by the Seller,
(b) the Leases, including, without limitation, all Lease Payments, defaulted
lease recoveries and any other payments due or made with respect to the Leases
after the Cut-Off Date relating to such Leases, (c) any guarantees of a Lessee's
obligations under a Lease, (d) all other documents in the Lease Files relating
to the Leases, including, without limitation, any UCC financing statements
related to the Leases or the Equipment, (e) any Insurance Policies and Insurance
Proceeds with respect to the Leases, (f) all of the Transferor's right, title
and interest in and to, and rights under, the Seller Contribution and Sale
Agreement executed and delivered in accordance therewith, (g) all amounts on
deposit in the Distribution Account with respect to the related Lease
Receivables, and (h) any and all income and proceeds of any of the foregoing.
The Servicer, as custodian, will have possession of the Leases and the
Lease Files, and the Servicer will retain copies of any other documents which
relate to the Lease Receivables, any related evidence of insurance and payment,
delinquency and related reports maintained by the Servicer in the ordinary
course of business with respect to each Lease Receivable. Prior to transfer of
the Lease Receivables to the Issuer, the Seller will cause its electronic ledger
to be marked to show that such Lease Receivables have been transferred to the
Transferor and then to the Issuer, and the Seller and the Transferor will file
UCC financing statements reflecting the sale and assignment of the Lease
Receivables in certain jurisdictions, as required by the Seller Contribution and
Sale Agreement, the Transferor Contribution and Sale Agreement and the Servicing
Agreement. See "Legal Aspects of the Leases."
Security Interest
The Notes will be secured by:
(i) a first priority security interest in the Leases perfected by
filing blanket Uniform Commercial Code ("UCC") financing statements on the
Leases against the Seller and the Transferor in New York; and
(ii) funds in the Distribution Account with respect to the related
Lease Receivables and the funds in the Reserve Account.
Representations and Warranties of the Seller
The Seller will make certain representations and warranties in the Seller
Contribution and Sale Agreement, as described more fully herein under "The
Leases - Eligible Leases", (as of the Closing Date with respect to the Leases
and, with respect to a Substitute Lease, as of the date on which the Issuer
acquires such Substitute Lease (each, a "Transfer Date"), the benefits of which
will be assigned to the Issuer and then to the Trustee.
Under the terms of the Seller Contribution and Sale Agreement, the Seller
will be obligated to accept the reconveyance of any Lease Receivables and
deposit the Repurchase Amount on or before the end of the calendar month
following the month of its discovery or receipt of notice of a breach of a
representation or warranty that materially adversely affects such item of Lease
Receivables or to substitute a Substitute Lease therefor, which breach has not
been cured or waived in all material respects. This obligation to accept the
reconveyance of the Lease Receivables and remit the Repurchase Amount or to
substitute a Substitute Lease therefor will constitute the sole remedy against
the Seller available to, the Transferor, the Issuer, the Trustee and the
Noteholders for a breach of a representation or warranty made by the Seller with
respect to the required characteristics of the Lease Receivables.
43
<PAGE>
Indemnification
The Servicing Agreement will provide that Charter will defend and indemnify
the Servicer, the Transferor, the Trustee, the Issuer and the Noteholders
against any and all losses, claims, damages and liabilities to the extent, but
only to the extent, that the same have been suffered by any such party by virtue
of (i) a breach by Charter of its obligations (other than breach of Charter's
representations and warranties, with respect to which the sole remedy is
expressly limited to Charter's acceptance of the reconveyance of the affected
Lease Receivables and the remittance of the Repurchase Amount by Charter as
discussed above) under the Servicing Agreement or (ii) in the case of the
Trustee, its performance of its duties, except to the extent that such loss,
claim, damage or liability resulted from the Trustee's gross negligence or
willful misconduct.
The Servicing Agreement will also provide that the Servicer will defend and
indemnify the Transferor, Charter, the Trustee, the Issuer and the Noteholders
against any and all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel and expenses of litigation,
reasonably incurred, arising out of or resulting from (i) the use, repossession
or operation by the Servicer or any affiliate thereof of any Equipment and (ii)
(A) the failure of the Servicer to perform its duties under the Servicing
Agreement or (B) in the case of the Trustee, its performance of its duties,
except to the extent that such cost, expense, loss, damage, claim or liability
resulted from the Trustee's gross negligence or willful misconduct. Charter's
obligations, as Servicer, to indemnify the Issuer, the Trustee and the
Noteholders for acts or omissions of Charter as Servicer will survive the
removal of the Servicer but will not apply to any acts or omissions of a
successor Servicer. Such indemnification does not extend to indirect,
incidental, special or consequential damages.
The Accounts
The Trustee will establish and maintain a Distribution Account in the name
of the Trustee to which all Lease Payments received under each Lease, any
recoveries for Defaulted Leases if not substituted for, proceeds of Casualty
Losses and Early Termination Leases, and payments by the Transferor in
connection with a Warranty Event will be directed within two (2) Business Days
of receipt by the Servicer, but excluding any Excluded Amounts.
A "Lease Payment" means, with respect to any Lease, the monthly, quarterly,
semi-annual or seasonal payments scheduled to be made under the terms of the
Lease whether received on or after the expiration or other termination of the
Lease. Casualty Payments, Termination Payments, prepayments of rent required
pursuant to Termination Payments, prepayments of rent required pursuant to the
terms of a Lease at or before the commencement of the term of such lease,
payments becoming due before the Cut-Off Date or the Transfer Date, as
applicable, and supplemental or additional payments required by the terms of
such a Lease with respect to taxes, insurance, maintenance, or other specific
charges shall not be considered Lease Payments hereunder.
A "Casualty Payment" is 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 such Lease (such event a "Casualty Loss"), 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 "Termination Payment" is a payment payable by a Lessee under a Lease upon
the early termination of such Lease, (such Lease, an "Early Termination 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 beneficial owner thereof, and the
Lessee.
"Defaulted Leases" are (i) Leases that have become more than 120 days
delinquent or (ii) Leases that have been charged off by the Servicer.
Amounts exempt from deposit into the Distribution Account ("Excluded
Amounts") include (i) collections attributable to any taxes, fees or other
charges imposed by any governmental authority; (ii) collections representing
reimbursements of insurance premiums or payments for services that were not
financed by the Seller; (iii) other non-contract or rental charges reimbursable
to the Servicer in accordance with the Servicer's customary
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policies and procedures; (iv) collections with respect to repurchased Leases or
a Lease which has been substituted by a Substitute Lease; (v) any servicing
charges and (vi) any late fees or penalties.
Available Funds
"Available Funds" for any Payment Date shall include funds received on or
prior to the related Calculation Date, net of any Excluded Amounts, will be
available for distribution by the Trustee on each Payment Date and will include:
(i) any Lease Payments due on, or prior to, the related Calculation
Date;
(ii) any Servicer Advances;
(iii) any recoveries on Defaulted Leases to the extent the Servicer
has not substituted an Eligible Lease for such Defaulted Lease;
(iv) any proceeds from repurchases by the Transferor or the Seller due
to a Warranty Event or otherwise to the extent that the Transferor or the
Seller, as the case may be, has not substituted an Eligible Lease for such
Lease;
(v) any Casualty Payments and any Prepayment to the extent not
included in clause (iv) hereof;
(vi) any Termination Payments to the extent the Issuer does not
reinvest such Termination Payments in Additional Leases;
(vii) payments from the Issuer to effect the redemption of the Notes
pursuant to an Optional Redemption;
(viii) any funds on deposit in the Reserve Account to the extent there
occurs an Available Funds Shortfall; and
(ix) amounts transferred from the Reserve Account and deposited in the
Distribution Account for the purpose of repaying the Notes in full on the
final Payment Date.
Reserve Account
The Trustee will establish and maintain an Eligible Account (the "Reserve
Account"). On the Closing Date, the Issuer will make an initial deposit in an
amount equal to 1.0% of the Initial Aggregate Discounted Lease Balance of the
Leases into the Reserve Account. In the event that Available Funds (exclusive of
amounts on deposit in the Reserve Account) are insufficient to pay (a) the
amounts owing the Trustee and the Servicer, (b) and Interest Payments on the
Notes, and (c) the Class A Principal Payment, the Class B Principal Payment, the
Class C Principal Payment and the Class D Principal Payment (such payments, the
"Required Payments" and such shortfall, an "Available Funds Shortfall"), the
Trustee will withdraw from excess of funds on deposit in 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) 1.0% of the Aggregated Discounted Lease Balance of the
Leases as of the Cut-Off Date and (b) the Outstanding Principal Amount of the
Notes. Any amounts on deposit in the Reserve Account in excess of the Required
Reserve Amount will be released to the Issuer.
If, on any Payment Date, the aggregate amounts on deposit in the
Distribution Account as of the end of the related Collection Period and the
Reserve Account are greater than or equal to the sum of (i) the remaining
Outstanding Principal Amount of the Notes, (ii) the Overcollateralization
Balance as of such
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Payment Date, (iii) the accrued and unpaid interest thereon, (iv) the accrued
and unpaid Servicing Fee and Trustee Fee, (v) the unreimbursed Servicer
Advances, if any, and (vi) any other amounts owed under the Indenture, the
amount on deposit in the Reserve Account will be deposited in the Distribution
Account and be used to repay the Notes.
Application of Payments
Monthly distributions will be made on each Payment Date by the Trustee from
Available Funds in the following priority:
(a) to pay (i) the Trustee Fee and (ii) to pay to the Trustee an amount
not to exceed the lesser of (A) any expenses or liabilities incurred
by the Trustee pursuant to the terms of the Indenture, or (B) the
Trustee Priority Expense Amount for such Payment Date;
(b) to pay the Servicing Fee;
(c) to reimburse unreimbursed Servicer Advances in respect of a prior
Payment Date;
(d) to make Interest Payments owing on the Class A Notes pro rata to the
Class A-1 Noteholders, Class A-2 Noteholders, Class A-3 Noteholders
and Class A-4 Noteholders;
(e) to make Interest Payments owing on the Class B Notes;
(f) to make Interest Payments owing on the Class C Notes;
(g) to make Interest Payments owing on the Class D Notes;
(h) 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
and finally, (iv) to the Class A-4 Noteholders until the Outstanding
Principal Amount on the Class A-4 Notes is reduced to zero;
(i) to make the Class B Principal Payment to the Class B Noteholders;
(j) to make the Class C Principal Payment to the Class C Noteholders;
(k) to make the Class D Principal Payment to the Class D Noteholders;
(l) to pay the Additional Principal, if any, to the Class A Noteholders
then receiving the Class A Principal Payment as provided in clause (g)
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, then to the Class C Noteholders until the Outstanding
Principal Amount on the Class C Notes has been reduced to zero,
thereafter to the Class D Noteholders until the Outstanding Principal
Amount on the Class D Notes has been reduced to zero;
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(m) to make a deposit in the Reserve Account in an amount equal to the
excess, if any, of the Required Reserve Amount over the Available
Reserve Amount for such Payment Date;
(n) reimburse the Trustee for any expenses or liabilities pursuant to the
terms of the Indenture to the extent not already paid pursuant to
clause (a)(ii) hereof; and
(o) to the Issuer, the balance, if any.
Interest
On each Payment Date, the interest due (the "Interest Payments") with
respect to the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes, the Class B Notes, the Class C Notes and the Class D Notes
since the last Payment Date will be the interest that has accrued on such Notes
since the last Payment Date (or in the case of the first Payment Date, since the
Issuance Date) (the "Interest Accrual Period") at the applicable Note Interest
Rate applied to the then unpaid principal amounts (the "Outstanding Principal
Amounts") of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes, the Class B Notes, the Class C Notes, and the Class D Notes,
respectively, after giving effect to payments of principal to the Class A-1
Noteholders, the Class A-2 Noteholders, the Class A-3 Noteholders, the Class A-4
Noteholders, the Class B Noteholders, the Class C Noteholders and the Class D
Noteholders, respectively, on the preceding Payment Date. See "Description of
the Notes--General" and "--Distributions on Notes."
The Interest Payments with respect to Class A-1 Notes will be calculated on
the basis of actual days elapsed over a year of 360 days, and with respect to
all other Notes will be calculated on the basis of a year of 360 days consisting
of twelve 30 day months.
Principal
On each Payment Date, each of the Noteholders will be entitled to receive
the Principal Payments, to the extent of funds available as described herein
under "Available Funds," in the priorities described herein under "Application
of Payments." Principal Payments on the Notes are required to be made on each
Payment Date to Noteholders on the related Record Date.
On each Payment Date, to the extent funds are available therefor, the
following 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
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, and
(iv) to the Class A-4 Noteholders, 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 Class C Noteholders, the Class C Principal Payment,
(d) to the Class D Noteholders, the Class D Principal Payment, and
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(e) to the extent that the Class B Floor exceeds the Class B Target
Investor Principal Amount, the Class C Floor exceeds the Class C Target
Investor Principal Amount and/or the Class D Floor exceeds the Class D
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, Class B
Notes, Class C Notes, and Class D Notes as applicable, until the
Outstanding Principal Amount of each Class has been reduced to zero.
The "Class A Principal Payment" shall equal:
(a) while the Class A-1 Notes are outstanding,
(i) on all Payment Dates prior to the Class A-1 Stated Maturity 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 excess, if any, of (A)
the Aggregate Discounted Lease Balance as of the previous Calculation Date,
over (B) the Aggregate Discounted Lease Balance as of the related
Calculation Date, and
(ii) on all Payment Dates on and after the Class A-1 Stated Maturity
Date, 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 Outstanding Principal Amount on the Class A Notes to the Class A
Target Investor Principal Amount (as defined below) for such Payment Date.
The "Class B Principal Payment" shall equal (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 (as defined below) and the Class B Floor (as
defined below).
The "Class C Principal Payment" shall equal (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 C Notes to the greater of the Class C
Target Investor Principal Amount (as defined below) and the Class C Floor (as
defined below).
The "Class D Principal Payment" shall equal (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 D Notes to the greater of the Class D
Target Investor Principal Amount (as defined below) and the Class D Floor (as
defined below).
The "Class A Target Investor Principal Amount" with respect to each Payment
Date is an amount equal to the product of (a) the Class A Percentage (as defined
below) and (b) the Aggregate Discounted Lease Balance as of the related
Calculation 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 (as defined
below) and (b) the Aggregate Discounted Lease Balance as of the related
Calculation Date.
The "Class C Target Investor Principal Amount" with respect to each Payment
Date is an amount equal to the product of (a) the Class C Percentage (as defined
below) and (b) the Aggregate Discounted Lease Balance as of the related
Calculation Date.
The "Class D Target Investor Principal Amount" with respect to each Payment
Date is an amount equal to the product of (a) the Class D Percentage (as defined
below) and (b) the Aggregate Discounted Lease Balance as of the related
Calculation Date.
The Class A Target Investor Principal Amount, the Class B Target Investor
Principal Amount, the Class C Target Investor Principal Amount, and the Class D
Target Investor Principal Amount are collectively referred to as the "Class
Target Investor Principal Amounts."
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The "Class A Percentage" will be equal to approximately 86.31%. The "Class
B Percentage" will be equal to approximately 5.97%. The "Class C Percentage"
will be equal to approximately 3.16%. The "Class D Percentage" will be equal to
approximately 1.05%.
The "Class B Floor" with respect to each Payment Date means:
(a) 2.15% of the initial Aggregate Discounted Lease Balance as of the
Cut-Off Date, plus
(b) the Cumulative Loss Amount with respect to such Payment Date, minus
(c) the sum of the Outstanding Principal Amount of the Class C Notes, the
Outstanding Principal Amount of the Class D Notes, and the Overcollateralization
Balance as of the immediately preceding Payment Date after giving effect to all
principal payments made on that day, minus
(d) the amount on deposit in the Reserve Account after giving effect to
withdrawals to be made on such Payment Date.
The "Class C Floor" with respect to each Payment Date means:
(a) 1.30% of the initial Aggregate Discounted Lease Balance as of the
Cut-Off Date, plus
(b) the Cumulative Loss Amount with respect to such Payment Date, minus
(c) the sum of the Outstanding Principal Amount of the Class D Notes and
the Overcollateralization Balance as of the immediately preceding Payment Date
after giving effect to all principal payments made on that day, minus
(d) the amount on deposit in the Reserve Account after giving effect to
withdrawals to be made on such Payment Date; provided, however, that if the
Outstanding Principal Amount of the Class B Notes is less than or equal to the
Class B Floor on such Payment Date, the Class C Floor will equal the Outstanding
Principal Amount of the Class C Notes utilized in the calculation of the Class B
Floor for such Payment Date.
The "Class D Floor" with respect to each Payment Date means:
(a) 0.85% of the initial Aggregate Discounted Lease Balance as of the
Cut-Off Date, plus
(b) the Cumulative Loss Amount with respect to such Payment Date, minus
(c) the Overcollateralization Balance as of the immediately preceding
Payment Date after giving effect to all principal payments made on that day,
minus
(d) the amount on deposit in the Reserve Account after giving effect to
withdrawals to be made on such Payment Date; provided, however, that if the
Outstanding Principal Amount of the Class C Notes is less than or equal to the
Class C Floor on such Payment Date, the Class D Floor will equal the Outstanding
Principal Amount of the Class D Notes utilized in the calculation of the Class C
Floor for such Payment Date.
The Class B Floor, the Class C Floor and the Class D Floor are collectively
referred to herein as the "Class Floors."
"Additional Principal" with respect to each Payment Date equals:
(a) zero, if each of the Class Target Investor Principal Amounts for the
Class B Notes, the Class C Notes, and the Class D Notes exceed their respective
Class Floors on such Payment Date and
(b) in each other case the excess, if any, of
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(i) (A) the Outstanding Principal Balance of the Notes plus the
Overcollateralization Balance as of the immediately preceding Payment Date
after giving effect to payments on such Payment Date, minus (B) the
Aggregate Discounted Lease Balance as of the related Calculation Date, over
(ii) the sum of the Class A Principal Payment, the Class B Principal
Payment, the Class C Principal Payment, and the Class D Principal Payment
to be paid on such Payment Date.
The "Overcollateralization Balance" with respect to each Payment Date is an
amount equal to the excess, if any, of (a) the Aggregate Discounted Lease
Balance as of the related Calculation Date over (b) the Outstanding Principal
Amount of the Notes as of such Payment Date after giving effect to all principal
payments made on that day.
The "Cumulative Loss Amount" with respect to each Payment Date is an amount
equal to the excess, if any, of:
(a) the total of:
(i) the Outstanding Principal Amount of the Notes as of the
immediately preceding Payment Date after giving effect to all principal
payments made on that day, plus
(ii) the Overcollateralization Balance as of the immediately preceding
Payment Date, minus
(iii) the lesser of (A) the Aggregate Discounted Lease Balance as of
the Calculation Date relating to the immediately preceding Payment Date
minus the Aggregate Discounted Lease Balance as of the related Calculation
Date and (B) Available Funds remaining after the payment of amounts owing
to the Servicer in respect of interest on the Notes on such Payment Date,
over
(b) the Aggregate Discounted Lease Balance as of the related Calculation
Date.
Subordination
Payments of interest on the Class B Notes, the Class C Notes and the Class
D Notes will be subordinated in priority of payment to interest due on the Class
A Notes to the extent described herein. The Class B Notes, the Class C Notes and
the Class D Notes will not receive any payments of interest with respect to a
Collection Period until the full amount of interest on the Class A Notes
relating to such Collection Period has been paid to the Class A Notes. Payments
of interest on the Class C Notes and the Class D Notes will be subordinated in
priority of payment to interest due on the Class B Notes to the extent described
herein. The Class C Notes and the Class D Notes will not receive any payments of
interest with respect to a Collection Period until the full amount of interest
on the Class B Notes relating to such Collection Period has been allocated to
the Class B Notes. Payments of interest on the Class D Notes will be
subordinated in priority of payment of interest to interest due on the Class C
Notes to the extent described herein. The Class D Notes will not receive any
payments of interest with respect to a Collection Period until the full amount
of interest on the Class C Notes relating to such Collection Period has been
allocated to the Class C Notes. Payments of principal on the Class B Notes, the
Class C Notes and the Class D Notes will be subordinated in priority of payment
to principal due on the Class A Notes to the extent described herein. Payments
of principal on the Class C Notes and the Class D Notes will be subordinated in
priority of payment to principal due on the Class B Notes to the extent
described herein. Payments of principal on the Class D Notes will be
subordinated in priority of payment to principal due on the Class C Notes to the
extent described herein.
Book-Entry Registration
With respect to the Offered Notes, Noteholders may hold their Notes through
DTC if they are participants therein, or indirectly through organizations that
are participants therein. Cede, as nominee for DTC, will hold the global Notes
in respect of given series.
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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 New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of securities. Participants
include Notes brokers and dealers, banks, trust companies and clearing
corporations. 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 DTC Participants will occur in
accordance with DTC rules.
The Noteholders of a given series that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Notes may do so only through Participants and Indirect
Participants. In addition, Noteholders will receive all distributions of
principal and interest through the Participants who in turn will receive them
from DTC. Under a book-entry format, Noteholders may experience some delay in
their receipt of payments, since such payments will be forwarded by the Trustee
to Cede, as nominee for DTC. DTC will forward such payments to its Participants,
which thereafter will forward them to Indirect Participants or the Noteholders.
It is anticipated that the only "Noteholder" in respect of any series will be
Cede, as nominee of DTC. Noteholder will not be recognized as Noteholders, and
the Noteholders will be permitted to exercise the rights of Noteholders only
indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Notes among Participants on whose behalf it acts with respect to the Notes and
to receive and transmit distributions of principal of, and interest on, the
Notes. Participants and Indirect Participants with which the Noteholders have
accounts with respect to the Notes similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
Noteholders. Accordingly, although such Noteholders will not possess Notes, the
Rules provide a mechanism by which Participants will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Noteholder
to pledge Notes to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Notes, may be limited due to
the lack of a physical certificate for such Notes.
DTC will advise the Trustee that it will take any action permitted to be
taken by a Noteholder only at the direction of one or more Participants to whose
accounts with DTC the Notes are credited. DTC 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.
Except as required by law, the Trustee will not have any liability for any
aspect of the records relating to or payments made or account of beneficial
ownership interests of the related Notes held by Cede, as nominee for DTC, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Definitive Notes
The Offered Notes will be issued in fully registered, certificated form
("Definitive Notes") to the Noteholders or their nominees, rather than to DTC or
its nominee, only if (i) the Trustee advises in writing that DTC is no longer
willing or able to discharge properly its responsibilities as a trust depositary
with respect to such Notes and the Trustee is unable to locate a qualified
successor, (ii) the Trustee, at its option, elects to terminate the book-entry
system through DTC or (iii) after the occurrence of an "Event of Default" under
the Indenture or a default by the Servicer under the Servicing Agreement,
Noteholders representing at least a majority of the outstanding principal amount
of such Notes advise the Trustee through DTC in writing that the continuation of
a book-entry system through DTC (or a successor thereto) is no longer in such
Noteholders' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to use its best efforts to notify all
such Participants of the availability of Definitive Notes. Upon
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surrender by DTC of the definitive Notes representing such Notes and receipt of
instructions for reregistration, the Trustee will reissue such Notes as
Definitive Notes to such Noteholders.
Distributions of principal of, and interest on, such Notes will thereafter
be made by the Trustee in accordance with the procedures set forth in the
Indenture directly to holders of Definitive Notes in whose names the Definitive
Notes were registered at the close of business on the applicable Record Date.
Such distributions will be made by check mailed to the address of such holder as
it appears on the register maintained by the Trustee. The final payment on any
such Security, however, will be made only upon presentation and surrender of
such Security at the office or agency specified in the notice of final
distribution to the applicable Noteholders.
Definitive Notes will be transferable and exchangeable at the offices of
the Trustee, or of a certificate registrar named in a notice delivered to
holders of such Definitive Notes. No service charge will be imposed for any
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
Withholding
The Trustee is required to comply with all applicable federal income tax
withholding requirements respecting payments to Noteholders of interest with
respect to the Notes. The consent of Noteholders is not required for such
withholding. In the event the Noteholder is other than DTC, then in the event
that the Trustee does withhold or causes to be withheld any amount from interest
payments or advances thereof to any Noteholders pursuant to federal income tax
withholding requirements, the Trustee shall indicate the amount withheld
annually to such Noteholders.
Reports to Noteholders
On each Payment Date the Trustee will furnish or cause to be furnished with
each payment to Noteholders, a statement prepared by the Servicer setting forth
the following information (as well as expressed per $1,000 of Initial
Outstanding Principal Amount as to the items described in clauses (a) and (b)
below):
(a) with respect to a statement to a Noteholder, the amount of such
payment allocable to such Noteholder's required payment of the Principal
Payment for such Payment Date;
(b) with respect to a statement to a Noteholder, the amount of such
payment allocable to such Noteholder's required payment of the Interest
Payment for such Payment Date;
(c) the aggregate amount of fees and compensation received by the
Servicer pursuant to the Servicing Agreement and the aggregate amount of
fees received by the Trustee for the Collection Period;
(d) the aggregate Outstanding Principal Amount, individual Outstanding
Principal Amounts for each Class of Notes, the Pool Factor and the
Aggregate Discounted Lease Balance, after taking into account all
distributions made on such Payment Date;
(e) the total unreimbursed Servicer Advances with respect to the
related Collection Period;
(f) the amount of recoveries on Defaulted Leases for the related
Collection Period and the Aggregate Discounted Lease Balances for all
Leases that became Defaulted Leases during the related Collection Period,
calculated immediately prior to the time such Leases became Defaulted
Leases; and
(g) the total number of Leases and the Discounted Lease Balances
thereof, together with the number and Discounted Lease Balances of all
Leases as to which the Lessees, as of the related Calculation Date, were
one, two, three or four Lease Payments delinquent.
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Further, on the Reporting Date, the Servicer shall be required to deliver a
monthly Servicer Report to (i) each Rating Agency and (ii) the Underwriter (as
defined below) detailing amounts received on the Leases in respect of the
immediately preceding Collection Period and available for distribution on the
Payment Date.
In addition, by January 31 of each calendar year following any year during
which the Notes are outstanding, commencing January 31, 2000, the Trustee will
furnish to each Noteholder of record at any time during such preceding calendar
year, information as to the aggregate of amounts reported pursuant to items (a)
and (b) above for such calendar year to enable Noteholders to prepare their
federal income tax returns.
Optional Redemption
The Issuer will have the option, subject to certain conditions, to redeem
all, but not less than all, of the Notes as of any Payment Date on which the
Aggregate Discounted Lease Balance as of the related Calculation Date is less
than or equal to 10% of the Aggregate Discounted Lease Balance as of the Cut-Off
Date.
POOL FACTORS
The "Pool Factor" for Class of Notes will be a seven-digit decimal, which
the Servicer will compute prior to each distribution with respect to such Class
of Notes, indicating the remaining outstanding principal balance of such Class
of Notes as of the applicable Payment Date (after taking into account all
distributions to be made on such Payment Date), as a fraction of the initial
outstanding principal balance of such Class of Notes. Each Pool Factor will be
initially 1.0000000, and thereafter will decline to reflect reductions in the
outstanding principal balance of the applicable Class of Notes. A Noteholder's
portion of the aggregate outstanding principal balance of the related Class of
Notes is the product of (i) the Initial Outstanding Principal Amount (as defined
herein) of such Noteholder's Notes and (ii) the applicable Pool Factor.
DESCRIPTION OF THE TRANSACTION DOCUMENTS
The following summary describes all material terms of the Transaction
Documents pursuant to which the Lease Receivables will be transferred and the
Notes will be issued. For purposes of this Prospectus, the term "Transaction
Document" as used means, collectively, and except as otherwise specified, any
and all agreements relating to the establishment of the Issuer, the servicing of
the related Lease Receivables and the issuance of the Notes, including, without
limitation, the Indenture, (i.e., pursuant to which any Notes shall be issued).
Forms of the Transaction Documents have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. The summary does
not purport to be complete. It is subject to the provisions of the respective
Transaction Documents.
Acquisition of the Lease Receivables Pursuant to a Contribution and Sale
Agreement
On the Closing Date, the Transferor will acquire the Lease Receivables from
the Seller pursuant to the Seller Contribution and Sale Agreement. The
Transferor will either transfer such Lease Receivables, or a portion thereof, to
the Issuer pursuant to the Transferor Contribution and Sale Agreement, or will
pledge the Transferor's right, title and interests in and to such Lease
Receivables, or a portion thereof, to the Issuer, and the Issuer will pledge its
right, title and interests in and to such Lease Receivables to the Trustee on
behalf of Noteholders pursuant to the Indenture. The rights and benefits of the
Transferor under the Seller Contribution and Sale Agreement and the rights and
benefits of the Issuer under the Transferor Contribution and Sale Agreement will
be assigned to the Trustee on behalf of Noteholders as collateral for the Notes
issued by the Issuer pursuant to the Indenture. The obligations of the
Transferor and the Servicer under such Transaction Documents include those
specified below.
The Transferor and/or the Seller will be obligated to acquire from the
Issuer its interest in any Lease Receivable transferred to the Issuer or pledged
to the Issuer or the Trustee on behalf of the Noteholders if the interest of the
Noteholders therein is materially adversely affected by a breach of any
representation or warranty made by the Transferor or the Seller with respect to
such Lease, which breach has not been cured following the
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discovery by or notice to the Transferor of the breach. To the extent that the
Transferor so acquires any Lease Receivables, the Seller will be obligated to
acquire such Lease Receivables from the Transferor pursuant to the Seller
Contribution and Sale Agreement contemporaneously with the Transferor's
acquisition of its interest in such Lease Receivables. The obligation of the
Transferor to acquire any such Lease Receivables with respect to which a Seller
has breached a representation or warranty is subject to such Seller's
acquisition of such Lease Receivables from the Transferor. In addition, the
Transferor may from time to time reacquire certain Lease Receivables or
substitute other Lease Receivables for such Lease Receivable held by the Issuer
subject to specified conditions set forth in the related Transaction Document.
Accounts
The Servicer will establish and maintain with the Trustee one or more
accounts constituting the Distribution Account , in the name of the Trustee on
behalf of the Noteholders, into which all payments made on or with respect to
the related Lease Receivables will be deposited within two Business Days of the
receipt thereof by the Servicer.
Funds in the Reserve Account (as defined herein) and the Distribution
Account (collectively, the "Trust Accounts") shall be invested as provided in
the related Transaction Document and Indenture in Eligible Investments.
"Eligible Investments" are generally limited to investments acceptable to the
Rating Agencies as being consistent with the rating of such Notes. Subject to
certain conditions, Eligible Investments may include Notes issued by the Issuer,
the Seller, the Servicer or their respective affiliates. Except as described
below, Eligible Investments are limited to obligations that mature not later
than the Business Day immediately preceding the related Payment Date. Investment
earnings on funds deposited in the applicable Trust Accounts, net of losses and
investment expenses (collectively, "Investment Earnings"), shall be payable to
the Servicer on each Payment Date and shall be treated as additional servicing
compensation.
The Trust Accounts will be maintained as Eligible Accounts. "Eligible
Account" means either (a) a segregated account with an Eligible Institution as
defined below or (b) a segregated trust account with the corporate trust
department of a trust 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 notes of such trust depository institution has a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade. "Eligible Institution" means (a) the corporate trust department of the
Trustee, or (b) a trust 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), which (i) (A) has either
(1) a long-term unsecured debt rating acceptable to the Rating Agencies or (2) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies or (B) the parent corporation of which has either (1) a
long-term unsecured debt rating acceptable to the Rating Agencies or (2) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies and (ii) whose deposits are insured by the FDIC.
The Servicer
The Servicer will service the Lease Receivables which comprise the Pool of
Assets. The Servicer may delegate its servicing responsibilities to one or more
Sub-Servicers, but will not be relieved of its liabilities with respect thereto.
The Servicer will make certain representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
Servicing Agreement. An uncured breach of such a representation or warranty that
in any respect materially and adversely affects the interests of the Noteholders
will constitute an Event of Termination by the Servicer under the Servicing
Agreement.
Servicing Procedures
The Servicing Agreement will provide that the Servicer will make reasonable
efforts to collect all payments due with respect to the Lease Receivables and,
in a manner consistent with the Servicing Agreement, will continue such
collection procedures as the Servicer follows with respect to the particular
type of Lease Receivable in the particular pool it services for itself and
others. Consistent with its normal procedures, the Servicer may, in its
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discretion and on a case-by-case basis, arrange with the Lessee on a Lease to
extend or modify the payment schedule. Some of such arrangements (including,
without limitation, any extension of the payment schedule beyond the final
scheduled Payment Date for the related Notes) may result in the Servicer
acquiring such Lease Receivable if such Lease becomes a Defaulted Lease. The
Servicer may sell the Equipment securing the respective Defaulted Lease, if any,
at a public or private sale, or take any other action permitted by applicable
law. See "Legal Aspects of the Leases."
Advances by the Servicer
Prior to any Payment Date, the Servicer, to the extent that the Servicer
believes such advance to be recoverable from such Lease, may advance (each, a
"Servicer Advance") to the Trustee an amount sufficient to cover delinquencies
on any Leases with respect to the prior Collection Period other than a Defaulted
Lease or a Lease which has been charged off. The Servicer will be reimbursed for
Servicer Advances from Available Funds on the second following Payment Date. See
"Description of the Notes -- Application of Payments" above.
Remittance and Other Servicing Procedures
The Servicer, the Trustee and the Issuer will enter into the Servicing
Agreement on or prior to the Closing Date that will further detail the
procedures for Lease collections and Equipment remarketing. The Servicer has
agreed to manage, administer and service the Lease Receivables and to enforce
and make collections on the Lease Receivables, exercising the degree of skill
and care consistent with that which the Servicer customarily exercises with
respect to similar property owned, managed or serviced by it. In general, the
Servicer, in accordance with the Servicer's policies and procedures, shall have
full power and authority to do any and all things in connection with such
managing, servicing, administration, and collection that it deems necessary or
desirable. The Servicer's duties will include collection and posting of all
payments, responding to inquiries of Lessees regarding the Leases, investigating
delinquencies, remitting payments to the Distribution Account in a timely
manner, furnishing monthly and annual statements with respect to collections and
payments, using commercially reasonable efforts to dispose of any related
Equipment upon the expiration or termination of a Lease, and using its best
efforts to maintain the perfected first priority security interest of the
Trustee on behalf of the Noteholders in the Leases and their respective
interests, if any, in the related Equipment to the extent required herein.
The Servicer will, at its own cost and expense, maintain all documents
relating to the Leases (the "Lease Files"), as custodian for the Noteholders in
accordance with the Servicer's customary practices, policies, and procedures.
The Servicer may grant to a Lessee any rebate, refund or adjustment that
the Servicer in good faith believes is required, because of Prepayment in full
of a Lease. The Servicer may deduct the amount of any such rebate, refund or
adjustment from the amount otherwise payable by the Servicer into the
Distribution Account; provided, however, that the Servicer will not permit any
rescission or cancellation of any Lease which would materially impair the rights
of the Issuer or the Noteholders in the Leases or the proceeds thereof, nor will
the prepayment price after giving effect to any such rebate, refund or
adjustment (and without any adjustment for any security deposit previously paid
by the Lessee) be less than the Prepayment Amount for such Lease. The Servicer
may waive, modify or vary any term of a Lease if the Servicer, in its reasonable
and prudent judgment, determines that it will not be materially adverse to the
Noteholders. However, the Servicer will covenant in the Servicing Agreement that
(i) it will not forgive any payment of rent, principal or interest, (ii) unless
a Lessee is in default, it will not permit any modification with respect to a
Lease which would defer the payment of any principal or interest or any
Scheduled Payment or change the final maturity date on any Lease; provided,
however, that no change in the final maturity date of any Lease shall be
permitted under any circumstances if such new maturity date is later than the
latest maturity date of any other Lease then held by the Issuer, and (iii) the
Servicer may accept Prepayment in part or in full; provided, further, that (1)
in the event of Prepayment in full, the Servicer may consent to such Prepayment
only in an amount not less than Prepayment Amount for such Lease and (2) in the
event of a partial Prepayment, the Servicer may consent to such partial
Prepayment only if (x) following such partial Prepayment there are no delinquent
amounts then due from the Lessee and (y) such partial Prepayment will not reduce
the Aggregate Discount Lease Balance by more than an amount equal to (I) the
amount of such partial Prepayment, minus (II) unpaid interest at the Discount
Rate, accrued through the end of the Collection Period immediately following
such partial Prepayment on the outstanding Discounted Lease Balance prior to
such partial
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Prepayment. In the case of a partial Prepayment, the Servicer is required to
accurately recalculate the Aggregate Discounted Lease Balance, and the
allocation of Lease Payments to principal and interest.
The Servicer, as an independent contractor on behalf of the Issuer and for
the benefit of the Noteholders, will be responsible for the managing, servicing
and administering the Lease Receivables and enforcing and making collections on
the Leases and for the enforcing of any security interest in any item of
Equipment, all as set forth in the Servicing Agreement. The Servicer's
responsibilities will include collecting and posting of all payments, responding
to inquiries of Lessees, investigating delinquencies, accounting for
collections, furnishing monthly and annual statements to the Trustee, providing
appropriate federal income tax information for use in providing information to
Noteholders, collecting and remitting sales and property taxes on behalf of
taxing authorities and maintaining the perfected security interest of the Issuer
in the Equipment and the Leases.
Payments on Lease Receivables
The Servicer will deposit all payments on the related Lease Receivables
(from whatever source) and all proceeds of the Lease Receivables collected
during each collection period (each, a "Collection Period") within two Business
Days of receipt thereof into the Distribution Account. Pending deposit into the
Distribution Account, collections in such collection facility may be invested by
the Servicer at its own risk and for its own benefit, and will not be segregated
from funds of the Servicer.
Distributions
Beginning on August 25, 1999, distributions of principal and interest (or,
where applicable, of principal or interest only) on each Class of such Notes
entitled thereto will be made by the Trustee to the Noteholders. The timing,
calculation, allocation, order, source, priorities of, distribution of, and
requirements for each class of Notes will be set forth herein under the headings
"Description of the Notes -- Application of Payments," "-- Interest," and "--
Principal."
Servicing Compensation and Payment of Expenses
The Servicer will be entitled to receive a servicing fee for each
Collection Period (the "Servicing Fee") in an amount equal to the product of (a)
one-twelfth times 0.50% per annum (the "Servicing Fee Rate") and (b) the
Aggregate Discounted Lease Balance, as of the first day of such Collection
Period. The priority of distributions with respect to the Servicing Fee
(together with any portion of the Servicing Fee that remains unpaid from prior
Payment Dates), is set forth in the Indenture, as described more fully under
"Description of the Notes--Application of Payments" herein. The Servicing Fee
will be paid prior to any distribution to the Noteholders.
The Servicer will also collect and retain any late fees or the penalty
portion of interest paid on past due amounts and other administrative fees or
similar charges allowed by applicable law with respect to the Lease Receivables
and any prepayment premiums or other payments in excess of the present value of
all outstanding amounts owed under a Lease by a Lessee as a result of the early
termination thereof, and will be entitled to reimbursement from the Issuer for
certain liabilities. Payments by or on behalf of Lessees will be allocated to
scheduled payments and late fees and other charges in accordance with the
Servicer's normal practices and procedures.
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of similar types of leases as an agent for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of Lessees on the Lease Receivables, investigating delinquencies,
sending payment coupons to Lessees, reporting tax information to Lessees, paying
costs of collection and disposition of defaults, and policing the collateral.
The Servicing Fee also will compensate the Servicer for administering the Lease
Receivables, accounting for collections and furnishing statements to the
Trustee, if any, with respect to distributions. The Servicing Fee also will
reimburse the Servicer for certain taxes, accounting fees, outside auditor fees,
data processing costs and other costs incurred in connection with administering
the Lease Receivables.
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Statements to the Trustee
At least three Business Days prior to each Payment Date with respect to
each series of Notes, the Servicer will provide to the Trustee as of the close
of business on the last day of the preceding related Collection Period a
statement setting forth substantially the same information as is required to be
provided in the periodic reports provided to Noteholders described under
"Description of the Notes -- Reports to Noteholders."
Compliance Certification
The Servicing Agreement will provide for annual delivery of a report (the
"Supplementary Report") by the Servicer to the Trustee not later than 120 days
after the end of each fiscal year, signed by an authorized officer of the
Servicer (a "Servicing Officer") on behalf of the Servicer and dated as of the
last day of such fiscal year, stating that (a) a review of the activities of the
Servicer and the Servicer's performance under the Servicing Agreement for the
previous 12-month period has been made under such Servicing Officer's
supervision and (b) nothing has come to such Servicing Officer's attention to
indicate that an Event of Servicing Termination (as defined below) has occurred,
or, if such Event of Servicing Termination has so occurred and is continuing,
specifying each such event known to the officer, the nature and status thereof
and the steps necessary to remedy such event.
Copies of such certificates may be obtained by Noteholders by a request in
writing addressed to the Trustee.
The Servicing Agreement will provide that the Servicer, upon request of the
Trustee, will furnish to the Trustee such underlying data necessary for
administration of the Indenture or enforcement actions as can be generated by
the Servicer's existing data processing system.
Certain Matters Relating to the Servicer
The Servicing Agreement will provide that the Servicer may not resign from
its obligations and duties as Servicer thereunder, except upon a determination
that the Servicer's performance of such duties is no longer permissible under
applicable law. No such resignation will become effective until the Trustee or a
successor servicer has assumed the Servicer's servicing obligations and duties
under the Servicing Agreement (the "Successor Servicer"). The Servicer can only
be removed pursuant to an Event of Servicing Termination as discussed below.
Under the circumstances specified in the 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 or, with respect to its obligations
as Servicer, which corporation or other entity in each of the foregoing cases
assumes the obligations of the Servicer, will be the successor to the Servicer
under the Servicing Agreement.
The Servicing Agreement will further provide that neither the Servicer nor
any of its respective directors, officers, employees, or agents shall be under
any liability to the Issuer or the Noteholders for taking any action or for
refraining from taking any action pursuant to the Servicing Agreement, or for
errors in judgment; provided, however, 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 gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties thereunder. In addition, the Servicing Agreement will provide that the
Servicer is under no obligation to appear in, prosecute, or defend any legal
action that is not incidental to its servicing responsibilities under the
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
Events of Servicing Termination
An "Event of Servicing Termination" under the Servicing Agreement will
occur: (a) if the Servicer fails to make any payment or deposit required under
the Servicing Agreement within three Business Days of when required to do so;
(b) if the Servicer fails to submit a Servicer's certificate, within three
Business Days following knowledge or notice of non-receipt; (c) (i) if the
Servicer fails to observe or perform in any material respect any other covenant
or agreement in the Servicing Agreement or the Notes or (ii) if any
representation or
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warranty of the Servicer in the Servicing Agreement is incorrect, and such
failure or breach materially and adversely affects the rights of the Trustee or
the Noteholders and continues unremedied for 30 days after the earlier to occur
of (x) written notice to the Servicer by the Trustee or to the Trustee or the
Servicer by any Noteholders, or (y) the date on which any Servicing Officer or
authorized officer of the Trustee knows, or reasonably should have known, of
such failure or of such breach; (d) upon the filing of an involuntary petition
in bankruptcy or the decree or order of a court, agency or supervisory authority
having jurisdiction over the Servicer for the appointment of a conservator,
receiver, trustee in bankruptcy or liquidator in any bankruptcy, insolvency or
similar proceedings, and the continuance of any such petition, decree or order
undismissed or unstayed and in effect for a period of 60 consecutive days; (e)
upon the voluntary filing of such petition or assignment for the benefit of
creditors, the consent by the Servicer to any such appointment, the admission in
writing by the Servicer of its inability to pay its debts as they become due or
the determination by a court that the Servicer is generally not paying its debts
as they come due; or (f) in the event that the Servicer assigns or attempts to
assign its rights and duties under the Servicing Agreement except as
specifically permitted therein.
Rights Upon an Event of Servicing Termination
If an Event of Servicing Termination has occurred and is continuing, the
Trustee shall with the consent of the majority of the Noteholders terminate all
(but not less than all) of the Servicer's rights and obligations under the
Servicing Agreement. Upon such termination, the Successor Servicer will succeed
to all the responsibilities, duties and liabilities of the Servicer under the
Servicing Agreement; provided, however, that the Successor Servicer shall not
(i) assume any obligation to reacquire Lease Receivables by reason of
misrepresentations or breaches of warranties, or (ii) be liable for acts,
omissions or breaches of representations or warranties by the Servicer occurring
prior to transfer of the servicing functions. Notwithstanding such termination,
the Servicer shall be entitled to payment of certain amounts payable to it prior
to such termination for services rendered prior to such termination. The Trustee
also may appoint, or petition a court of competent jurisdiction for the
appointment of, a successor Servicer with a net worth of at least $25,000,000
and whose regular business includes the servicing of a similar type of leases.
The Trustee may make such arrangements for compensation to be paid, which in no
event may be greater than the servicing compensation payable to the Servicer
under the Servicing Agreement.
Events of Default
Upon the occurrence of an Event of Default, the Trustee, upon the written
direction of a majority of the Noteholders, shall declare the unpaid principal
amount of all the Notes to be 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 waived by the Issuer. "Events of Default" wherever
used herein means any one of the following events:
(i) failure to pay interest on any Note within four (4) days of when due or
the failure to pay principal on any Note by its Stated Maturity Date;
(ii) failure of the Seller, the Transferor, or the Servicer to make
payments or deposits required under the Transaction Documents within three
(3) Business Days;
(iii) failure of the Seller, the Transferor, the Issuer, the Trustee or the
Servicer to perform any covenant with respect to the transaction documents,
which such failure has a material adverse effect on the Noteholders and
which continues unremedied for a period of 60 days (provided no such cure
period shall apply to the Seller's failure to accept the reassignment of
any Ineligible Lease, and further provided, only a five (5) day cure period
will apply to the Seller's, the Transferor's, the Issuer's or the Trustee's
covenant not to grant a security interest in or otherwise intentionally
create a lien on the Leases);
(iv) any representation or warranty by the Seller, the Transferor, the
Trustee or the Servicer is not correct in any material respect and
continues for a period of 60 days (provided that the Transferor can "cure"
such misrepresentation by purchasing the contracts related thereto);
(v) the insolvency of the Seller, the Transferor or the Issuer; or
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(vi) the Issuer becomes an "Investment Company."
If the Notes have been declared due and payable following an Event of
Default with respect thereto, the Trustee may and, at the direction of a
majority of the Noteholders, shall institute proceedings to collect amounts due
or foreclose on the Lease Receivables, exercise remedies as a secured party,
sell the related Lease Receivables or elect to have the Issuer maintain
possession of such Lease Receivables and continue to apply collections on such
Lease Receivables as if there had been no declaration of acceleration. The
Trustee, however, will be prohibited from selling the related Lease Receivables
following an Event of Default, unless (i) the holders of all the 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 such outstanding Notes at
the date of such sale; or (iii) the Trustee determines that the proceeds of the
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 Trustee obtains the consent of
the holders of 66-2/3% of the aggregate outstanding amount of the Notes.
Following a declaration upon an Event of Default that the Notes are immediately
due and payable, (i) Noteholders will be entitled to ratable repayment of
principal on the basis of their respective unpaid principal balances and (ii)
repayment in full of the accrued interest on and unpaid principal balances of
the Notes will be made prior to any further payment to the Issuer of any
residual interest.
Termination of the Indenture
The Indenture will terminate, (i) at any time which is 100 days after the
payment to the Noteholders of all amounts required to be paid to them pursuant
to the Indenture, reducing the aggregate Outstanding Principal Amount to zero or
(ii) after the 100th day following the date on which the Issuer has deposited
with the Trustee sufficient funds to discharge all obligations under the
Indenture on or after a date one year prior to the final Stated Maturity Date of
the last outstanding Class of the Notes. The Notes will be redeemed following
the exercise by the Issuer of an Optional Redemption or the exercise by the
Servicer of a Clean-Up Call. Upon termination of the Indenture and the reduction
of the aggregate Outstanding Principal Amount, to zero and payment of any
amounts then owing to the Trustee, the Issuer shall retain any remaining
property
The respective representations, warranties and indemnities of Charter, the
Seller, the Servicer and the Transferor will survive any termination of the
Indenture.
Amendment
The Transaction Documents may be amended by agreement of the parties
thereto, the Trustee, and the Issuer at any time, without consent of the
Noteholders, to cure any ambiguity, upon receipt of an opinion of counsel to the
Servicer that such amendment will not adversely affect in any respect the
interests of any Noteholder.
The Transaction Documents may also be amended from time to time by the
parties thereto, the Trustee, the Issuer, and a specified percentage of the
Noteholders for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Transaction Documents or of
modifying in any manner the rights of the Noteholders; provided, however, that
no such amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on the Lease
Receivables or distributions which are required to be made on any Note without
the consent of the holder of such Note or (b) reduce the aforesaid percentage of
Noteholders required to consent to any amendment, without unanimous consent of
the Noteholders.
The Trustee is required under the Indenture to furnish Noteholders and the
Rating Agencies with written notice of the substance of any such amendment to
the Indenture promptly upon execution of such amendment.
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THE TRUSTEE
General
The Trustee, LaSalle Bank National Association, is a national banking
association organized under the laws of the United States of America. The
Trustee may resign, subject to the conditions set forth below, at any time upon
written notice to the Transferor and the Servicer, in which event the Servicer
will be obligated to appoint a successor Trustee. If no successor Trustee shall
have been so appointed and have accepted such appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition a
court of competent jurisdiction for the appointment of a successor Trustee. Any
successor Trustee shall meet the financial and other standards for qualifying as
a successor Trustee under the Indenture. The Servicer may and shall at the
direction of the Noteholders evidencing more than 25% of the aggregate
Outstanding Principal Amount of all Classes of Notes (the "Percentage
Interests"), also remove the Trustee if the Trustee ceases to be eligible to
continue as such under the Indenture and fails to resign after written request
therefor, or is legally unable to act, or if the Trustee is adjudicated to be
insolvent. In such circumstances, the Servicer or such Noteholders will also be
obligated to 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.
Duties and Immunities of the Trustee
The Trustee will make no representations as to the validity or sufficiency
of the Indenture, the Servicing Agreement, the Notes (other than the
authentication thereof) or of any Lease Receivable or related document and will
not be accountable for the use or application by Charter or the Transferor of
any funds paid to the Transferor in consideration of the sale of any Notes. If
no Event of Servicing Termination has occurred, then the Trustee will be
required to perform only those duties specifically required of it under the
Servicing Agreement. However, upon receipt of the various resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments required to be furnished to it, the Trustee will be required to
examine them to determine whether they conform as to form to the requirements of
the Servicing Agreement.
No recourse is available based on any provision of the Servicing Agreement,
the Notes or any Lease Receivable or assignment thereof against LaSalle Bank
National Association, in its individual capacity, and LaSalle Bank National
Association shall not have any personal obligation, liability or duty whatsoever
to any Noteholder or any other person with respect to any such claim and such
claim shall be asserted solely against the Lease Receivables or any indemnitor,
except for such liability as is determined to have resulted from the Trustee's
own negligence or willful misconduct.
The Trustee will be entitled to receive, pursuant to the priority set forth
in the Indenture, (a) reasonable compensation for its services (the "Trustee
Fee"), (b) reimbursement for its reasonable expenses and (c) indemnification for
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of performance of its duties thereunder (b) and (c) collectively,
the "Trustee Expenses").
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on, and the weighted average life of, the
Notes will be directly related to the rate of principal payments on the
underlying Leases. If purchased at a price other than par, the yield to maturity
will also be affected by the rate of such principal payments. The principal
payments on such Leases may be in the form of scheduled principal payments or
liquidations due to default, casualty, repurchases for breach and the like. Any
such payments will 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 payment of principal
may also be affected by any removal of the Leases from the pool and the deposit
of the related Prepayment Amount or Repurchase Amount into the Distribution
Account.
The Leases generally do not provide for the right of the Lessee to prepay.
As provided in the Servicing Agreement, the Servicer will be permitted to allow
such Prepayments in full or in part, provided that
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(x) no partial Prepayment of a Lease will be allowed unless all current amounts
owed on such Lease have been paid and (y) that no Prepayment in full of a Lease
will be allowed unless the Prepayment Amount for such Lease has been paid.
Prepayment of the Notes may also occur as a result of the exercise of an
Optional Redemption by the Issuer or a Clean-Up Call by the Servicer.
The "weighted average life" refers to the average amount of time from the
date of issuance of a security until each dollar of principal of such security
will be repaid to the investor. The weighted average lives of the Notes will be
influenced by the rate at which principal payments (including Lease payments and
prepayments) on the Leases are made. Principal payments on Leases may be in the
form of scheduled amortization or prepayments (for this purpose, the term
"prepayment" includes prepayments and liquidations due to a default or other
dispositions of the Leases). The weighted average lives of the Notes will also
be influenced by delays associated with realizing on Defaulted Leases. In the
prepayment model used in this Prospectus, the "Conditional Prepayment Rate" or
"CPR," represents an assumed annualized rate of prepayment relative to the then
outstanding balance on a pool of Leases. The CPR assumes that a fraction of the
outstanding Pool of Assets is prepaid on each Payment Date, which implies that
each Lease in the Pool of Assets is equally likely to prepay. This fraction,
expressed as a percentage, is annualized to arrive at the CPR for the Pool of
Assets. The CPR measures prepayments based on the outstanding principal on the
previous Payment Date. 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 effective yield to holders of the Notes will depend upon, among other
things, the 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.
Weighted Average Lives of the Notes
For the purpose of the tables below, it is assumed, among other things,
that: (i) the Closing Date for the Notes occurs on August 20, 1999, (ii)
distributions on (A) the Notes other than the Class A-1 Notes are made on the
25th day of each month regardless of the day on which the Payment Date actually
occurs, and (B) on the Class A-1 Notes are made on the actual Payment Date,
commencing on August 25, 1999 in accordance with the priorities described
herein, (iii) no delinquencies or defaults in the payment of principal and
interest on the Leases are experienced, (iv) no Lease is repurchased for breach
of a representation and warranty or otherwise, (v) the Statistical Discount Rate
is 7.23% per annum, (vi) Prepayments with respect to the Leases are received on
the last day of each Collection Period, commencing on July 31, 1999, (vii) the
Initial Outstanding Principal Amount is $50,642,266 for the Class A-1 Notes,
$40,355,556 for the Class A-2 Notes, $18,990,850 for the Class A-3 Notes,
$48,708,013 for the Class A-4 Notes, $7,473,251 for the Class B Notes,
$3,956,427 for the Class C Notes and $1,318,809 for the Class D Notes, (viii)
the Servicer exercises its Clean-Up Call on the earliest possible date, (ix) the
Servicing Fee is 0.50% per annum, (x) the Lease pool consists of a single Lease
with an Aggregate Discounted Lease Balance equal to $175,841,202 and (xi) Lease
Payments on such Lease are timely received (collectively, the "Modeling
Assumptions").
Since the tables were prepared on the basis of the Modeling Assumptions,
there are discrepancies between the characteristics of the actual Leases and the
characteristics of the Leases assumed in preparing the tables. Any such
discrepancies may have an effect upon the percentages of the Outstanding
Principal Amount of the Notes and weighted average lives of the Notes set forth
in the tables. In addition, since the actual Leases which will be owned by the
Issuer may have characteristics which differ from those assumed in preparing the
tables set forth below (for example, the actual Leases may experience
delinquencies or defaults or be repurchased due to a breach of representation
and warranty), the related weighted average life may be longer or shorter than
as indicated in the tables.
The following tables set forth the percentages of the initial principal
amount of the Notes that would be outstanding after each of the dates shown,
assuming a CPR of 0%, 5%, 7% and 10%.
61
<PAGE>
PERCENTAGE OF INITIAL AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OUTSTANDING AT
STATED PREPAYMENT SPEEDS
<TABLE>
<CAPTION>
Class A-1 Notes Class A-2 Notes
Payment Date Prepayment Speed (CPR) Prepayment Speed (CPR)
- -----------------------------------------------------------------------------------------------------------------------------
0% 5% 7% 10% 0% 5% 7% 10%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
August, 99 91.95 90.50 89.90 88.98 100.00 100.00 100.00 100.00
September, 99 84.09 81.27 80.11 78.33 100.00 100.00 100.00 100.00
October, 99 76.17 72.05 70.36 67.77 100.00 100.00 100.00 100.00
November, 99 67.94 62.60 60.41 57.06 100.00 100.00 100.00 100.00
December, 99 60.01 53.51 50.86 46.81 100.00 100.00 100.00 100.00
January, 2000 52.05 44.47 41.38 36.69 100.00 100.00 100.00 100.00
February, 2000 43.71 35.14 31.66 26.37 100.00 100.00 100.00 100.00
March, 2000 35.43 25.93 22.08 16.25 100.00 100.00 100.00 100.00
April, 2000 24.98 14.71 10.56 4.30 100.00 100.00 100.00 100.00
May, 2000 16.59 5.55 1.11 0.00 100.00 100.00 100.00 93.95
June, 2000 8.25 0.00 0.00 0.00 100.00 96.23 91.13 83.46
July, 2000 0.00 0.00 0.00 0.00 99.89 86.50 81.15 73.12
August, 2000 0.00 0.00 0.00 0.00 90.78 76.81 71.23 62.89
September, 2000 0.00 0.00 0.00 0.00 82.02 67.51 61.75 53.13
October, 2000 0.00 0.00 0.00 0.00 73.46 58.48 52.54 43.69
November, 2000 0.00 0.00 0.00 0.00 64.66 49.29 43.22 34.20
December, 2000 0.00 0.00 0.00 0.00 56.10 40.41 34.23 25.06
January, 2001 0.00 0.00 0.00 0.00 47.90 31.93 25.65 16.37
February, 2001 0.00 0.00 0.00 0.00 39.84 23.65 17.31 7.95
March, 2001 0.00 0.00 0.00 0.00 32.19 15.81 9.41 0.00
April, 2001 0.00 0.00 0.00 0.00 24.33 7.84 1.42 0.00
May, 2001 0.00 0.00 0.00 0.00 16.78 0.22 0.00 0.00
June, 2001 0.00 0.00 0.00 0.00 9.36 0.00 0.00 0.00
July, 2001 0.00 0.00 0.00 0.00 1.55 0.00 0.00 0.00
August, 2001 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
September, 2001 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
October, 2001 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November, 2001 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December, 2001 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
February, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
March, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
April, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
August, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
September, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
October, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December, 2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
January, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
February, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
March, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
April, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
July, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
August, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
September, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
October, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average
Life (years)* to Call 0.48 0.42 0.40 0.37 1.46 1.31 1.25 1.18
Weighted Average
Life (years)* to 0.48 0.42 0.40 0.37 1.46 1.31 1.25 1.18
Maturity
<CAPTION>
Class A-3 Notes
Payment Date Prepayment Speed (CPR)
0% 5% 7% 10%
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Closing Date 100.00% 100.00% 100.00% 100.00%
August, 99 100.00 100.00 100.00 100.00
September, 99 100.00 100.00 100.00 100.00
October, 99 100.00 100.00 100.00 100.00
November, 99 100.00 100.00 100.00 100.00
December, 99 100.00 100.00 100.00 100.00
January, 2000 100.00 100.00 100.00 100.00
February, 2000 100.00 100.00 100.00 100.00
March, 2000 100.00 100.00 100.00 100.00
April, 2000 100.00 100.00 100.00 100.00
May, 2000 100.00 100.00 100.00 100.00
June, 2000 100.00 100.00 100.00 100.00
July, 2000 100.00 100.00 100.00 100.00
August, 2000 100.00 100.00 100.00 100.00
September, 2000 100.00 100.00 100.00 100.00
October, 2000 100.00 100.00 100.00 100.00
November, 2000 100.00 100.00 100.00 100.00
December, 2000 100.00 100.00 100.00 100.00
January, 2001 100.00 100.00 100.00 100.00
February, 2001 100.00 100.00 100.00 100.00
March, 2001 100.00 100.00 100.00 99.98
April, 2001 100.00 100.00 100.00 82.97
May, 2001 100.00 100.00 86.81 66.78
June, 2001 100.00 84.65 71.02 51.07
July, 2001 100.00 68.22 54.69 34.94
August, 2001 87.79 52.90 39.49 19.94
September, 2001 73.13 38.46 25.18 5.86
October, 2001 58.74 24.38 11.25 0.00
November, 2001 45.08 11.07 0.00 0.00
December, 2001 31.80 0.00 0.00 0.00
January, 2002 15.92 0.00 0.00 0.00
February, 2002 0.28 0.00 0.00 0.00
March, 2002 0.00 0.00 0.00 0.00
April, 2002 0.00 0.00 0.00 0.00
May, 2002 0.00 0.00 0.00 0.00
June, 2002 0.00 0.00 0.00 0.00
July, 2002 0.00 0.00 0.00 0.00
August, 2002 0.00 0.00 0.00 0.00
September, 2002 0.00 0.00 0.00 0.00
October, 2002 0.00 0.00 0.00 0.00
November, 2002 0.00 0.00 0.00 0.00
December, 2002 0.00 0.00 0.00 0.00
January, 2003 0.00 0.00 0.00 0.00
February, 2003 0.00 0.00 0.00 0.00
March, 2003 0.00 0.00 0.00 0.00
April, 2003 0.00 0.00 0.00 0.00
May, 2003 0.00 0.00 0.00 0.00
June, 2003 0.00 0.00 0.00 0.00
July, 2003 0.00 0.00 0.00 0.00
August, 2003 0.00 0.00 0.00 0.00
September, 2003 0.00 0.00 0.00 0.00
October, 2003 0.00 0.00 0.00 0.00
Weighted Average
Life (years)* to Call 2.27 2.08 2.00 1.90
Weighted Average
Life (years)* to 2.27 2.08 2.00 1.90
Maturity
</TABLE>
* The weighted average life of a Class of Notes is determined by (a)
multiplying the amount of cash distributions in reduction of the
Outstanding Principal Amount of the respective Notes by the number of years
from the Closing Date to such Payment Date, (b) adding the results, and (c)
dividing the sum by the respective Initial Outstanding Principal Amount.
This table has been prepared based on the "Modeling Assumptions" preceding this
table (including the assumptions regarding the characteristics and performance
of the Leases which differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
62
<PAGE>
PERCENTAGE OF INITIAL AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OUTSTANDING AT
STATED PREPAYMENT SPEEDS
<TABLE>
<CAPTION>
Class A-4 Notes Class B Notes
Payment Date Prepayment Speed (CPR) Prepayment Speed (CPR)
- -------------------------------------------------------------------------------------------------------------------------------
0% 5% 7% 10% 0% 5% 7% 10%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
August, 99 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September, 99 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October, 99 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November, 99 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
December, 99 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January, 2000 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
February, 2000 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
March, 2000 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
April, 2000 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
May, 2000 100.00 100.00 100.00 100.00 100.00 100.00 100.00 97.74
June, 2000 100.00 100.00 100.00 100.00 100.00 98.59 96.69 93.82
July, 2000 100.00 100.00 100.00 100.00 99.96 94.96 92.96 89.96
August, 2000 100.00 100.00 100.00 100.00 96.56 91.34 89.26 86.14
September, 2000 100.00 100.00 100.00 100.00 93.29 87.87 85.71 82.50
October, 2000 100.00 100.00 100.00 100.00 90.09 84.49 82.27 78.97
November, 2000 100.00 100.00 100.00 100.00 86.80 81.06 78.79 75.42
December, 2000 100.00 100.00 100.00 100.00 83.60 77.74 75.44 72.01
January, 2001 100.00 100.00 100.00 100.00 80.54 74.58 72.23 68.77
February, 2001 100.00 100.00 100.00 100.00 77.53 71.49 69.12 65.62
March, 2001 100.00 100.00 100.00 100.00 74.68 68.56 66.17 62.65
April, 2001 100.00 100.00 100.00 100.00 71.74 65.58 63.18 59.66
May, 2001 100.00 100.00 100.00 100.00 68.92 62.73 60.33 56.81
June, 2001 100.00 100.00 100.00 100.00 66.15 59.95 57.56 54.05
July, 2001 100.00 100.00 100.00 100.00 63.23 57.07 54.69 51.22
August, 2001 100.00 100.00 100.00 100.00 60.51 54.37 52.02 48.58
September, 2001 100.00 100.00 100.00 100.00 57.93 51.84 49.50 46.11
October, 2001 100.00 100.00 100.00 96.96 55.40 49.36 47.06 43.71
November, 2001 100.00 100.00 99.26 91.95 53.00 47.02 44.74 41.45
December, 2001 100.00 99.30 94.32 87.13 50.67 44.76 42.52 39.28
January, 2002 100.00 93.43 88.59 81.61 47.88 42.11 39.93 36.79
February, 2002 100.00 87.68 82.99 76.25 45.13 39.53 37.41 34.37
March, 2002 95.12 82.96 78.38 71.82 42.88 37.39 35.33 32.37
April, 2002 90.20 78.33 73.88 67.51 40.66 35.31 33.30 30.43
May, 2002 85.15 73.63 69.32 63.17 38.38 33.19 31.25 28.48
June, 2002 80.54 69.35 65.17 59.23 36.30 31.26 29.38 26.70
July, 2002 76.14 65.28 61.24 55.51 34.32 29.43 27.61 25.02
August, 2002 71.72 61.23 57.34 51.83 32.33 27.60 25.85 23.36
September, 2002 67.73 57.58 53.83 48.52 30.53 25.95 24.26 21.87
October, 2002 63.73 53.94 50.34 45.25 28.73 24.32 22.69 20.40
November, 2002 59.49 50.14 46.71 41.87 26.82 22.60 21.05 18.87
December, 2002 55.79 46.82 43.54 38.92 25.15 21.11 19.63 17.55
January, 2003 52.67 44.01 40.85 36.42 23.74 19.84 18.42 16.42
February, 2003 49.75 41.40 38.36 34.11 22.43 18.66 17.29 15.37
March, 2003 46.78 38.76 35.85 31.79 21.09 17.47 16.16 14.33
April, 2003 43.86 36.19 33.41 0.00 19.77 16.31 15.06 0.00
May, 2003 41.38 33.99 31.33 0.00 18.65 15.32 14.12 0.00
June, 2003 38.99 31.90 0.00 0.00 17.58 14.38 0.00 0.00
July, 2003 36.59 0.00 0.00 0.00 16.50 0.00 0.00 0.00
August, 2003 33.82 0.00 0.00 0.00 15.25 0.00 0.00 0.00
September, 2003 31.31 0.00 0.00 0.00 14.11 0.00 0.00 0.00
October, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average
Life (years)* to Call 3.53 3.30 3.22 3.08 2.54 2.34 2.27 2.16
Weighted Average
Life (years)* to 3.77 3.54 3.45 3.32 2.75 2.56 2.50 2.40
Maturity
<CAPTION>
Class C Notes
Payment Date Prepayment Speed (CPR)
- -----------------------------------------------------------------------------
0% 5% 7% 10%
<S> <C> <C> <C> <C>
Closing Date 100.00% 100.00% 100.00% 100.00%
August, 99 100.00 100.00 100.00 100.00
September, 99 100.00 100.00 100.00 100.00
October, 99 100.00 100.00 100.00 100.00
November, 99 100.00 100.00 100.00 100.00
December, 99 100.00 100.00 100.00 100.00
January, 2000 100.00 100.00 100.00 100.00
February, 2000 100.00 100.00 100.00 100.00
March, 2000 100.00 100.00 100.00 100.00
April, 2000 100.00 100.00 100.00 100.00
May, 2000 100.00 100.00 100.00 97.74
June, 2000 100.00 98.59 96.69 93.82
July, 2000 99.96 94.96 92.96 89.96
August, 2000 96.56 91.34 89.26 86.14
September, 2000 93.29 87.87 85.71 82.50
October, 2000 90.09 84.49 82.27 78.97
November, 2000 86.80 81.06 78.79 75.42
December, 2000 83.60 77.74 75.44 72.01
January, 2001 80.54 74.58 72.23 68.77
February, 2001 77.53 71.49 69.12 65.62
March, 2001 74.68 68.56 66.17 62.65
April, 2001 71.74 65.58 63.18 59.66
May, 2001 68.92 62.73 60.33 56.81
June, 2001 66.15 59.95 57.56 54.05
July, 2001 63.23 57.07 54.69 51.22
August, 2001 60.51 54.37 52.02 48.58
September, 2001 57.93 51.84 49.50 46.11
October, 2001 55.40 49.36 47.06 43.71
November, 2001 53.00 47.02 44.74 41.45
December, 2001 50.67 44.76 42.52 39.28
January, 2002 47.88 42.11 39.93 36.79
February, 2002 45.13 39.53 37.41 34.37
March, 2002 42.88 37.39 35.33 32.37
April, 2002 40.66 35.31 33.30 30.43
May, 2002 38.38 33.19 31.25 28.48
June, 2002 36.30 31.26 29.38 26.70
July, 2002 34.32 29.43 27.61 25.02
August, 2002 32.33 27.60 25.85 23.36
September, 2002 30.53 25.95 24.26 21.87
October, 2002 28.73 24.32 22.69 20.40
November, 2002 26.82 22.60 21.05 18.87
December, 2002 25.15 21.11 19.63 17.55
January, 2003 23.74 19.84 18.42 16.42
February, 2003 22.43 18.66 17.29 15.37
March, 2003 21.09 17.47 16.16 14.33
April, 2003 19.77 16.31 15.06 0.00
May, 2003 18.65 15.32 14.12 0.00
June, 2003 17.58 14.38 0.00 0.00
July, 2003 16.50 0.00 0.00 0.00
August, 2003 15.25 0.00 0.00 0.00
September, 2003 14.11 0.00 0.00 0.00
October, 2003 0.00 0.00 0.00 0.00
Weighted Average
Life (years)* to Call 2.54 2.34 2.27 2.16
Weighted Average
Life (years)* to 2.75 2.56 2.50 2.40
Maturity
</TABLE>
* The weighted average life of a Class of Notes is determined by (a)
multiplying the amount of cash distributions in reduction of the
Outstanding Principal Amount of the respective Notes by the number of years
from the Closing Date to such Payment Date, (b) adding the results, and (c)
dividing the sum by the respective Initial Outstanding Principal Amount.
This table has been prepared based on the "Modeling Assumptions" preceding this
table (including the assumptions regarding the characteristics and performance
of the Leases which differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
63
<PAGE>
PERCENTAGE OF INITIAL AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OUTSTANDING AT
STATED PREPAYMENT SPEEDS
Class D Notes
Payment Date Prepayment Speed (CPR)
- --------------------------------------------------------------------------
0% 5% 7% 10%
Closing Date 100.00% 100.00% 100.00% 100.00%
August, 1999 100.00 100.00 100.00 100.00
September, 1999 100.00 100.00 100.00 100.00
October, 1999 100.00 100.00 100.00 100.00
November, 1999 100.00 100.00 100.00 100.00
December, 1999 100.00 100.00 100.00 100.00
January, 2000 100.00 100.00 100.00 100.00
February, 2000 100.00 100.00 100.00 100.00
March, 2000 100.00 100.00 100.00 100.00
April, 2000 100.00 100.00 100.00 100.00
May, 2000 100.00 100.00 100.00 97.74
June, 2000 100.00 98.59 96.69 93.82
July, 2000 99.96 94.96 92.96 89.96
August, 2000 96.56 91.34 89.26 86.14
September, 2000 93.29 87.87 85.71 82.50
October, 2000 90.09 84.49 82.27 78.97
November, 2000 86.80 81.06 78.79 75.42
December, 2000 83.60 77.74 75.44 72.01
January, 2001 80.54 74.58 72.23 68.77
February, 2001 77.53 71.49 69.12 65.62
March, 2001 74.68 68.56 66.17 62.65
April, 2001 71.74 65.58 63.18 59.66
May, 2001 68.92 62.73 60.33 56.81
June, 2001 66.15 59.95 57.56 54.05
July, 2001 63.23 57.07 54.69 51.22
August, 2001 60.51 54.37 52.02 48.58
September, 2001 57.93 51.84 49.50 46.11
October, 2001 55.40 49.36 47.06 43.71
November, 2001 53.00 47.02 44.74 41.45
December, 2001 50.67 44.76 42.52 39.28
January, 2002 47.88 42.11 39.93 36.79
February, 2002 45.13 39.53 37.41 34.37
March, 2002 42.88 37.39 35.33 32.37
April, 2002 40.66 35.31 33.30 30.43
May, 2002 38.38 33.19 31.25 28.48
June, 2002 36.30 31.26 29.38 26.70
July, 2002 34.32 29.43 27.61 25.02
August, 2002 32.33 27.60 25.85 23.36
September, 2002 30.53 25.95 24.26 21.87
October, 2002 28.73 24.32 22.69 20.40
November, 2002 26.82 22.60 21.05 18.87
December, 2002 25.15 21.11 19.63 17.55
January, 2003 23.74 19.84 18.42 16.42
February, 2003 22.43 18.66 17.29 15.37
March, 2003 21.09 17.47 16.16 14.33
April, 2003 19.77 16.31 15.06 0.00
May, 2003 18.65 15.32 14.12 0.00
June, 2003 17.58 14.38 0.00 0.00
July, 2003 16.50 0.00 0.00 0.00
August, 2003 15.25 0.00 0.00 0.00
September, 2003 14.11 0.00 0.00 0.00
October, 2003 0.00 0.00 0.00 0.00
Weighted Average
Life (years)* to Call 2.54 2.34 2.27 2.16
Weighted Average
Life (years)* to 2.75 2.56 2.50 2.40
Maturity
* The weighted average life of a Class of Notes is determined by (a)
multiplying the amount of cash distributions in reduction of the
Outstanding Principal Amount of the respective Notes by the number of years
from the Closing Date to such Payment Date, (b) adding the results, and (c)
dividing the sum by the respective Initial Outstanding Principal Amount.
This table has been prepared based on the "Modeling Assumptions" preceding this
table (including the assumptions regarding the characteristics and performance
of the Leases which differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
64
<PAGE>
LEASE CASH FLOW
<TABLE>
<CAPTION>
Collection Period Scheduled Cash Flow Collection Period Scheduled Cash Flow
<S> <C> <C> <C>
July, 1999 5,138,321.09 January, 2003 1,824,675.96
August, 1999 5,010,975.27 February, 2003 1,848,749.46
September, 1999 5,022,620.51 March, 2003 1,804,101.51
October , 1999 5,156,746.81 April, 2003 1,551,010.11
November, 1999 4,976,701.51 May, 2003 1,486,552.32
December, 1999 4,969,211.51 June, 2003 1,486,553.66
January, 2000 5,133,635.79 July, 2003 1,688,292.59
February, 2000 5,084,810.96 August, 2003 1,532,823.89
March, 2000 6,152,930.76 September, 2003 1,328,333.07
April, 2000 5,080,856.54 October , 2003 1,275,779.86
May, 2000 5,027,193.16 November, 2003 922,912.59
June, 2000 5,011,181.05 December, 2003 872,526.79
July, 2000 5,011,736.67 January, 2004 849,139.79
August, 2000 4,822,396.37 February, 2004 803,663.79
September, 2000 4,709,691.84 March, 2004 800,422.79
October , 2000 4,794,218.50 April, 2004 747,605.65
November, 2000 4,656,259.05 May, 2004 783,240.78
December, 2000 4,465,775.63 June, 2004 699,691.89
January, 2001 4,372,948.20 July, 2004 1,404,761.67
February, 2001 4,162,899.92 August, 2004 647,390.66
March, 2001 4,239,322.45 September, 2004 647,390.66
April, 2001 4,071,038.72 October , 2004 939,355.66
May, 2001 3,989,648.41 November, 2004 752,635.66
June, 2001 4,149,199.28 December, 2004 579,350.66
July, 2001 3,889,728.22 January, 2005 579,350.66
August, 2001 3,681,550.08 February, 2005 516,394.06
September, 2001 3,603,649.12 March, 2005 499,359.06
October , 2001 3,423,620.45 April, 2005 474,724.06
November, 2001 3,321,742.77 May, 2005 505,309.06
December, 2001 3,876,859.90 June, 2005 409,534.06
January, 2002 3,804,185.98 July, 2005 339,558.06
February, 2002 3,157,038.62 August, 2005 314,893.06
March, 2002 3,097,213.09 September, 2005 301,510.50
April, 2002 3,159,485.66 October , 2005 165,961.86
May, 2002 2,890,260.13 November, 2005 143,397.95
June, 2002 2,755,450.21 December, 2005 126,072.50
July, 2002 2,753,438.27 January, 2006 126,072.50
August, 2002 2,494,567.57 February, 2006 101,996.27
September, 2002 2,490,297.54 March, 2006 101,996.27
October , 2002 2,610,094.74 April, 2006 98,534.27
November, 2002 2,290,394.47 May, 2006 54,098.27
December, 2002 1,950,627.27
</TABLE>
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The Leases will not have the characteristics assumed above, and there can
be no assurance that (i) the Leases will prepay at any of the rates shown in the
tables or at any other particular rate or will prepay proportionately or (ii)
the weighted average lives of the Notes will be as calculated above. Because the
rate of distributions of principal of the Notes will be a result of the actual
amortization (including prepayments) of the Leases, which will include Leases
that have remaining terms to stated maturity shorter or longer than those
assumed, the weighted average lives of the Notes will differ from those set
forth above, even if all of the Leases prepay at the indicated constant
prepayment rates.
The effective yield to Noteholders will depend upon, among other things,
the price at which such Notes are purchased, and the amount of and rate at which
principal, including both scheduled and Lease Payments thereof, is paid to the
Noteholders. See "Risk Factors -- Maturity and Prepayment Considerations."
LEGAL ASPECTS OF THE LEASES
General
The Leases that are to be included in the Pool of Assets will be "chattel
paper" as defined in the Uniform Commercial Code. Pursuant to the UCC, a
purchaser of chattel paper must take the same action as a secured party in a
transaction creating a security interest in chattel paper in order to protect or
perfect its interest in chattel paper. The Transferor, the Servicer and/or the
Seller will cause the filing of appropriate UCC-1 financing statements covering
the Leases to be made with the appropriate governmental authorities. Under the
Servicing Agreement, the Servicer will be obligated from time to time to take
such actions as are necessary to protect, perfect and preserve the Issuer's or
the Trustee's interests in the Leases and their proceeds, as the case may be.
The Equipment
The Seller will convey the Seller's interest in the related Equipment to
the Transferor. UCC financing statements will not be filed to perfect any
security interest in the Equipment. Moreover, in the event of the repossession
and resale of Equipment, it may be subject to a superior lien. In such case, the
senior lienholder may 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 of the Servicer.
In the event of a default by a Lessee, the Servicer on behalf of the
Trustee may take action to enforce such Defaulted Lease by repossession and
resale or re-lease of the Equipment. Under the UCC in most states, a creditor
can, without prior notice to the debtor, repossess assets securing a defaulted
contract by the Lessee's voluntary surrender of such assets or by "self-help"
repossession that does not involve a breach of the peace and by judicial
process.
In the event of a default by the Lessee, some jurisdictions require that
the Lessee be notified of the default and be given a time period within which it
may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
The UCC and other state laws place restrictions on repossession sales,
including requirements that the secured party provide the Lessee with reasonable
notice of the date, time and place of any public sale and/or the date after
which any private sale of the collateral may be held and that any such sale be
conducted in a commercially reasonable manner. The Servicing Agreement may
require the Servicer to sell promptly any repossessed item of Equipment,
reacquire such Equipment from the Issuer, re-lease such Equipment for the
benefit of the Noteholders.
Under most state laws, a Lessee has the right to redeem collateral for its
obligations prior to actual sale by paying to the secured party the unpaid
balance of the obligation plus reasonable expenses for repossession, holding and
preparing the collateral for disposition and arranging for its sale, plus, to
the extent provided for in the written agreement of the parties, reasonable
attorneys' fees.
In addition, because the market value of the equipment of the type financed
pursuant to the Leases generally declines with age and because of obsolescence,
the net disposition proceeds of Equipment at any time
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during the term of the Lease may be less than the outstanding balance on the
Lease which it secures. Because of this, and because other creditors may have
rights in the related Equipment superior to those of the Issuer, the Servicer
may not be able to recover the entire amount due on a Defaulted Lease in the
event that the Servicer elects to repossess and sell such Equipment at any time.
Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a Lessee for any deficiency on repossession
and resale of the asset securing the unpaid balance of such Lessee's contract.
However, some states impose prohibitions or limitations on deficiency judgments.
In most jurisdictions, the courts, in interpreting the UCC, would impose upon a
creditor an obligation to repossess the equipment in a commercially reasonable
manner and to "mitigate damages" in the event of a Lessee's failure to cure a
default. The creditor would be required to exercise reasonable judgment and
follow acceptable commercial practice in seizing and disposing of the equipment
and to offset the net proceeds of such disposition against its claim. In
addition, a Lessee may successfully invoke an election of remedies defense to a
deficiency claim in the event that the Servicer's repossession and sale of the
Equipment is found to be a retention discharging the Lessee from all further
obligations under UCC Section 9-505(2). If a deficiency judgment were granted,
the judgment would be a personal judgment against the Lessee for the shortfall,
but a defaulting Lessee may not have sufficient assets to satisfy such
judgments. Therefore, it may not be useful to seek a deficiency judgment or, if
one is obtained, it may be settled at a significant discount or uncollectible.
Certain statutory provisions, including federal and state bankruptcy and
insolvency laws, may also limit the ability of the Servicer to repossess and
resell collateral or obtain a deficiency judgment. In the event of the
bankruptcy or reorganization of a Lessee, various provisions of the Bankruptcy
Code of 1978 (the "Bankruptcy Code") and related laws may interfere with or
eliminate the ability of the Servicer or the Trustee to enforce its rights under
the Lease Receivables. If bankruptcy proceedings were instituted in respect of a
Lessee, the Trustee could be prevented from continuing to collect payments due
from or on behalf of such Lessee or exercising any remedies assigned to the
Trustee without the approval of the bankruptcy court, and the bankruptcy court
could permit the Lessee to use or dispose of the Equipment and provide the
Trustee with a lien on substitute collateral, so long as such substitute
collateral constituted "adequate protection" as defined under the Bankruptcy
Code.
In addition, certain of the Lessees may be governmental entities. Payment
by governmental authorities of amounts due under such Leases may be contingent
upon legislative approval. Further, the assignment of such payment obligations
may be void or voidable if not done in compliance with applicable government
rules and regulations. Accordingly, payment delays and collection difficulties
may limit collections with respect to certain governmental Leases.
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 the collateral to less than the amount due on the related Lease.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of all of the material anticipated federal
income tax consequences to investors of the purchase, ownership and disposition
of the Notes offered hereby. The discussion is based upon laws, regulations,
rulings and decisions now in effect, all of which are subject to change. The
discussion below does not purport to deal with all federal tax consequences
applicable to all categories of investors, some of which may be subject to
special rules. Investors are urged to consult their own tax advisors in
determining the particular federal, state and local consequences to them of the
purchase, ownership and disposition of the Notes.
The following discussion addresses lease-backed notes such as the Notes
that are intended to be treated for federal income tax purposes as indebtedness
secured by the underlying Lease Receivables.
Tax Characterization of the Issuer
Tax counsel is of the opinion that the Issuer will not be treated as an
association (or a publicly traded partnership) taxable as a corporation for
federal income tax purposes.
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Tax Characterization of the Notes
In the opinion of Tax Counsel, although no transaction closely comparable
to that contemplated herein has been the subject of any treasury regulation,
revenue ruling or judicial decision, based on the application of existing law to
the facts as set forth in the applicable agreements, the Offered Notes will be
treated as indebtedness for federal income tax purposes. If characterized as
indebtedness, interest on the Notes will be taxable as ordinary income for
federal income tax purposes when received by Noteholders using the cash method
of accounting and when accrued by Noteholders using the accrual method of
accounting. Noteholders using the accrual method of accounting may be required
to report income for tax purposes in advance of receiving a corresponding cash
distribution with which to pay the related tax. Interest received on the Notes
also may constitute "investment income" for purposes of limitations in the Code
concerning the deductibility of investment interest expense.
Although it is the opinion of Tax Counsel that the Offered Notes are
properly characterized as indebtedness for federal income tax purposes, no
assurance can be given that this debt characterization of the Offered Notes will
prevail. If any class of Notes were treated as an ownership interest in the
Leases, all income on the Leases would be income to the holders of such class of
Notes, and related fees and expenses would generally be deductible (subject to
the limitations on the deductibility of miscellaneous itemized deductions by
individuals) and the market discount and premium provisions of the Code might
apply to a purchase of the Notes.
If, alternatively, any class of Notes were treated as an equity interest in
the Issuer, the Issuer might be classified as a partnership or as an association
taxable as a corporation or a publicly traded partnership taxable as a
corporation. If such class of Notes were treated as interests in a partnership,
each item of income, gain, loss, deduction and credit generated through the
ownership of the Equipment and the Lease Receivables by the partnership would be
passed through to Noteholders of such class, as partners in a partnership
according to their respective interests therein. The timing, amount and
character of the income or expenses reportable by the Noteholders as partners in
a partnership could differ from the income or expenses reportable by the
Noteholders as holders of debt. If the Noteholders were treated as partners, a
cash basis Noteholder might be required to report income when it accrues to the
partnership rather than when it is received by the Noteholder. Moreover, if
Notes were treated as interests in a partnership, an individual Noteholder's
share of expenses of the partnership (e.g., Servicing Fees) would be
miscellaneous itemized deductions that in the aggregate are allowed only to the
extent they exceed two percent of the individual Noteholder's adjusted gross
income, meaning that the individual Noteholder might be taxed on a greater
amount of income than the stated interest on his or her Notes. Finally, if a
Note were treated as a partnership interest, any taxable income allocated to a
Holder that is a pension, profit sharing or employee benefit plan or other
tax-exempt, could constitute "unrelated business taxable income."
If the Notes were treated as interests in an association taxable as a
corporation or a publicly traded partnership taxable as a corporation, the
resulting entity would be subject to federal income tax at corporate tax rates
on its taxable income generated by ownership of the Lease Receivables. Moreover,
distributions by the entity on the Notes probably would not be deductible in
computing the entity's taxable income and all or part of any distributions to
Noteholders would probably be treated as dividends. The imposition of an
entity-level tax could result in a reduced amount of cash available for
distributions to Noteholders.
Since the Issuer will treat the Notes as indebtedness for federal income
tax purposes, the Trustee (and Participants and Indirect Participants) will not
attempt to satisfy the tax reporting requirements that would apply under these
alternative characterizations of the Notes. Further, if the IRS were to contend
successfully that the Notes are interests in a publicly traded partnership
taxable as a corporation, additional tax consequences would apply to foreign
Noteholders. Investors are urged to consult their own tax advisors with regard
to the potential application of those provisions.
Discount and Premium
A Note purchased for an amount other than its outstanding principal amount
will be subject to the rules governing original issue discount, market discount
or premium. In very general terms, (i) original issue discount is treated as a
form of interest and must be included in a beneficial owner's income as it
accrues (regardless of the beneficial owner's regular method of accounting)
using a constant yield method; (ii) market discount is treated as ordinary
income and must be included in a beneficial owner's income as principal payments
are made on the Note
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(or upon a sale of a Note); and (iii) if a beneficial owner so elects, premium
may be amortized over the life of the Note and offset against inclusions of
interest income. These tax consequences are discussed in greater detail below.
Original Issue Discount. In general, a Note will be considered to be issued
with original issue discount equal to the excess, if any, of its "stated
redemption price at maturity" over its "issue price." The issue price of a Note
is the initial offering price to the public (excluding bond houses and brokers)
at which a substantial number of the Notes were sold. The issue price also
includes any accrued interest attributable to the period between the beginning
of the first Remittance Period and the closing date relating to such series of
Notes (the "Closing Date"). The stated redemption price at maturity of a Note
that has a notional principal amount or receives principal only or that is or
may provide for accruals of interest is equal to the sum of all distributions to
be made under such Note. The stated redemption price at maturity of any other
Note is its stated principal amount, plus an amount equal to the excess (if any)
of the interest payable on the first Payment Date over the interest that accrues
for the period from the Closing Date to the first Payment Date. The Trustee will
supply, at the time and in the manner required by the IRS, to beneficial owners,
brokers and middlemen information with respect to the original issue discount
accruing on the Notes.
Notwithstanding the general definition, original issue discount will be
treated as zero if such discount is less than 0.25% of the stated redemption
price at maturity of the Note multiplied by its weighted average life. The
weighted average life of a Note is apparently computed for this purpose as the
sum, for all distributions included in the stated redemption price at maturity,
of the amounts determined by multiplying (i) the number of complete years
(rounding down for partial years) from the Closing Date until the date on which
each such distribution is expected to be made under the assumption that the
Lease Receivables prepay at the rate specified under the heading "Prepayment and
Yield Considerations" (the "Prepayment Assumption") by (ii) a fraction, the
numerator of which is the amount of such distribution and the denominator of
which is the Note's stated redemption price at maturity. Even if original issue
discount is treated as zero under this rule, the actual amount of original issue
discount must be allocated to the principal distributions on the Note and, when
each such distribution is received, gain equal to the discount allocated to such
distribution will be recognized.
The adjusted issue price of a Note at any time will equal the issue price
of the Note, increased by the aggregate amount of previously accrued original
issue discount with respect to that Note, and reduced by the amount of any
distributions made on that Note as of that time of amounts included in the
stated redemption price at maturity. The original issue discount accruing during
any accrual period will then be allocated ratably to each day during the period
to determine the daily portion of original issue discount.
A subsequent purchaser of a Note that purchases such Note at a cost less
than its remaining stated redemption price at maturity also will be required to
include in gross income for each day on which it holds such Note, the daily
portion of original issue discount with respect to such Note (but reduced, if
the cost of such Note to such purchaser exceeds its adjusted issue price, by an
amount equal to the product of (i) such daily portion and (ii) a constant
fraction, the numerator of which is such excess and the denominator of which is
the sum of the daily portions of original issue discount on such Note for all
days on or after the day of purchase).
Market Discount. A beneficial owner that purchases a Note at a market
discount, that is, at a purchase price less than the remaining stated redemption
price at maturity of such Note (or, in the case of a Note with original issue
discount, its adjusted issue price), will be required to allocate each principal
distribution first to accrued market discount on the Note, and recognize
ordinary income to the extent such distribution does not exceed the aggregate
amount of accrued market discount on such Note not previously included in
income. With respect to Notes that have unaccrued original issue discount, such
market discount must be included in income in addition to any original issue
discount. A beneficial owner that incurs or continues indebtedness to acquire a
Note at a market discount may also be required to defer the deduction of all or
a portion of the interest on such indebtedness until the corresponding amount of
market discount is included in income. In general terms, market discount on a
Note may be treated as accruing either (i) under a constant yield method or (ii)
in proportion to remaining accruals of original issue discount, if any, or if
none, in proportion to remaining distributions of interest on the Note, in any
case taking into account the Prepayment Assumption. The Trustee will make
available, as required by the IRS, to beneficial owners of Notes information
necessary to compute the accrual of market discount.
Notwithstanding the above rules, market discount on a Note will be
considered to be zero if such discount is less than 0.25% of the remaining
stated redemption price at maturity of such Note multiplied by its
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weighted average remaining life. Weighted average remaining life presumably
would be calculated in a manner similar to weighted average life, taking into
account payments (including prepayments) prior to the date of acquisition of the
Note by the subsequent purchaser. If market discount on a Note is treated as
zero under this rule, the actual amount of market discount must be allocated to
the remaining principal distributions on the Note and, when each such
distribution is received, gain equal to the discount allocated to such
distribution will be recognized.
Premium. A purchaser of a Note that purchases such Note at a cost greater
than its remaining stated redemption price at maturity will be considered to
have purchased such Note (a "Premium Note") at a premium. Such a purchaser need
not include in income any remaining original issue discount and may elect, under
section 171(c)(2) of the Tax Code, to treat such premium as "amortizable bond
premium." If a beneficial owner makes such an election, the amount of any
interest payment that must be included in such beneficial owner's income for
each period ending on a Payment Date will be reduced by the portion of the
premium allocable to such period based on the Premium Note's yield to maturity.
Such premium amortization should be made using constant yield principles. If
such election is made by the beneficial owner, the election will also apply to
all bonds the interest on which is not excludible from gross income ("fully
taxable bonds") held by the beneficial owner at the beginning of the first
taxable year to which the election applies and to all such fully taxable bonds
thereafter acquired by it, and is irrevocable without the consent of the IRS. If
such an election is not made, (i) such a beneficial owner must include the full
amount of each interest payment in income as it accrues, and (ii) the premium
must be allocated to the principal distributions on the Premium Note and when
each such distribution is received, a loss equal to the premium allocated to
such distribution will be recognized. Any tax benefit from the premium not
previously recognized will be taken into account in computing gain or loss upon
the sale or disposition of the Premium Note.
Special Election. For any Note acquired on or after April 4, 1994, a
beneficial owner may elect to include in gross income all "interest" that
accrues on the Note by using a constant yield method. For purposes of the
election, the term "interest" includes stated interest, acquisition discount,
original issue discount, de minimis original issue discount, market discount, de
minimis market discount and unstated interest as adjusted by any amortizable
bond premium or acquisition premium. A beneficial owner should consult its own
tax advisor regarding the time and manner of making and the scope of the
election and the implementation of the constant yield method.
Backup Withholding
Distributions of interest and principal, as well as distributions of
proceeds from the sale of Notes, may be subject to the "backup withholding tax"
under Section 3406 of the Tax Code at a rate of 31% if recipients of such
distributions fail to furnish to the payor certain information, including their
taxpayer identification numbers, or otherwise fail to establish an exemption
from such tax. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against such recipient's federal income
tax. Furthermore, certain penalties may be imposed by the IRS on a recipient of
distributions that is required to supply information but that does not do so in
the proper manner.
The Internal Revenue Service has issued some of the regulations (the
"Withholding Regulations"), which change some of the rules relating to some of
the presumptions currently available relating to information reporting and
backup withholding. The Withholding Regulations would provide alternative
methods of satisfying the beneficial ownership certification requirement. The
Withholding Regulations are effective January 1, 2001, although valid
withholding certificates that are held on December 31, 2000 remain valid until
the earlier of December 31, 2001 or the due date of expiration of the
certificate under the rules as currently in effect.
Foreign Investors
The Notes. Distributions made on a Note to, or on behalf of, a beneficial
owner that is not a U.S. Person generally will be exempt from U.S. federal
income and withholding taxes. The term "U.S. Person" means a citizen or resident
of the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, an estate that is subject to U.S. federal income tax regardless of the
source of its income, or a trust if a court within the United States can
exercise primary supervision over its administration and at least one United
States person has the authority to control all substantial decisions of the
trust. This exemption is applicable provided (a) the beneficial owner is not
subject to U.S. tax as a result of a connection to the United States other than
ownership of the Note, (b) the beneficial owner signs a statement under
penalties of perjury that certifies that such beneficial owner is not a U.S.
Person, and provides the name and address
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of such beneficial owner, and (c) the last U.S. Person in the chain of payment
to the beneficial owner receives such statement from such beneficial owner or a
financial institution holding on its behalf and does not have actual knowledge
that such statement is false. Beneficial owners should be aware that the IRS
might take the position that this exemption does not apply to a beneficial owner
that is a "controlled foreign corporation" described in Section 881(c)(3)(C) of
the Tax Code.
If income or gain with respect to a Note is effectively connected with a
U.S. trade or business carried on by a Noteholder who or which is not a U.S.
person, the 30 percent withholding tax will not apply but the Noteholder will be
subject to U.S. federal income tax at graduated rates applicable to U.S.
persons.
The Withholding Regulations would require, in the case of Notes held by a
foreign partnership, that (x) the certification described above be provided by
the partners rather than by the foreign partnership and (y) the partnership
provide certain information, including a United States taxpayer identification
number. See "Backup Withholding" above. A look-through rule would apply in the
case of tiered partnerships. Non-U.S. Persons should consult their own tax
advisors regarding the application to them of the Withholding Regulations.
STATE AND LOCAL TAX CONSIDERATIONS
Potential Noteholders should consider the state and local income tax
consequences of the purchase, ownership and disposition of the Notes. State and
local income tax laws may differ substantially from the corresponding federal
law, and this discussion does not purport to describe any aspect of the income
tax laws of any state or locality. Therefore, potential Noteholders should
consult their own tax advisors with respect to the various state and local tax
consequences of an investment in the Notes.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Tax Code prohibit a pension,
profit sharing, or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Tax Code with respect to the
plan. ERISA also imposes certain duties on persons who are fiduciaries of plans
subject to ERISA and prohibits certain transactions between a plan and parties
in interest with respect to such plans. Under ERISA, any person who exercises
any authority or control respecting the management or disposition of the assets
of a plan is considered to be a fiduciary of such plan (subject to certain
exceptions not here relevant). A violation of these "prohibited transaction"
rules may generate excise tax and other liabilities under ERISA and the Tax Code
for such persons.
In addition to the matters described below, purchasers of Notes that are
insurance companies should consult with their counsel with respect to the United
States Supreme Court case interpreting the fiduciary responsibility rules of
ERISA, John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank,
114 S. Ct. 517 (1993). In John Hancock, the Supreme Court ruled that assets held
in an insurance company's general account may be deemed to be "plan assets" for
ERISA purposes under certain circumstances. Prospective purchasers should
determine whether the decision affects their ability to make purchases of the
Notes.
Certain transactions involving the Issuer might be deemed to constitute
prohibited transactions under ERISA and the Tax Code if assets of the Issuer
were deemed to be "plan assets" of an employee benefit plan subject to ERISA or
the Tax Code, or an individual retirement account (an "IRA"), or any entity
whose underlying assets are deemed to be assets of an employee benefit plan or
an IRA by reason of such employee benefit plan's or such IRA's investment in
such entity (each a "Benefit Plan"). Under a regulation issued by the United
States Department of Labor (the "Plan Assets Regulation"), the assets of the
Issuer would be treated as plan assets of a Benefit Plan for the purposes of
ERISA and the Tax Code only if the Benefit Plan acquires an "equity interest" in
the Issuer and none of the exceptions contained in the Plan Assets Regulation is
applicable. An equity interest is defined under the Plan Assets Regulation as an
interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. The Offered
Notes should be treated as indebtedness without substantial equity features for
purposes of the Plan Assets Regulation. This determination is based in part upon
the traditional debt features of the Offered Notes, including the reasonable
expectation of purchasers of Offered Notes that the Offered Notes will be repaid
when due, as well as the absence of conversion
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rights, warrants and other typical equity features. The debt treatment of the
Offered Notes for ERISA purposes could change if the Issuer incurred losses.
However, even if the Offered Notes are treated as indebtedness for ERISA
purposes, the acquisition or holding of Offered Notes by or on behalf of a
Benefit Plan could be considered to give rise to a prohibited transaction if the
Issuer or any of its affiliates is or becomes, a party in interest or
disqualified person with respect to such Benefit Plan. In such case, certain
exemptions from the prohibited transaction rules could be applicable depending
on the type and circumstances of the plan fiduciary making the decision to
acquire a Note. Included among these exemptions are: Prohibited Transaction
Class Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 91-38, regarding investments by bank collective
investment funds; PTCE 95-60, regarding investments by insurance company general
accounts; PTCE 96-23, regarding transactions by in-house asset managers; and
PTCE 84-14, regarding transactions by "qualified professional assets managers."
Each investor using the assets of a Benefit Plan which acquires the Offered
Notes, or to whom the Offered Notes are transferred, will be deemed to have
represented that the acquisition and continued holding of the Offered Notes will
be covered by a Department of Labor class exemption.
Employee plans that are government plans (as defined in Section 3(32) of
ERISA) and certain church plans (as defined in Section 3(53) of ERISA, are not
subject to ERISA; however, such plans may be subject to comparable state law
restrictions.
Any Benefit Plan fiduciary considering the purchase of a Note should
consult with its counsel with respect to the potential applicability of ERISA
and the Code to such investment. Moreover, each Benefit Plan fiduciary should
determine whether, under the general fiduciary standards of investment prudence
and diversification, an investment in the Offered Notes is appropriate for the
Benefit Plan, taking into account the overall investment policy of the Benefit
Plan and the composition of the Benefit Plan's investment portfolio.
USE OF PROCEEDS
The proceeds from the sale of the Notes will be applied by the Issuer to
the acquisition of the related Lease Receivables from the Transferor and by the
Transferor to the acquisition of the related Lease Receivables from the Seller.
RATINGS
It is a condition to the issuance of the Offered Notes that the Class A-1
Notes be rated "A-1+" by S&P and "D-1+" by DCR, the Class A-2 Notes be rated
"AAA" by S&P and "AAA" by DCR, the Class A-3 Notes be rated "AAA" by S&P and
"AAA" by DCR, the Class A-4 Notes be rated "AAA" by S&P and "AAA" by DCR, the
Class B Notes be rated "A" by S&P and "A" by DCR, the Class C Notes be rated
"BBB" by S&P and "BBB" by DCR, and the Class D Notes be rated "BB" by S&P and
"BB" by DCR. The ratings are not a recommendation to purchase, hold or sell the
Notes, inasmuch as such ratings do not comment as to market price or suitability
for a particular investor. Each rating may be subject to revision or withdrawal
at any time by the assigning Rating Agency. There is not assurance that any such
rating will continue for any period of time or that it will not be lowered or
withdrawn entirely by the Rating Agency if, in its judgment, circumstances so
warrant. A revision or withdrawal of such rating may have an adverse effect on
the market price of the Notes. The rating of the Notes addresses the likelihood
of the timely payment of interest and the ultimate payment of principal on the
Notes pursuant to their terms. The rating does not address the rate of
Prepayments that may be experienced on the Leases and, therefore, does not
address the effect of the rate of Prepayments on the return of principal to the
Noteholders. Such ratings do not constitute a recommendation to buy, sell or
hold any Notes.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") for the sale of the Offered Notes dated August
__, 1999 the Issuer has agreed to sell and First Union Capital Markets Corp.
(the "Underwriter") has agreed to purchase, the Offered Notes. Purchasers of
Offered Notes,
72
<PAGE>
including dealers, may, depending on the facts and circumstances of such
purchases, be deemed to be "underwriters" within the meaning of the Securities
Act in connection with reoffers and sales by them of Notes. Holders of Offered
Notes should consult with their legal advisors in this regard prior to any such
reoffer or sale. The Issuer is affiliated with Charter.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions therein, to purchase all the Offered Notes offered hereby
if any of such Offered Notes are purchased. The Underwriting Agreement
pertaining to the sale of the Offered Notes will provide that the obligations of
the Underwriter will be subject to certain conditions precedent.
The Underwriter has advised the Issuer that it proposes to offer the
Offered Notes purchased by the Underwriter for sale from time to time in one or
more negotiated transactions or otherwise, at market prices prevailing at the
time of sale, at prices related to such market prices or at negotiated prices.
In connection with the sale of the Offered Notes, the Underwriter may receive
compensation from the Issuer or from purchasers of the Notes in the form of
discounts, concessions or commissions. The Underwriter may effect such
transactions by selling such Notes to or through a dealer, and such dealer may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriters or purchasers of the Offered Notes for whom
they may act as agent. Any dealers that participate with the Underwriter in the
distribution of the Notes purchased by the Underwriter may be deemed to be
underwriters, and any discounts or commissions received by them or the
Underwriter, and any profit on the resale of Notes by them or the Underwriter
may be deemed to be underwriting discounts or commissions under the Securities
Act of 1933, as amended (the "Securities Act").
The Transaction Documents and the Underwriting Agreement provide that
Charter and the Issuer under certain circumstances will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the Underwriter may be required to
make in respect thereof.
Purchasers of Notes, including dealers, may, depending on the facts and
circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
Notes. Holders of Notes should consult with their legal advisors in this regard
prior to any such reoffer or sale.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the
Issuer by Dewey Ballantine LLP, New York, New York and for the Underwriter by
Cadwalader, Wickersham & Taft, New York, New York. Certain Federal income tax
matters will be passed upon for the Issuer by Dewey Ballantine LLP, New York,
New York.
73
<PAGE>
Index To Financial Statements
Page
----
Report of Independent Auditors 75
Balance Sheet of the Issuer as of July 15, 1999 76
Notes to Balance Sheet 77
74
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Charter Equipment Lease 1999-1 LLC:
We have audited the accompanying balance sheet of Charter Equipment Lease 1999-1
LLC ("the Company") as of July 15, 1999. This balance statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in that balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Company at July 15, 1999, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
July 15, 1999
75
<PAGE>
CHARTER EQUIPMENT LEASE 1999-1 LLC
Balance Sheet
July 15, 1999
Assets
Cash $100
Total assets $100
Members' Equity
Members' equity $100
Total members' equity $100
See accompanying notes to balance sheet.
76
<PAGE>
CHARTER EQUIPMENT LEASE 1999-1 LLC
Notes to Balance Sheet
July 15, 1999
(1) Organization
Charter Equipment Lease 1999-1 LLC (the "Company") is a limited purpose
limited liability company organized under the laws of the State of Delaware
and was formed on September 21, 1998 by Charter Funding Corporation V
pursuant to a Certificate of Formation dated as of September 21, 1998, as
amended as of May 17, 1999 and is governed by the Limited Liability
Company Operating Agreement (the "Agreement") dated as of September 21,
1998, as amended as of May 17, 1999, and as of August 8, 1999. Charter
Funding Corporation V is a wholly-owned subsidiary of Charter Financial,
Inc. ("Charter"). The activities of the Company are limited by the terms of
the Agreement to acquiring, owning, and managing lease receivables and
related assets, issuing and making payments on notes and subordinate
securities and other activities related thereto. Prior to July 1, 1999 the
Company did not conduct any activities.
Charter will pay all fees and expenses related to the organization and
operations of the Company (including any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes)
imposed by the United States or any other domestic taxing authority upon
the Company). Charter has also agreed to indemnify the Company and certain
other persons for certain expenses.
The Company intends to issue notes subsequent to July 15, 1999. The
proceeds will be used to acquire lease contracts and related interests from
Charter Funding Corporation V.
77
<PAGE>
INDEX OF PRINCIPAL DEFINED TERMS
Page
----
Aggregate Discounted Lease Balance.............................................8
Article 2A....................................................................24
Available Funds...............................................................45
Available Reserve Amount......................................................16
Bankruptcy Code...............................................................67
Benefit Plan..................................................................71
Calculation Date...............................................................5
Casualty Loss.................................................................44
Casualty Payment..............................................................44
Cede...........................................................................3
CFC............................................................................2
Charter.....................................................................2, 4
Class..........................................................................1
Class A Notes..................................................................5
Class A Percentage........................................................13, 49
Class A Principal Payment.................................................12, 48
Class A Target Investor Principal Amount..................................13, 48
Class B Floor.............................................................13, 49
Class B Notes..................................................................5
Class B Percentage........................................................13, 49
Class B Principal Payment.............................................12, 13, 48
Class B Target Investor Principal Amount..................................13, 48
Class C Floor.............................................................14, 49
Class C Notes..................................................................5
Class C Percentage........................................................13, 49
Class C Principal Payment.................................................13, 48
Class C Target Investor Principal Amount..................................13, 48
Class D Floor.............................................................14, 49
Class D Notes..................................................................5
Class D Percentage........................................................13, 49
Class D Target Investor Principal Amount..................................13, 48
Class Target Investor Principal Amount....................................13, 48
Clean-Up Call.................................................................18
Closing Date...............................................................4, 69
Collection Period..............................................................4
Commission.....................................................................3
Conditional Prepayment Rate...................................................61
CPR...........................................................................61
Credit and Collection Policies................................................28
Cumulative Loss Amount....................................................15, 50
Cut-Off Date...................................................................4
Debtors.......................................................................22
Defaulted Leases..............................................................44
Definitive Notes..............................................................51
Delinquency Amounts...........................................................18
Delinquent Lease..............................................................18
Discount Rate..................................................................8
Discounted Lease Balance.......................................................7
Distribution Account......................................................18, 54
DTC........................................................................3, 17
Early Termination Lease.......................................................44
Eligible Account..............................................................54
Eligible Institution..........................................................54
Eligible Investments..........................................................54
Eligible Lease................................................................26
Equipment................................................................2, 5, 6
ERISA.........................................................................20
Event of Default..............................................................16
Event of Servicing Termination................................................57
Event of Termination..........................................................54
Events of Default.............................................................58
Exchange Act...................................................................3
Excluded Amounts..............................................................44
Finance Lease.................................................................28
fully taxable bonds...........................................................70
Indenture...................................................................2, 6
Initial Outstanding Principal Amount...........................................1
Insolvency Laws...............................................................22
Interest Accrual Period...................................................11, 47
Interest Payments.........................................................11, 47
IRA...........................................................................71
Issuer.........................................................................1
Lease Files...................................................................43
Lease Payment.................................................................44
Lease Payments................................................................29
Lease Receivables..............................................................2
Leases.........................................................................2
Legal Aspects of the Leases...................................................21
Lessee.........................................................................7
Lessor.........................................................................7
LLC Agreement...........................................................2, 6, 26
Note Interest Rate.............................................................1
Noteholders....................................................................2
Notes..........................................................................5
Offered Notes..................................................................5
Optional Redemption...........................................................19
Outstanding Principal Amounts.............................................11, 47
Overcollateralization Balance.............................................15, 50
Payment Date................................................................2, 4
Percentage Interests..........................................................60
Permitted Encumbrance.........................................................28
Plan..........................................................................20
Plan Assets Regulation........................................................71
Pool Factor...................................................................53
Pool of Assets..........................................................5, 6, 25
Premium Note..................................................................70
Prepayment....................................................................23
Prepayment Amount.............................................................29
Prepayment Assumption.........................................................69
PTCE..........................................................................72
Rating Agencies...............................................................20
Receivables....................................................................5
Record Date....................................................................5
Reporting Date................................................................18
Repurchase Amount.............................................................30
Required Reserve Amount.......................................................16
Reserve Account...............................................................16
Rules.........................................................................51
Schedule of Leases............................................................29
Securities Act................................................................73
Seller.........................................................................2
Seller Contribution and Sale Agreement.........................................2
78
<PAGE>
Servicer.......................................................................4
Servicer Advance..........................................................18, 55
Servicing Agreement.........................................................3, 6
Servicing Fee.............................................................17, 56
Servicing Fee Rate........................................................17, 56
Servicing Officer.............................................................57
Soft Items....................................................................24
Stated Maturity Date...........................................................2
Statistical Discount Rate.....................................................30
Sub-Servicer...................................................................4
Substitute Lease..............................................................31
Successor Servicer............................................................18
Supplementary Report..........................................................57
Tax Code......................................................................19
Termination Payment...........................................................44
Transfer Date.............................................................26, 43
Transferor.....................................................................4
Transferor Contribution and Sale Agreement..................................2, 6
Trust Accounts................................................................54
Trustee.....................................................................2, 6
Trustee Expenses..............................................................60
Trustee Fee...................................................................60
Trustee Fee Rate...............................................................4
Trustee Priority Expense Amount...............................................11
U.S. Person...................................................................70
Underwriter...................................................................72
Underwriting Agreement........................................................72
Warranty Event.................................................................8
weighted average life.........................................................60
Withholding Regulations.......................................................70
79
<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 Seller or the Issuer 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
Page
----
AVAILABLE INFORMATION ................................................... 3
REPORTS TO NOTEHOLDERS .................................................. 3
ADDITIONAL INFORMATION .................................................. 3
SUMMARY OF TERMS ........................................................ 5
RISK FACTORS ............................................................ 22
THE POOL OF ASSETS ...................................................... 26
THE ISSUER .............................................................. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION ............................................... 27
THE LEASES .............................................................. 27
CHARTER'S LEASING BUSINESS .............................................. 38
TRANSFEROR .............................................................. 44
DESCRIPTION OF THE NOTES ................................................ 44
POOL FACTORS ............................................................ 55
DESCRIPTION OF THE TRANSACTION
DOCUMENTS ............................................................ 55
THE TRUSTEE ............................................................. 61
PREPAYMENT AND YIELD CONSIDERATIONS ..................................... 62
PERCENTAGE OF INITIAL AGGREGATE
OUTSTANDING PRINCIPAL AMOUNT
OUTSTANDING AT STATED PREPAYMENT
SPEEDS ............................................................... 64
LEGAL ASPECTS OF THE LEASES ............................................. 68
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES ......................................................... 69
STATE AND LOCAL TAX CONSIDERATIONS ...................................... 73
ERISA CONSIDERATIONS .................................................... 73
USE OF PROCEEDS ......................................................... 74
RATINGS ................................................................. 74
PLAN OF DISTRIBUTION .................................................... 75
LEGAL MATTERS ........................................................... 75
Until November____, 1999 (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.
================================================================================
================================================================================
$166,169,936
Charter Equipment Lease 1999-1 LLC
$50,642,266 ____% Lease-Backed Notes, Class A-1
$40,355,556 ____% Lease-Backed Notes, Class A-2
$18,990,850 ____% Lease-Backed Notes, Class A-3
$48,708,013 ____% Lease-Backed Notes, Class A-4
$7,473,251 _____% Lease-Backed Notes, Class B
-------------------
P R O S P E C T U S
-------------------
--------------------------------
FIRST UNION CAPITAL MARKETS CORP.
Dated August ___, 1999
================================================================================
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item
No. Name and Caption in Form S-1 Caption in Prospectus
---- ---------------------------- ---------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Forepart of the Registration Statement; Front
Front Cover Page of Prospectus Cover Page of Prospectus; Cross Reference
Sheet
2. Inside Front and Outside Back Cover Pages of the Inside Front Cover and Outside Back Cover
Prospectus Pages of Prospectus; Table of Contents
3. Summary Information; Risk Factors and Ratio of Summary of Terms; Risk Factors; Pool of
Earnings to Fixed Charges Assets; The Leases
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price *
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Summary of Terms; Description of the Notes
10. Interest of Named Experts and Counsel Certain Legal Aspects of the Leases
11. Information with Respect to the Registrant Transferor
12. Disclosure of Commission Position on Included as an Undertaking in Item 17 of Part
Indemnification for Securities Act Liabilities II hereof
</TABLE>
* Not Applicable
II-I
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the amount of fees and expenses (other
than underwriting discounts and commissions) to be incurred in connection with
the issuance and distribution of the Offered Notes.
SEC Filing Fee .................................................... $ 46,789
Trustee's Fees and Expenses ....................................... $ 10,000
Legal Fees and Expenses ........................................... $275,000
Accounting Fees and Expenses ...................................... $ 15,000
Printing and Engraving Expenses ................................... $ 12,000
Blue Sky Qualification and Legal Investment Fees and Expenses ..... $ 4,000
Rating Agency Fees ................................................ $120,000
Miscellaneous ..................................................... $ 10,000
- --------------------------------------------------------------------------------
TOTAL ............................................................. $492,789
Item 14. Indemnification of Directors and Officers.
Indemnification. Under the laws which govern the organization of the
registrant, the registrant has the power and in some instances may be required
to provide an agent, including an officer or director, who was or is a party or
is threatened to be made a party to certain proceedings, with indemnification
against certain expenses, judgments, fines, settlements and other amounts under
certain circumstances.
Section 3 of Article VI of the Amended and Restated LLC Agreement of the
registrant provides that the registrant shall indemnify its members and agents
for all costs, losses, liabilities, and damages paid or accrued by such member
or agent in connection with the business of the registrant.
Section 8.1 of the By-Laws of Charter Funding Corporation V, the initial
member of the registrant, provides that all officers and directors of the
corporation shall be indemnified by the corporation from and against all
expenses, liabilities or other matters arising out of their status as an officer
or director for their acts, omissions or services rendered in such capacities.
Charter Financial, Inc., the ultimate corporate parent of Charter Funding
Corporation V, maintains certain policies of liability insurance coverage for
the officers and directors of Charter Financial, Inc. and certain of its
subsidiaries, including Charter Funding Corporation V.
The form of the Underwriting Agreement, filed as Exhibit 1.1 to this
Registration Statement, provides that Charter Equipment Lease 1999-1 LLC will
indemnify and reimburse the underwriter(s) and each controlling person of the
underwriter(s) with respect to certain expenses and liabilities, including
liabilities under the 1933 Act or other federal or state regulations or under
the common law, which arise out of or are based on certain material
misstatements or omissions in the Registration Statement. In addition, the
Underwriting Agreement provides that the underwriter(s) will similarly indemnify
and reimburse Charter Equipment Lease 1999-1 LLC in with respect to certain
material misstatements or omissions in the Registration Statement which are
based on certain written information furnished by the underwriter(s) for use in
connection with the preparation of the Registration Statement.
Insurance. As permitted under the laws which govern the organization of the
registrant, the registrant's By-laws permit the board of directors to purchase
and maintain insurance on behalf of the registrant's agents, including its
officers and directors, against any liability asserted against them in such
capacity or arising out of such agents' status as such, whether or not such
registrant would have the power to indemnify them against such liability under
applicable law.
Item 15. Recent Sales of Unregistered Securities.
Not applicable
Item 16. Exhibits and Financial Statement Schedules.
II-2
<PAGE>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Formation of Charter Equipment Lease
1999-1 LLC.*
3.2 Second Amended and Restated LLC Agreement of Charter Equipment Lease
1999-1 LLC.
4.1 Form of Indenture.
5.1 Opinion of Dewey Ballantine LLP with respect to legality.
8.1 Opinion of Dewey Ballantine LLP with respect to tax matters.
10.1 Form of Seller Contribution and Sale Agreement.
10.2 Form of Transferor Contribution and Sale Agreement.
10.3 Form of Servicing Agreement.
10.4 Form of Placement Agency Agreement
23.1 Consents of Dewey Ballantine (included in Exhibits 5.1 and 8.1 hereto).
23.2 Consent of Accountant.
24.1 Power of Attorney (originally included on Page II-4 hereto).*
25.1 Form of Statement of Eligibility of Trustee.
- ----------
* Previously filed.
Item 17. Undertakings.
A. Undertaking in respect of indemnification
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described above in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by them is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
B. Undertaking pursuant to Rule 430A.
The Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York on the 11th day of August, 1999.
CHARTER EQUIPMENT LEASE 1999-1 LLC
By: CHARTER FUNDING CORPORATION V
By: /s/ Gary Corr
------------------------------
Name: Gary Corr
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Henry Frommer* Director and Vice Chairman August 11, 1999
- ----------------------
Henry Frommer
/s/ Alan A. Fischer* Director and Principal Executive August 11, 1999
- ---------------------- Officer
Alan A. Fischer
/s/ David Paris* Director August 11, 1999
- ----------------------
David Paris
/s/ Gary Corr Director, President, Chief Financial August 11, 1999
- ---------------------- Officer and Comptroller
Gary Corr
* By: /s/ Gary Corr
--------------------
Gary Corr
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Formation of Charter Equipment Lease
1999-1 LLC.*
3.2 Second Amended and Restated LLC Agreement of Charter Equipment Lease
1999-1 LLC.
4.1 Form of Indenture.
5.1 Opinion of Dewey Ballantine LLP with respect to legality.
8.1 Opinion of Dewey Ballantine LLP with respect to tax matters.
10.1 Form of Seller Contribution and Sale Agreement.
10.2 Form of Transferor Contribution and Sale Agreement.
10.3 Form of Servicing Agreement.
10.4 Form of Placement Agency Agreement
23.1 Consents of Dewey Ballantine (included in Exhibits 5.1 and 8.1 hereto).
23.2 Consent of Accountant.
24.1 Power of Attorney(originally included on Page II-4 hereto).*
25.1 Form of Statement of Eligibility of Trustee.
- ----------
* Previously filed.
CHARTER EQUIPMENT LEASE 1999-1 LLC (Issuer)
CHARTER FINANCIAL, INC. (Seller and Servicer)
FORM OF UNDERWRITING AGREEMENT
August [__], 1999
First Union Capital Markets Corp.
301 South College Street, TW-9
Charlotte, North Carolina 28288-0610
Ladies and Gentlemen:
Charter Equipment Lease 1999-1 LLC (the "Issuer"), proposes to issue the
asset-backed notes identified in Schedule I hereto (the "Notes"). The Notes will
be issued pursuant to and secured by an indenture (the "Indenture") to be
entered into among the Issuer, Charter Financial, Inc. ("Charter"), as servicer,
and LaSalle Bank National Association, as trustee (the "Trustee"), the form of
which has been filed as an exhibit to the Registration Statement (as defined
below). The Notes identified in Schedule I hereto will be sold in a public
offering through First Union Capital Markets Corp. (the "Underwriter"). To the
extent not defined herein, capitalized terms used herein have the meanings
assigned to such terms in the Indenture.
Section 1. Representations and Warranties. The Issuer and Charter, jointly
and severally, represent and warrant to the Underwriter that:
(a) The Issuer has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement on Form S-1 (registration number 333-64045), including a form of
prospectus, relating to the Notes. The registration statement, and any
post-effective amendment thereto, each in the form heretofore delivered to the
Underwriter and, excluding exhibits thereto, have been declared effective by the
Commission. As used in this Underwriting Agreement, "Effective Time" means the
date and the time as of which such registration statement, or the most recent
post-effective amendment thereto, if any, was declared effective by the
Commission and "Effective Date" means the date of the Effective Time. The Issuer
has furnished to the Underwriter, for use by the Underwriter, copies of one or
more preliminary prospectuses (each, a "Preliminary Prospectus"), relating to
the Notes. Except where the context otherwise requires, the registration
statement, as amended at the Effective Time, including all documents filed as a
part thereof, and including any information contained in a prospectus
subsequently filed with the Commission pursuant to Rule 424(b) under the
Securities Act and deemed to be part of the registration statement as of the
Effective Time pursuant to Rule
<PAGE>
430A under the Securities Act, is herein called the "Registration Statement",
and the prospectus, in the form filed by the Issuer with the Commission pursuant
to Rule 424(b) under the Securities Act or, if no such filing is required, the
form of final prospectus included in the Registration Statement at the time it
became effective, is hereinafter called the "Prospectus".
(b) The Registration Statement relating to the Notes, has been filed with
the Commission and such Registration Statement has become effective. No stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceeding for that purpose has been instituted or, to the knowledge of
the Issuer or Charter, threatened by the Commission.
(c) The Registration Statement conforms, and any amendments or supplements
thereto and the Prospectus will conform, in all material respects to the
requirements of the Securities Act and the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto, as of the applicable filing date as to the Prospectus and any amendment
or supplement thereto, and as of the Closing Date, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however that this representation and warranty shall not apply to (i) that part
of the Registration Statement which shall constitute the Statement of
Eligibility and Qualification (Form T-1) of the Trustee under the Trust
Indenture Act or (ii) any Underwriter's Information (as defined in Section 10(d)
herein) contained therein. The Indenture conforms in all respects to the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission thereunder.
(d) The representations and warranties of the Issuer in Section [__] of the
Servicing Agreement will be true and correct as of the Closing Date.
(e) The representations and warranties of Charter in Sections 2 and 3 of
the Servicing Agreement and in Section 3 of the Seller Contribution and Sale
Agreement will be true and correct as of the Closing Date.
(f) Charter and each of its subsidiaries involved in the ownership,
origination, or security of, or otherwise related to, the Leases have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation, are duly qualified to
do business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property or the
conduct of their respective businesses requires such qualification, and have all
power and authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged, except where the failure to so
qualify or have such power or authority could not have, individually or in the
aggregate, a material adverse effect on the condition (financial or otherwise),
results of operations, business or prospects of Charter and its subsidiaries
taken as a whole.
(g) All the outstanding membership interests in the Issuer have been duly
authorized and validly issued, are fully paid and nonassessable and, except to
the extent set forth
-2-
<PAGE>
in the Registration Statement, are owned by Charter directly or indirectly
through one or more wholly-owned subsidiaries, free and clear of any claim,
lien, encumbrance, security interest, restriction upon voting or transfer or any
other claim of any third party.
(h) (i) the Servicing Agreement, when duly executed by the Issuer and
Charter and delivered by such parties, will constitute a valid and binding
agreement of the Issuer and Charter enforceable against them in accordance with
its terms; (ii) the Indenture, when duly executed by the Trustee and delivered
by the Trustee, will constitute a valid and binding agreement of the Issuer and
Charter enforceable against the Issuer and Charter in accordance with its terms;
(iii) the Notes, when duly executed, authenticated, issued and delivered as
provided in the Indenture, will be duly and validly issued and outstanding and
will constitute valid and binding obligations of the Issuer entitled to the
benefits of the Indenture and enforceable in accordance with its terms; and (iv)
the Indenture, the Servicing Agreement, the Contribution and Sale Agreement
between Charter and Charter Funding Corporation V (the "Transferor") dated as of
August [__], 1999 (the "Seller Contribution and Sale Agreement") and the
Contribution and Sale Agreement between the Transferor and the Issuer dated as
of August [__], 1999 (the "Transferor Contribution and Sale Agreement")
(collectively, the "Transaction Agreements") and the Notes conform to the
descriptions thereof contained in the Prospectus.
(i) The execution, delivery and performance of this Underwriting Agreement,
the Transaction Agreements to which Charter or its subsidiaries, as the case may
be, is a party and the issuance and sale of the Notes, the consummation of the
transactions contemplated hereby and thereby will not conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Charter or any of its subsidiaries is a party
or by which Charter or any of its subsidiaries is bound or to which any of the
property or assets of Charter or any of its subsidiaries is subject, nor will
such actions result in any violation of the provisions of Charter or by-laws of
Charter or any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
Charter or any of its subsidiaries or any of their properties or assets; and
except for the registration of the Notes under the Securities Act, the
qualification of the Indenture under the Trust Indenture Act, such consents,
approvals, authorizations, registrations or qualifications as may be required
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
applicable state securities laws in connection with the purchase and
distribution of the Notes by the Underwriter and the filing of any financing
statements required to perfect the Issuer's interest in the Granted Assets, no
consent, approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the execution,
delivery and performance of this Underwriting Agreement or the Transaction
Agreements, the issuance and sale of the Notes and the consummation of the
transactions contemplated hereby and thereby.
(j) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Securities Act and which have not been so described or filed.
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(k) There are no legal or governmental proceedings pending to which Charter
or any of its subsidiaries is a party or of which any property or assets of
Charter or any of its subsidiaries is the subject which, individually or in the
aggregate, if determined adversely to Charter or any of its subsidiaries, are
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), results of operations, business or prospects of Charter and its
subsidiaries taken as a whole; and to the best of Charter's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(l) Neither Charter nor any of its subsidiaries involved in the ownership,
origination, or security of, or otherwise related to, the Leases (i) is in
violation of its charter or by-laws, (ii) is in default in any material respect,
and no event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term,
covenant or condition contained in any material indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which it is a party or
by which it is bound or to which any of its property or assets is subject or
(iii) is in violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be subject,
except any violation or default that could not have a material adverse effect on
the condition (financial or otherwise), results of operations, business or
prospects of Charter and its subsidiaries taken as a whole.
(m) This Underwriting Agreement has been duly authorized, executed and
delivered by each of the Issuer and Charter; and
(n) The Issuer is not required to be registered under the Investment
Company Act of 1940, as amended.
Section 2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the covenants, representations and warranties herein set forth,
the Issuer agrees to sell to the Underwriter, and the Underwriter agrees to
purchase from the Issuer, the principal amount of Notes set forth in Schedule II
hereto. The purchase price for the Notes shall be as set forth in Schedule I
hereto.
Section 3. Delivery and Payment. Payment for the Notes shall be made to the
Issuer or to its order by wire transfer of same day funds at the office of Dewey
Ballentine LLP in New York, New York at 9:00 A.M., New York time, on the Closing
Date (as hereinafter defined), or at such other time on the same or such other
date as the Underwriter and the Issuer may agree upon. The time and date of such
payment for the Notes as specified in Schedule I hereto are referred to herein
as the "Closing Date." As used herein, the term "Business Day" means any day
other than a day on which banks are permitted or required to be closed in New
York City or Charlotte, North Carolina.
Payment for the Notes shall be made against delivery to the Underwriter of
the Notes registered in the name of Cede & Co. as nominee of The Depository
Trust Company and in such denominations as the Underwriter shall request in
writing not later than two full Business Days prior to the Closing Date. The
Issuer shall make the Notes available for inspection by the
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Underwriter in New York, New York not later than one full Business Day prior to
the Closing Date.
Section 4. Offering by the Underwriter. It is understood that the
Underwriter proposes to offer the Notes for sale to the public, which may
include selected dealers, as set forth in the Prospectus.
Section 5. Covenants of the Issuer and Charter. The Issuer and Charter,
jointly and severally, covenant and agree with the Underwriter as follows:
(a) The Issuer will prepare the Prospectus in a form approved by the
Underwriter and file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Underwriting Agreement
or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under
the Securities Act.
(b) During the period that a prospectus relating to the Notes is required
to be delivered under the Securities Act in connection with sales of such Notes
(such period being hereinafter sometimes referred to as the "prospectus delivery
period"), before filing any amendment or supplement to the Registration
Statement or the Prospectus, the Issuer will furnish to the Underwriter a copy
of the proposed amendment or supplement for review and will not file any such
proposed amendment or supplement to which the Underwriter reasonably objects.
(c) During the prospectus delivery period, the Issuer will advise the
Underwriter promptly after it receives notice thereof, (i) when any amendment to
the Registration Statement shall have become effective; (ii) of any request by
the Commission for any amendment or supplement to the Registration Statement or
the Prospectus or for any additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation or threatening of any proceeding for that purpose,
(iv) of the issuance by the Commission of any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus or the initiation or
threatening of any proceedings for that purpose and (v) of any notification with
respect to any suspension of the qualification of the Notes for offer and sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose; and will use its best efforts to prevent the issuance of any such stop
order or suspension and, if any is issued, will promptly use its best efforts to
obtain the withdrawal thereof.
(d) If, at any time during the prospectus delivery period, any event occurs
as a result of which the Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it shall be necessary to amend or
supplement the Prospectus to comply with the Securities Act, the Issuer promptly
will prepare and file with the Commission, an amendment or a supplement which
will correct such statement or omission or effect such compliance.
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(e) The Issuer will endeavor to qualify the Notes for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the Underwriter shall
reasonably request and will continue such qualification in effect so long as
reasonably required for distribution of the Notes; provided, however, that the
Issuer shall not be obligated to qualify to do business in any jurisdiction in
which it is not currently so qualified; and provided, further, that the Issuer
shall not be required to file a general consent to service of process in any
jurisdiction.
(f) The Issuer will furnish to the Underwriter, without charge, two copies
of the Registration Statement (including exhibits thereto), one of which will be
signed, and to the Underwriter five conformed copies of the Registration
Statement (without exhibits thereto) and, during the prospectus delivery period,
as many copies of any Preliminary Prospectus and the Prospectus and any
supplement thereto as the Underwriter may reasonably request.
(g) For a period from the date of this Underwriting Agreement until the
retirement of the Notes, or until such time as the Underwriter shall cease to
maintain a secondary market in the Notes, whichever first occurs, the Issuer
will deliver to the Underwriter (i) the annual statements of compliance, (ii)
the annual independent certified public accountants' reports furnished to the
Trustee, (iii) all documents required to be distributed to Noteholders and (iv)
all documents filed with the Commission pursuant to the Exchange Act or any
order of the Commission thereunder, in each case as provided to the Trustee or
filed with the Commission, as soon as such statements and reports are furnished
to the Trustee or filed or as soon thereafter as practicable.
(h) To the extent, if any, that the rating provided with respect to the
Notes by the rating agency or agencies that initially rate the Notes is
conditional upon the furnishing of documents or the taking of any other actions
by the Issuer or Charter, the Issuer or Charter, as the case may be, shall
furnish such documents and take any such other actions.
(i) The Issuer will make generally available to Noteholders and to the
Underwriter as soon as practicable an earnings statement covering a period of at
least twelve months beginning with the first fiscal quarter of the Issuer
occurring after the Effective Date of the Registration Statement, which shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of
the Commission promulgated thereunder.
(j) For a period of 90 days from the date hereof, the Issuer will not offer
for sale, sell, contract to sell or otherwise dispose of, directly or
indirectly, or file a registration statement for, or announce any offering of,
any securities collateralized by, or evidencing an ownership interest in, any
asset-backed securities of the Issuer (other than the Notes purchased hereunder)
without the prior written consent of the Underwriter.
Section 6. Conditions to the Obligations of the Underwriter. The
obligations of the Underwriter hereunder are subject to the accuracy, when made
and on the Closing Date, of the representations and warranties of the Issuer and
Charter contained herein, in the Servicing Agreement, the Seller Contribution
and Sale Agreement, the Transferor Contribution and Sale Agreement and in
Indenture, to the accuracy of the statements of the Issuer and Charter made in
any certificates pursuant to the provisions hereof, to the performance by the
Issuer and Charter of
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their respective obligations hereunder and to each of the following additional
terms and conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424 in the manner and within the applicable time period prescribed for such
filing by the rules and regulations of the Commission under the Securities Act
and in accordance with Section 5(a) of this Underwriting Agreement; and, prior
to the Closing Date, no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceedings for such purpose shall have been initiated or threatened by the
Commission; and all requests for additional information from the Commission with
respect to the Registration Statement shall have been complied with to the
reasonable satisfaction of the Underwriter.
(b) (i) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Underwriting Agreement, the Transaction
Agreements, the Notes, the Registration Statement, the Preliminary Prospectus
and the Prospectus, and all other legal matters relating to such agreements and
the transactions contemplated hereby and thereby shall be reasonably
satisfactory in all material respects to counsel for the Underwriter, and the
Issuer shall have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such matters and (ii)
prior to or contemporaneously with the purchase of Notes hereunder, all
transactions contemplated to be consummated under such Transaction Agreements on
the Closing Date (including, without limitation, the issuance and placement of
any subordinated, privately-placed securities) shall have been so consummated to
the reasonable satisfaction of the Underwriter.
(c) Dewey Ballentine LLP shall have furnished to the Underwriter their
written opinion, as U.S. counsel to the Issuer and Charter, addressed to the
Underwriter and dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriter and its counsel with respect to, or to the
effect that: (i) the Notes have been duly authorized, executed and delivered by
the Issuer and constitute the legal, valid and binding obligations of the
Issuer, enforceable in accordance with their terms (subject to customary
exceptions as to bankruptcy and laws affecting creditors' rights) and are
entitled to the benefits of the Indenture; (ii) there is no legal or
governmental proceeding pending or, to the best of such counsel's knowledge,
threatened against the Issuer or Charter which (A) asserts the invalidity of
this Underwriting Agreement, the Transaction Agreements or the Notes, (B) would
have a material adverse effect on the issuance of the Notes or the tax
characteristics of the Notes, or (C) would have a material adverse effect on the
consummation of, or any of Charter's, the Transferor's or the Issuer's
performance under, any of the transactions contemplated by this Underwriting
Agreement or the Transaction Agreements; (iii) each of this Underwriting
Agreement and the Transaction Agreements are the legal, valid and binding
obligation of the Issuer, the Transferor and Charter, as applicable, enforceable
against each of them in accordance with its terms (subject to customary
exceptions relating to bankruptcy and laws affecting creditors' rights); (iv)
assuming no prior financing statements covering the Leases are in effect based
on a review of certain UCC searches, that financing statements covering the
Leases and naming (A) Charter as debtor and the Transferor as secured party, (B)
the Issuer as secured party and Transferor as debtor and (C) the
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Issuer as debtor and the Trustee as secured party are being filed in the
appropriate filing offices of the State of New York, and assuming that the
Trustee has taken possession of the Leases, the Trustee has a first priority
perfected security interest in all right, title and interest of Charter, the
Transferor and the Issuer in the Leases; (v) on the Closing Date the
Registration Statement is effective, and, that to the best of such counsel's
knowledge no stop order suspending the effectiveness of the Registration
Statement has been issued or is threatened, and that although such counsel is
not passing on the factual accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus, nothing came to such
counsel's attention that leads such counsel to believe that either the
Registration Statement or the Prospectus (as of the Effective Date or the date
of the Prospectus) contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (vi) the Indenture has been duly qualified under the Trust
Indenture Act; (vii) the execution, delivery and performance of the Transaction
Agreements by the parties thereto do not require compliance with any "bulk
sales" laws; (viii) the Notes will be classified as indebtedness for tax
purposes; (ix) none of Charter, the Transferor or the Issuer are, or will be as
a result of the transactions contemplated under the Transaction Agreements, an
"investment company" or a company "controlled by" an "investment company", in
each case within the meaning of the Investment Company Act of 1940, as amended;
(x) the tax and ERISA sections in the Prospectus are accurate and fairly present
the information required to be shown therein; and (x) such other matters as the
Underwriter shall reasonably request. In rendering such opinion, counsel may
rely, to the extent deemed proper and as stated therein, as to matters of fact
on certificates of responsible officers of the Issuer or Charter and public
officials and as to matters of state law of jurisdictions other than the
jurisdictions in which such counsel is admitted to practice, on opinions of
local counsel satisfactory to the Underwriter.
(d) Stewart Abramson shall have furnished to the Underwriter his written
opinion, as General Counsel to Charter, addressed to the Underwriter and dated
the Closing Date, in form and substance reasonably satisfactory to the
Underwriter and its counsel with respect to, or to the effect that: (i) the due
formation and qualification of each of the Issuer, the Transferor and Charter
and that the Issuer, the Transferor and Charter, as applicable, have the
requisite power and authority to perform their respective obligations under this
Underwriting Agreement and the Transaction Agreements and the transactions
contemplated herein and therein; (ii) the due authorization, execution, delivery
and enforceability of this Underwriting Agreement and the Transaction Agreements
applicable, by the Issuer, the Transferor and Charter; and (iii) the issuance
and sale of the Notes by the Issuer, the performance of this Underwriting
Agreement by the Issuer and Charter and the compliance by the Issuer, the
Transferor and Charter with the terms of the Transactions Agreements, as
applicable, and the consummation of the transactions contemplated herein and
therein will not conflict with the organizational documents of the Issuer, the
Transferor or Charter, or any other contracts to which the Issuer, the
Transferor or Charter is a party or by which any of them is bound.
(e) The Underwriter shall have received from Cadwalader, Wickersham & Taft,
counsel for the Underwriter, such opinion or opinions, dated the Closing Date,
with respect
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to such matters as the Underwriter may require, and the Issuer shall have
furnished to such counsel such documents as they reasonably request for enabling
them to pass upon such matters.
(f) [___________________] shall have furnished to the Underwriter their
written opinion, as counsel to the Trustee, addressed to the Underwriter and
dated the Closing Date, in form and substance reasonably satisfactory to the
Underwriter.
(g) Each of the Issuer and Charter shall have furnished to the Underwriter
a certificate, dated the Closing Date, of any of its Chairman of the Board,
President or Vice President and its chief financial officer stating that (i)
such officers have carefully examined the Registration Statement and the
Prospectus, (ii) the Prospectus does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided that each of
the Issuer and Charter may exclude the Underwriter's Information (as defined in
Section 10(d) herein) from such representation), (iii) the representations and
warranties of Charter or the Issuer, as the case may be, contained in this
Underwriting Agreement and the Transaction Agreements are true and correct in
all material respects on and as of the Closing Date, (iv) Charter or the Issuer,
as the case may be, has complied in all material respects with all agreements
and satisfied in all material respects all conditions on its part to be
performed or satisfied hereunder and under such agreements at or prior to the
Closing Date, (v) no stop order suspending the effectiveness of the Registration
Statement has been issued and is outstanding and no proceedings for that purpose
have been instituted and not terminated or, to the best of his or her knowledge,
are contemplated by the Commission, and (vi) since the date of its most recent
financial statements, there has been no material adverse change in the financial
position or results of operations of Charter or the Issuer, as applicable, or
any change, or any development including a prospective change, in or affecting
the condition (financial or otherwise), results of operations or business of
Charter or the Issuer except as set forth in or contemplated by the Registration
Statement and the Prospectus.
(h) Subsequent to the date of this Underwriting Agreement, there shall not
have occurred any of the following events: (i) any change, or any development
involving a prospective change, in or affecting particularly the business or
properties of the Issuer or Charter which materially impairs the investment
quality of the Notes; (ii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the over-the-counter market shall have
been suspended or limited, or minimum prices shall have been established on
either of such exchanges or such market by the Commission, by such exchange or
by any other regulatory body or governmental authority having jurisdiction, or
trading in securities of the Issuer or Charter on any exchange or in the
over-the-counter market shall have been suspended or (iii) a general moratorium
on commercial banking activities shall have been declared by Federal or New York
State authorities or (iv) an outbreak or escalation of hostilities or a
declaration by the United States of a national emergency or war or such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of the Underwriter,
impracticable or inadvisable to proceed with the public offering or the delivery
of the Notes on the terms and in the manner contemplated in the Prospectus.
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(i) The Underwriter shall have received from independent accountants of the
Issuer and Charter, one or two letters, one such letter dated the date of the
Prospectus relating to the Notes and satisfactory in form and substance to the
Underwriter and counsel for the Underwriter, and a second letter, if necessary,
dated the Closing Date, as to such matters as the Underwriter may reasonably
request in form and substance satisfactory to the Underwriter and counsel to the
Underwriter, provided by the Issuer and Charter.
(j) The Underwriter shall receive evidence satisfactory to them that, on or
before the Closing Date, UCC-1 financing statements have been or are being filed
in each office in each jurisdiction in which such financing statements are
required to perfect the first priority security interests created by the
Transferor Contribution and Sale Agreement reflecting the interest of the Issuer
in the Leases and the proceeds thereof.
(k) Subsequent to the execution and delivery of this Underwriting
Agreement, there shall not have occurred any (i) downgrade, withdrawal or
qualification shall have occurred with respect to the rating accorded the Notes
or any of the Issuer's other debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) of the Securities Act and (ii) public announcement by
any such organization that it has under surveillance or review (other than an
announcement with positive implications of a possible upgrading), its rating of
the Notes or any of the Issuer's other debt securities.
All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Underwriting Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriter.
Section 7. Termination. The obligations of the Underwriter hereunder may be
terminated by the Underwriter, in its absolute discretion, by notice given to
and received by the Issuer and Charter prior to delivery of and payment for the
Notes if, prior to that time, any of the events described in Section 6(h) or
clauses (i) and (ii) of Section 6(k) shall have occurred.
Section 8. Reserved.
Section 9. Reimbursement of the Underwriter's Expenses. If (i) the Issuer
shall fail to tender the Notes for delivery to the Underwriter for any reason
not permitted under this Underwriting Agreement or (ii) the Underwriter shall
decline to purchase the Notes for any reason permitted under this Underwriting
Agreement, the Issuer shall reimburse the Underwriter for the fees and expenses
of its counsel and for such other out-of-pocket expenses as shall have been
reasonably incurred by it in connection with this Underwriting Agreement and the
proposed purchase of the Notes, and upon demand the Issuer shall pay the full
amount thereof to the Underwriter.
Section 10. Indemnification.
(a) Charter and the Issuer shall, jointly and severally, indemnify and hold
harmless the Underwriter and each person, if any, who controls the Underwriter
within the
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meaning of the Securities Act (collectively referred to for the purposes of this
Section 10 as the Underwriter) against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which that Underwriter
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement as originally filed or in any amendment thereof or
supplement thereto, or in any Preliminary Prospectus or the Prospectus or in any
amendment thereof or supplement thereto or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse the Underwriter
for any legal or other expenses reasonably incurred by that Underwriter directly
in connection with investigating or preparing to defend or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that neither Charter nor the Issuer shall be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement in or omission or
alleged omission from any Registration Statement as originally filed or in any
amendment thereof or supplement thereto, or in any Preliminary Prospectus or the
Prospectus or in any amendment thereof or supplement thereto in reliance upon
and in conformity with the Underwriter's Information (as defined in Section
10(d) herein).
(b) The Underwriter shall indemnify and hold harmless each of the Issuer,
Charter, and each of their directors, each officer of the Issuer or Charter who
signed the Registration Statement and each person, if any, who controls the
Issuer or Charter within the meaning of the Securities Act (collectively
referred to for the purposes of this Section 10 as the Issuer or Charter, as
appropriate), against any loss, claim, damage or liability, joint or several, or
any action in respect thereof, to which the Issuer and Charter may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement as originally filed or in any amendment thereof or
supplement thereto, or in any Preliminary Prospectus or the Prospectus or in any
amendment thereof or supplement thereto or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with the Underwriter's
Information (as defined in Section 10(d) herein), and shall reimburse the Issuer
and Charter for any legal or other expenses reasonably incurred by the Issuer
and Charter in connection with investigating or preparing to defend or defending
against or appearing as third party witness in connection with any such loss,
claim, damage or liability (or any action in respect thereof) as such expenses
are incurred.
(c) Promptly after receipt by an indemnified party under this Section 10 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 10, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability
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which it may have under this Section 10 except to the extent it has been
materially prejudiced by such failure; and, provided, further, that the failure
to notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party otherwise than under this Section 10. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. Each indemnified party, as
a condition of the indemnity agreements contained in Sections 10(a) and 10(b),
shall use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) The Underwriter confirm that the information (such information, the
"Underwriter's Information") set forth in (i) the last paragraph on the cover
page, (ii) [the first paragraph on the second page], and (iii) the [_______]
paragraph under the caption "Plan of Distribution" in the Prospectus is correct
and constitutes the only information furnished in writing to the Issuer and
Charter by or on behalf of the Underwriter specifically for inclusion in the
Registration Statement and the Prospectus.
The obligations of Charter, the Issuer and the Underwriter in this Section
10 are in addition to any other liability which Charter, the Issuer or the
Underwriter, as the case may be, may otherwise have.
Section 11. Contribution. If the indemnification provided for in Section 10
is unavailable or insufficient to hold harmless an indemnified party under
Section 10(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
any action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by Charter and the Issuer on the one hand
and the Underwriter on the other from the offering of the Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of Charter and the
Issuer on the one hand and the Underwriter on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or any action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by Charter and the Issuer on the
one hand and the Underwriter on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Notes purchased
-12-
<PAGE>
hereunder (before deducting expenses) received by the Issuer bear to the total
underwriting discounts and commissions received by the Underwriter with respect
to the Notes purchased hereunder, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by Charter and the Issuer on the one hand or the
Underwriter on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. Charter, the Issuer and the Underwriter agree that
it would not be just and equitable if contributions pursuant to this Section 11
were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim damage or liability referred to above in Section 10
shall be deemed to include, for purposes of this Section 11, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim or any action. Notwithstanding the
provisions of this Section 11, the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Notes underwritten by it and distributed to the public were offered to the
public less the amount of any damages which the Underwriter has otherwise paid
or become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Section 12. Persons Entitled to Benefit of Agreement. This Underwriting
Agreement shall inure to the benefit of and be binding upon the Underwriter, the
Issuer and Charter and their respective successors. Nothing expressed or
mentioned in this Underwriting Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriter, the Issuer and
Charter and their respective successors and the controlling persons and officers
and directors referred to in Sections 10 and 11 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Underwriting Agreement or any provision contained herein.
Section 13. Expenses. The Issuer and Charter, jointly and severally, agree
with the Underwriter to pay (i) the costs incident to the authorization,
issuance, sale, preparation and delivery of the Notes and any taxes payable in
that connection; (ii) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (iii) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus and the
Prospectus, all as provided in this Underwriting Agreement; (iv) the costs of
reproducing and distributing this Underwriting Agreement and any other
underwriting and selling group documents by mail, telex or other means of
communications; (v) the fees and expenses of qualifying the Notes under the
securities laws of the several jurisdictions as provided in Section 5(e) and of
preparing, printing and distributing Blue Sky Memoranda and Legal Investment
Surveys (including the related reasonable and documented fees and expenses of
counsel to the Underwriter); (vi) any fees
-13-
<PAGE>
charged by rating agencies for rating the Notes; (vii) all fees and expenses of
the Trustee and its counsel; (viii) any transfer taxes payable in connection
with its sale of the Notes pursuant to this Underwriting Agreement; and (ix) all
other costs and expenses incident to the performance of the obligations of the
Issuer and Charter under this Underwriting Agreement; provided that, except as
otherwise provided in this Section 13, the Underwriter shall pay its own costs
and expenses, including, the costs and expenses of its counsel and the expenses
of advertising any offering of the Notes made by the Underwriter.
Section 14. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Issuer, Charter and the
Underwriter contained in this Underwriting Agreement or made by or on their
behalf, respectively, pursuant to this Underwriting Agreement, shall survive the
delivery of and payment for the Notes and shall remain in full force and effect,
regardless of any termination or cancellation of this Underwriting Agreement or
any investigation made by or on behalf of any of them or any person controlling
any of them.
Section 15. Notices. All communication hereunder shall be in writing and,
(i) if sent to the Underwriter will be mailed, delivered or telecopied and
confirmed to them at First Union Capital Markets Corp., Asset Securitization
Division, 301 South College Street, TW-9, Charlotte, North Carolina, 28288-0610,
Telecopy Number: (704) 374-3254; (ii) if sent to the Issuer, will be mailed,
delivered or telecopied and confirmed to them at the address of the Issuer set
forth in the Registration Statement, Attention: Chief Financial Officer; and
(iii) if sent to Charter, will be mailed, delivered or telecopied and confirmed
to them at the address of Charter set forth in the Registration Statement,
Attention: Vice President and Treasurer. Any such statements, requests, notices
or agreements shall take effect at the time of receipt thereof.
Section 16. Governing Law. This Underwriting Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to provisions of conflicts of law.
Section 17. Submission to Jurisdiction; Appointment of Agent for Service;
Currency Indemnity.
(a) To the fullest extent permitted by applicable law, each of the Issuer
and Charter irrevocably submits to the jurisdiction of any Federal or State
court in the City, County and State of New York, United States of America, in
any suit or proceeding based on or arising under this Underwriting Agreement,
and irrevocably agrees that all claims in respect of such suit or proceeding may
be determined in any such court. Each of the Issuer and Charter hereby
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Each of the Issuer and Charter hereby
irrevocably designates and appoints CT Corporation (the "Process Agent"), as its
authorized agent upon whom process may be served in any such suit or proceeding,
it being understood that the designation and appointment of CT Corporation as
such authorized agent shall become effective immediately without any further
action on the part of the Issuer or Charter. Each of the Issuer and Charter
represents to the Underwriter that it has notified the Process Agent of such
designation and appointment and
-14-
<PAGE>
that the Process Agent has accepted the same in writing. Each of the Issuer and
Charter hereby irrevocably authorizes and directs the Process Agent to accept
such service. Each of the Issuer and Charter further agrees that service of
process upon the Process Agent and written notice of said service to the Issuer
or Charter, as the case may be, mailed by first class mail or delivered to the
Process Agent at its principal office, shall be deemed in every respect
effective service of process upon the Issuer or Charter, as the case may be, in
any such suit or proceeding. Nothing herein shall affect the right of the
Underwriter or any person controlling the Underwriter to serve process in any
other manner permitted by law. Each of the Issuer and Charter agrees that a
final action in any such suit or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other lawful
manner.
(b) The obligation of the parties to make payments hereunder is in U.S.
dollars (U.S. dollars and such other currencies referred to above being called
the "Obligation Currency") and such obligation shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency or any other
realization in such other currency, whether as proceeds of set-off, security,
guarantee, distributions, or otherwise, except to the extent to which such
tender, recovery or realization shall result in the effective receipt by the
party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable hereunder, and the party liable to make such
payment agrees to indemnify the party which is to receive such payment (as an
additional, separate and independent cause of action) for the amount (if any) by
which such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation to
indemnify shall not be affected by judgment being obtained for any other sums
due under this Underwriting Agreement.
Section 18. Counterparts. This Underwriting Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original, but
all such counterparts shall together constitute one and the same instrument.
Section 19. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Underwriting Agreement.
Section 20. Effectiveness. This Underwriting Agreement shall become
effective upon execution and delivery.
-15-
<PAGE>
If you are in agreement with the foregoing, please sign the counterpart
hereof and return it to the Issuer, whereupon this letter and your acceptance
shall become a binding agreement among the Issuer, Charter and the Underwriter.
Very truly yours,
CHARTER EQUIPMENT LEASE 1999-1 LLC
By: CHARTER FUNDING CORPORATION V
By:
------------------------------
Name:
Title:
CHARTER FINANCIAL, INC.
By:
------------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed
and accepted as of the date hereof.
FIRST UNION CAPITAL MARKETS CORP.,
as Underwriter
By:
------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
Date of Underwriting Agreement: August [___], 1999
Underwriter: First Union Capital Markets Corp.
Underwriter's Address: First Union Capital Markets Corp.
One First Union Center, TW-9
301 South College Street
Charlotte, NC 28288-0610
Title, Purchase Price and Description of Notes:
Class A-1 Notes
---------------
Title: $50,642,266 [_______]% Class A-1
Lease-Backed Notes, Series 1999-1
Price to public: [______]%
Purchase price: [______]%
Underwriting
discount: [_____]%
Payment Dates: The 25th calendar day of each month (if such
day is not a Business Day, the next
succeeding Business Day), commencing August
25, 1999
Maturity: August 2000 Payment Date
Redemption
provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment
Date at the Issuer's option if the Aggregate
Discounted Lease Balance of the Leases at
such time is less than 10% of the initial
Aggregate Discounted Lease Balance of the
Leases as of the Closing Date.
Class A-2 Notes
---------------
Title: $40,355,556 [_____]% Class A-2 Lease-Backed
Notes, Series 1999-1
Price to public: [________]%
Purchase price: [________]%
Underwriting
discount: [_____]%
Payment Dates: The 25th calendar day of each month (if such
day is not a Business Day, the next
succeeding Business Day), commencing August
25, 1999
Maturity: February 2002 Payment Date
Redemption
<PAGE>
provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment
Date at the Issuer's option if the Aggregate
Discounted Lease Balance of the Leases at
such time is less than 10% of the initial
Aggregate Discounted Lease Balance of the
Leases as of the Closing Date.
Class A-3 Notes
---------------
Title: $18,990,850 [____]% Class A-3 Lease-Backed
Notes, Series 1999-1
Price to public: [______]%
Purchase price: [______]%
Underwriting
discount: [___]%
Payment Dates: The 25th calendar day of each month (if such
day is not a Business Day, the next
succeeding Business Day), commencing August
25, 1999
Maturity: September 2002 Payment Date
Redemption
provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment
Date at the Issuer's option if the Aggregate
Discounted Lease Balance of the Leases at
such time is less than 10% of the initial
Aggregate Discounted Lease Balance of the
Leases as of the Closing Date.
Class A-4 Notes
---------------
Title: $48,708,013 [___]% Class A-4 Lease-Backed
Notes, Series 1999-1
Price to public: [______]%
Purchase price: [______]%
Underwriting
discount: [___]%
Payment Dates: The 25th calendar day of each month (if such
day is not a Business Day, the next
succeeding Business Day), commencing August
25, 1999
Maturity: January 2006 Payment Date
Redemption
provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment
Date at the Issuer's option if the Aggregate
Discounted Lease Balance of the Leases at
such time is less than 10% of the initial
Aggregate Discounted Lease Balance of the
Leases as of the Closing Date.
Class B Notes
-------------
Title: $7,473,251 [___]% Class B Lease-Backed
Notes, Series 1999-1
Price to public: [______]%
Purchase price: [______]%
<PAGE>
Underwriting
discount: [______]%
Payment Dates: The 25th calendar day of each month (if such
day is not a Business Day, the next
succeeding Business Day), commencing August
25, 1999
Maturity: October 2006 Payment Date
Redemption
provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment
Date at the Issuer's option if the Aggregate
Discounted Lease Balance of the Leases at
such time is less than 10% of the initial
Aggregate Discounted Lease Balance of the
Leases as of the Closing Date.
Closing Date, Time and Location:
Date: August [___], 1999
Time: 9:00 New York time
Location: Dewey Ballentine LLP [______________] New
York, New York
<PAGE>
SCHEDULE II
PRINCIPAL AMOUNT OF THE NOTES TO BE PURCHASED
$50,642,266 Principal Amount of Class A-1 Notes to be Purchased
$40,355,556 Principal Amount of Class A-2 Notes to be Purchased
$18,990,850 Principal Amount of Class A-3 Notes to be Purchased
$48,708,013 Principal Amount of Class A-4 Notes to be Purchased
$7,473,251 Principal Amount of Class B Notes to be Purchased
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CHARTER EQUIPMENT LEASE 1999-1 LLC
as of August 8, 1999
<PAGE>
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CHARTER EQUIPMENT LEASE 1999-1 LLC
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................1
1. Act.................................................................1
2. Additional Member...................................................1
3. Admission Agreement.................................................1
4. Affiliate...........................................................1
5. Assignee............................................................1
6. Bankrupt Member.....................................................2
7. Business Day........................................................2
8. Capital Account.....................................................2
9. Capital Contribution................................................2
10. Certificate of Formation............................................2
11. Code................................................................2
12. Commitment..........................................................2
13. Company.............................................................2
14. Company Liability...................................................2
15. Company Minimum Gain................................................2
16. Company Nonrecourse Deductions......................................3
17. Company Nonrecourse Liability.......................................3
18. Company Property....................................................3
19. Contributing Members................................................3
20. Control Party.......................................................4
21. Default Interest Rate...............................................4
22. Delinquent Member...................................................4
23. Disposition (Dispose)...............................................4
24. Dissolution Event...................................................4
25. Distribution........................................................4
26. Effective Date......................................................4
27. GAAP Capital Account................................................4
28. Independent Director................................................4
29. Indenture...........................................................5
30. Indenture Trustee...................................................5
31. Initial Capital Contribution........................................5
32. Initial Member......................................................5
33. Management Right....................................................5
34. Managing Member.....................................................5
35. Member..............................................................5
36. Member Minimum Gain.................................................5
i
<PAGE>
37. Member Nonrecourse Deductions.......................................6
38. Member Nonrecourse Liability........................................6
39. Membership Interest.................................................6
40. Money...............................................................6
41. Net Losses..........................................................7
42. Net Profits.........................................................7
43. Non-Consolidatable Entity...........................................7
44. Nonrecourse Liabilities.............................................7
46. Notice..............................................................7
47. Offsettable Decrease................................................7
48. Operating Agreement.................................................8
49. Organization........................................................8
50. Organization Expenses...............................................8
51. Person..............................................................8
52. Principal Office....................................................8
53. Proceeding..........................................................8
54. Property............................................................8
55. Regulations.........................................................8
56. Related Agreements..................................................9
57. Related Company.....................................................9
58. Related Person......................................................9
59. Securities..........................................................9
60. Sharing Ratio.......................................................9
61. State...............................................................9
62. Substitute Member...................................................9
63. Taxable Year........................................................9
64. Taxing Jurisdiction.................................................9
ARTICLE II FORMATION.........................................................10
1. Organization.......................................................10
2. Agreement..........................................................10
3. Name...............................................................10
4. Effective Date.....................................................10
5. Term...............................................................10
6. Resident Agent and Office..........................................11
7. Principal Office...................................................11
ARTICLE III NATURE OF BUSINESS...............................................11
1. Purposes...........................................................11
2. Limitations........................................................11
ARTICLE IV ACCOUNTING AND RECORDS............................................14
1. Records to be Maintained...........................................14
2. Accounts...........................................................14
ii
<PAGE>
ARTICLE V NAMES AND ADDRESSES OF MEMBERS.....................................14
ARTICLE VI RIGHTS AND DUTIES OF MEMBERS......................................15
1. Management Rights..................................................15
2. Liability of Members...............................................15
3. Indemnification....................................................15
4. Representations and Warranties.....................................15
5. Conflicts of Interest..............................................16
ARTICLE VII MANAGEMENT.......................................................16
1. Management of the Company..........................................16
2. Authority of Managing Member to Bind the Company...................17
3. Actions of the Managing Member.....................................18
4. Compensation of Managing Member....................................18
5. Managing Member's Standard of Care.................................18
6. Resignation........................................................18
ARTICLE VIII CONTRIBUTIONS AND CAPITAL ACCOUNTS..............................19
1. Capital Contributions..............................................19
2. Additional Contributions...........................................19
3. Enforcement of Commitments.........................................19
4. Maintenance of Capital Accounts....................................20
5. Contribution of Assets.............................................20
6. Sale or Exchange of Interest.......................................20
7. Compliance with Section 704(b) of the Code.........................21
8. Maintenance of GAAP Capital Accounts...............................21
ARTICLE IX ALLOCATIONS AND DISTRIBUTIONS.....................................21
1. Allocations of Net Profits and Net Losses from Operations..........21
2. Company Minimum Gain Chargeback....................................22
3. Member Minimum Gain Chargeback.....................................22
4. Qualified Income Offset............................................22
5. Interim Distributions..............................................23
6. Limitations on Distributions.......................................23
iii
<PAGE>
ARTICLE X TAXES..............................................................23
1. Tax Characterization of the Company................................23
2. Elections..........................................................24
3. Taxes of Taxing Jurisdictions......................................24
4. Tax Matters Member.................................................24
5. Method of Accounting...............................................24
ARTICLE XI DISPOSITION OF MEMBERSHIP INTERESTS...............................24
1. Disposition........................................................24
2. Dispositions Not in Compliance with this Article Void..............25
ARTICLE XII ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS....................25
1. Rights of Assignees................................................25
2. Admission or Substitute Members....................................25
3. Admission of Additional Members....................................25
4. Forbidden Transfers and Assignments................................26
ARTICLE XIII DISSOLUTION AND WINDING UP......................................26
1. Dissolution........................................................26
2. Effect of Dissolution..............................................26
3. Distribution of Assets on Dissolution..............................26
4. Winding Up and Certificate of Dissolution..........................26
5. Resignation of Member..............................................27
ARTICLE XIV AMENDMENT........................................................27
1. Operating Agreement may be Modified................................27
2. Amendment or Modification of Operating Agreement...................27
ARTICLE XV MISCELLANEOUS PROVISIONS..........................................27
1. Entire Agreement...................................................27
2. No Partnership Intended for Non-tax Purposes.......................27
3. Rights of Creditors and Third Parties Under Operating Agreement....28
EXHIBIT A INITIAL MEMBER
iv
<PAGE>
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CHARTER EQUIPMENT LEASE 1999-1 LLC
This Limited Liability Company Operating Agreement of CHARTER EQUIPMENT
LEASE 1999-1 LLC, a limited liability company organized pursuant to the Delaware
Limited Liability Company Act, is entered into and shall be effective as of the
September 21, 1998, by and among the Company and the entities executing this
Operating Agreement as Members, as amended and restated hereby as of August 8,
1999.
ARTICLE I
DEFINITIONS
For purposes of this Operating Agreement (as defined below), unless the
context clearly indicates otherwise, the following terms shall have the
following meanings:
1. Act. The Delaware Limited Liability Company Act and all amendments to
the Act.
2. Additional Member. A Member other than the Initial Member or a
Substitute Member who has acquired a Membership Interest from the Company.
3. Admission Agreement. The Agreement between an Additional Member and the
Company described in Article XII.
4. Affiliate. An "affiliate" of, or a Person, "affiliated" with, a
specified Person, is (a) a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the specified Person, (b) a Person owning or controlling ten percent or
more of the outstanding voting securities of such specified Person, (c) any
officer, director, partner or general trustee of such specified Person and (d)
if such other Person is an officer, director or partner, any company for which
such Person acts in any such capacity.
5. Assignee. A transferee of a Membership Interest who has not been
admitted as a Substituted Member.
6. Bankrupt Member. A Member who: (1) has become the subject of an Order
for Relief under the United States Bankruptcy Code, or (2) has initiated, either
in an original Proceeding or by way of answer in any state insolvency or
receivership proceeding, an action for liquidation arrangement, composition,
readjustment, dissolution, or similar relief.
<PAGE>
7. Business Day. Any day other than Saturday, Sunday or any legal holiday
observed in the State.
8. Capital Account. The account maintained for a Member or Assignee
determined in accordance with Article VIII.
9. Capital Contribution. Any contribution of Property, services or the
obligation to contribute Property or services made by or on behalf of a Member
or Assignee.
10. Certificate of Formation. The Certificate of Formation as properly
adopted and amended from time to time by the Members and filed with the
Secretary of State.
11. Code. The Internal Revenue Code of 1986, as amended from time to time.
12. Commitment. The Capital Contributions that a Member or Assignee is
obligated to make.
13. Company. Charter Equipment Lease 1999-1 LLC, a limited liability
company formed under the laws of the State of Delaware, and any successor
limited liability company.
14. Company Liability. Any enforceable debt or obligation for which the
Company is liable or which is secured by any Company Property.
15. Company Minimum Gain. An amount determined by first computing for each
Company Nonrecourse Liability any gain the Company would realize if it disposed
of the Company Property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. The amount of Company Minimum Gain includes such minimum gain
arising from a conversion, refinancing, or other change to a debt instrument,
only to the extent a Member is allocated a share of that minimum gain. For any
Taxable Year, the net increase or decrease in Company Minimum Gain is determined
by comparing the Company Minimum Gain on the last day of the immediately
preceding Taxable Year with the Minimum Gain on the last day of the current
Taxable Year. Notwithstanding any provision to the contrary contained herein,
Company Minimum Gain and increases and decreases in Company Minimum Gain are
intended to be computed in accordance with ss. 704 of the Code and the
Regulations issued thereunder, as the same may be issued and interpreted from
time to time. A Member's share of Company Minimum Gain at the end of any Taxable
Year equals: the sum of Company Nonrecourse Deductions allocated to that Member
(and to that Member's predecessors-in-interest) up to that time and the
distribution made to that Member (and to that Member's predecessors-in-interest)
up to that time of proceeds of a Company Nonrecourse Liability allocable to an
increase in Company Minimum Gain minus the sum of that Member's (and that
Member's predecessors-in-interest) aggregate share of the net decreases in
Company Minimum Gain plus their aggregate share of decreases resulting from
reevaluations of Company Property subject to one or more Company Nonrecourse
Liabilities.
2
<PAGE>
16. Company Nonrecourse Deductions. The net increase if any, in the amount
of Company Minimum Gain during the Taxable Year. The Company Nonrecourse
Deductions shall consist first of depreciation or cost recovery deductions with
respect to each item of Company Property to the extent of the increase in
Company Minimum Gain attributable to Company Nonrecourse Liabilities secured by
such Company Property, with the remainder of any Company Nonrecourse Deductions
made up of a pro rata portion of the Company's other items of deduction, loss
and nondeductible expenditures (to the extent that such nondeductible
expenditures reduce Capital Accounts). Company Nonrecourse Deductions shall be
further determined in accordance with Regulation ss. 1.704-2(c) and any
subsequent rule or regulation governing the determination of Company Nonrecourse
Deductions.
17. Company Nonrecourse Liability. A Company Liability to the extent that
no Member or Related Person bears the economic risk of loss (as defined in ss.
1.752-2 of the Regulations) with respect to the liability.
18. Company Property. Any Property owned by the Company.
19. Contributing Members. Those Members making contributions as a result of
the failure of a Delinquent Member to make the contributions required by the
Commitment as described in Article VIII.
20. Control Party. The person so designated as such in a Related Agreement,
or, if no such person is so designated, then the trustee, or if there is no
trustee, then any "agent" for the lenders thereunder.
21. Default Interest Rate. The higher of the legal rate or the then-current
prime rate quoted by the largest commercial bank in the jurisdiction of the
Principal Office plus three percent.
22. Delinquent Member. A Member or Assignee who has failed to meet the
Commitment of that Member or Assignee.
23. Disposition (Dispose). Any sale, assignment, transfer, exchange,
mortgage, pledge, grant, hypothecation, or other transfer, absolute or as
security or encumbrance (including dispositions by operation of law).
24. Dissolution Event. An event, the occurrence of which will result in the
dissolution of the Company under Article XIII.
25. Distribution. A transfer of Property to a Member on account of a
Membership Interest as described in Article IX.
26. Effective Date. As defined in Article II, Section 4 hereof.
27. GAAP Capital Account. The capital account maintained by the Company for
each of the Members in accordance with generally accepted accounting principles.
3
<PAGE>
28. Independent Director. A director of the Managing Member, not less than
one in number, who shall not be, and for the five-year period prior to such
individual's appointment as director shall not have been, and during the
continuation of his or her service as Independent Director is not: (A) an
employee, director, stockholder, partner or officer of the Company or any of its
affiliates; (B) a customer, supplier or other person that derives any of its
revenues from the Company or any of its affiliates; (C) a person or entity
controlling or under common control with any such employee, director,
stockholder, partner, officer, attorney, customer or supplier, or other person
or (D) any member of the immediate family of a person described (A), (B) or (C);
provided, however, that no individual shall be excluded from qualifying as an
"Independent Director" by virtue of serving as an Independent Director of one or
more other affiliates of the Managing Member that are special purpose,
bankruptcy remote entities.
29. Indenture. As defined in Article III hereof.
30. Indenture Trustee. As defined in Article III hereof.
31. Initial Capital Contribution. The Capital Contribution agreed to be
made by the Initial Member as described in Article VIII.
32. Initial Member. The person identified on Exhibit A attached hereto and
made a part hereof by this reference who has executed this Operating Agreement.
33. Management Right. The right of a Member to participate in the
management of the Company, including the rights to information and to consent or
approve actions of the Company.
34. Managing Member. As defined in Article VII hereof.
35. Member. Initial Member, Substituted Member or Additional Member, and,
unless the context expressly indicates to the contrary, includes Assignees.
36. Member Minimum Gain. An amount determined by first computing for each
Member Nonrecourse Liability any gain the Company would realize if it disposed
of the Company Property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. The amount of Member Minimum Gain includes such minimum gain
arising from a conversion, refinancing, or other change to a debt instrument,
only to the extent a Member is allocated a share of that minimum gain. For any
Taxable Year, the net increase or decrease in Member Minimum Gain is determined
by comparing the Member Minimum Gain on the last day of the immediately
preceding Taxable Year with the Minimum Gain on the last day of the current
Taxable Year. Notwithstanding any provision to the contrary contained herein,
Member Minimum Gain and increases and decreases in Member Minimum Gain are
intended to be computed in accordance with ss. 704 of the Code and the
Regulations issued thereunder, as the same may be issued and interpreted from
time to time. A Member's share of Member Minimum Gain at the end of any Taxable
Year equals: the sum of Member Nonrecourse Deductions allocated to that Member
(and to that Member's predecessors-in-interest) up to that time and the
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distribution made to that Member (and to that Member's predecessors-in-interest)
up to that time of proceeds of a Member Nonrecourse Liability allocable to an
increase in Company Minimum Gain minus the sum of that Member's (and that
Member's predecessors-in-interest) aggregate share of the net decreases in
Member Minimum Gain plus their aggregate share of decreases resulting from
reevaluations of Company Property subject to one or more Member Nonrecourse
Liabilities.
37. Member Nonrecourse Deductions. The net increase, if any, in the amount
of Member Minimum Gain during the Taxable Year. The Member Nonrecourse
Deductions shall consist first of depreciation or cost recovery deductions with
respect to each item of Company Property to the extent of the increase in Member
Minimum Gain attributable to Member Nonrecourse Liabilities secured by such
Company Property, with the remainder of any Member Nonrecourse Deductions made
up of a pro rata portion of the Company's other items of deduction, loss and
nondeductible expenditures (to the extent that such nondeductible expenditures
reduce Capital Accounts). Member Nonrecourse Deductions shall be further
determined in accordance with Regulation ss. 1.70422-(i)(2) and any subsequent
rule or regulation governing the determination of Member Nonrecourse Deductions.
38. Member Nonrecourse Liability. Any Company Liability to the extent the
liability is nonrecourse under state law, and on which a Member or Related
Person bears the economic risk of loss under ss. 1.752-2 of the Regulations
because, for example, the Member or Related Person is the creditor or a
guarantor.
39. Membership Interest. The rights of a Member or, in the case of an
Assignee, the rights of the assigning Member in Distributions (liquidating or
otherwise) and allocations of the profits, losses, gains, deductions, and
credits of the Company.
40. Money. Cash or other legal tender of the United States, or any
obligation that is immediately reducible to legal tender without delay or
discount. Money shall be considered to have a fair market value equal to its
face amount.
41. Net Losses. The loss and deductions of the Company determined in
accordance with accounting principles consistently applied from year to year
employed under the method of accounting adopted by the Company and as reported
separately or in the aggregate, as appropriate, on the tax return of the Company
filed for federal income tax purposes.
42. Net Profits. The income and gains of the Company determined in
accordance with accounting principles consistently applied from year to year
employed under the method of accounting adopted by the Company and as reported
separately or in the aggregate, as appropriate, on the tax return of the Company
filed for federal income tax purposes.
43. Non-Consolidatable Entity. Any Person with respect to which nationally
recognized bankruptcy counsel has delivered its opinion to the effect that such
Person's "estate", as defined under Section 541(c) of the United States
Bankruptcy Code, would
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not be consolidated with the "estate" of Charter Financial, Inc. in a bankruptcy
proceeding involving Charter Financial, Inc.
44. Nonrecourse Liabilities. Nonrecourse Liabilities include Company
Nonrecourse Liabilities and Member Nonrecourse Liabilities.
As defined in Article III hereof.
46. Notice. Notice shall be in writing. Notice to the Company shall be
considered given when mailed by first-class mail, postage prepaid, addressed to
the Managing Member in care of the Company at the address of Principal Office.
Notice as to a Member shall be considered given when mailed by first-class mail,
postage prepaid, addressed to the Member at the address reflected in this
Operating Agreement unless the Member has given the Company a Notice of a
different address.
47. Offsettable Decrease. Any allocation that unexpectedly causes or
increases a deficit in the Member's Capital Account as of the end of the taxable
year to which the allocation relates attributable to depletion allowances under
ss. 1.704-1(b)-(2)(iv)(k) of the Regulations, allocations of loss and deductions
under ss.ss. 704(a)(2) or 706 of the Code or under ss. 1.751-1 of the
Regulations, or distributions that, as of the end of the year are reasonably
expected to be made to the extent they exceed the offsetting increases to such
Member's Capital Account that reasonably are expected to occur during or (prior
to) the taxable years in which such distributions are expected to be made (other
than increases pursuant to a Minimum Gain Chargeback).
48. Operating Agreement. This Amended and Restated Limited Liability
Company Operating Agreement including all Admission Agreements and amendments
adopted in accordance with this Operating Agreement and the Act.
49. Organization. A Person other than a natural person. Organization
includes, without limitation, corporations (both non-profit and other
corporations), partnerships (both limited and general), joint ventures, limited
liability companies, and unincorporated associations, but the item does not
include joint tenancies and tenancies by the entirety.
50. Organization Expenses. Those expenses incurred in the organization of
the Company including the costs of preparation of this Operating Agreement and
the Certificate of Formation.
51. Person. An individual, trust, estate, or any incorporated or
unincorporated organization permitted to be a member of a limited liability
company under the laws of the State.
52. Principal Office. The office set forth in Article II, Section 7 of this
Operating Agreement.
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53. Proceeding. Any administrative, judicial, or other adversary
proceeding, including, without limitation, litigation, arbitration,
administrative adjudication, mediation, and appeal or review of any of the
foregoing.
54. Property. Any property, real or personal, tangible or intangible,
including money and any legal or equitable interest in such property, but
excluding services and promises to perform services in the future.
55. Regulations. Except where the context indicates otherwise, the
permanent, temporary, proposed, or proposed and temporary regulations of the
Department of the Treasury under the Code as such regulations may be lawfully
changed from time to time.
56. Related Agreements. Shall have the meaning set forth in Article III of
this Operating Agreement.
57. Related Company. Any Member of the Company other than a
Non-Consolidated Entity or any entity other than the Company or a
Non-Consolidated Entity now or hereafter controlled directly or indirectly by,
or under direct or indirect common control with, Charter Financial, Inc.
58. Related Person. A person having a relationship to a Member that is
described in ss. 1.752-4(b) of the Regulations.
59. Securities. Shall have the meaning set forth in Article III of this
Operating Agreement.
60. Sharing Ratio. With respect to any Member, a fraction (expressed as a
percentage), the numerator of which is the total of the Member's initial Capital
Account and the denominator is the total of all initial Capital Accounts of all
Members and Assignees.
61. State. The State of Delaware.
62. Substitute Member. An Assignee who has been admitted to all of the
rights of membership pursuant to this Operating Agreement.
63. Taxable Year. The taxable year of the Company as determined pursuant
toss. 706 of the Code.
64. Taxing Jurisdiction. Any state, local, or foreign government that
collects tax, interest or penalties, however designated, on any Member's share
of the income or gain attributable to the Company.
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ARTICLE II
FORMATION
1. Organization. The Members hereby organize the Company as a Delaware
limited liability company pursuant to the provisions of the Act.
2. Agreement. For and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Members executing this
Operating Agreement hereby agree to the terms and conditions of this Operating
Agreement, as it may from time to time be amended according to its terms. It is
the express intention of the Members that this Operating Agreement shall be the
sole source of agreement of the parties, and, except to the extent a provision
of this Operating Agreement expressly incorporates federal income tax rules by
reference to sections of the Code or Regulations or is expressly prohibited or
ineffective under the Act, this Operating Agreement shall govern, even when
inconsistent with, or different than, the provisions of the Act or any other law
or rule. To the extent any provision of this Operating Agreement is prohibited
or ineffective under the Act, this Operating Agreement shall be considered
amended to the smallest degree possible in order to make this Operating
Agreement effective under the Act. In the event the Act is subsequently amended
or interpreted in such a way to make any provision of this Operating Agreement
that was formerly invalid valid, such provision shall be considered to be valid
from the effective date of such interpretation or amendment.
3. Name. The name of the Company is Charter Equipment Lease 1999-1 LLC, and
all business of the Company shall be conducted under that name or under any
other name, but in any case, only to the extent permitted by applicable law.
4. Effective Date. This Operating Agreement shall become effective on
September 21, 1998, the date of filing of the Certificate of Formation of
Charter Equipment Lease 1999-1 LLC with the Secretary of State of the State.
5. Term. The Company shall be dissolved and its affairs wound up in
accordance with the Act and this Operating Agreement on December 31, 2050 unless
the term shall be extended by amendment to this Operating Agreement and the
Certificate of Formation, or unless the Company shall be sooner dissolved and
its affairs wound up in accordance with the Act or this Operating Agreement.
6. Resident Agent and Office. The resident agent for the service of process
and the registered office in the State shall be that Person and location
reflected in the Certificate of Formation as filed in the office of the
Secretary of State of the State. The Managing Member may, from time to time,
change the resident agent or office through appropriate filings with the
Secretary of State of the State. In the event the resident agent ceases to act
as such for any reason or the registered office shall change, the Managing
Member shall promptly designate a replacement resident agent or file a notice of
change of address as the case may be. If the Managing Member shall fail to
designate a
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replacement resident agent or change of address of the registered office, any
Member may designate a replacement resident agent or file a notice of change of
address.
7. Principal Office. The Principal Office of the Company shall be located
at 153 East 53rd Street, New York, NY 10022 until July 5, 1999, and 530 Fifth
Avenue, New York, NY 10036 on or after July 5, 1999.
ARTICLE III
NATURE OF BUSINESS
1. Purposes. The business in which the Company may engage and the powers
which the Company may exercise are restricted exclusively to the following:
1.1. to issue, authorize, sell and deliver the Charter Equipment Lease
1999-1 LLC Receivables-Backed Notes (the "Notes");
1.2. to hold and enjoy all of the rights and privileges of the Notes;
1.3. to distribute to the Members such of the Company's assets as each
are entitled to in accordance with the terms hereof and the terms of the
Indenture;
1.4. to do such other things and carry on any other activities which
the Managing Member determines to be necessary, convenient or incidental to
any of the foregoing purposes, including, without limitation, to accept
additional contributions of equity that are not subject to the lien of the
Indenture, and have and exercise all of the power and rights conferred upon
limited liability companies formed pursuant to the Act that are necessary,
convenient or incidental to any of the foregoing purposes in subsections
1.1 - 1.3 above.
2. Limitations.
2.1. Notwithstanding any other provision of this Operating Agreement
and any provision of law that otherwise so empowers the Company, the
Company shall not, without the prior written consent of the Indenture
Trustee and each nationally recognized statistical rating agency rating any
of the Company's issued and outstanding Notes, do any of the following:
(i) dissolve or liquidate, in whole or in part;
(ii) create any subsidiaries;
(iii) consolidate or merge with or into any other entity or
convey or transfer all or substantially all of its properties and
assets to any entity (other than pursuant to the Indenture);
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(iv) incur, assume or guarantee any indebtedness, or pledge its
assets to secure any indebtedness or hold its assets out to be
available to satisfy the obligations of any other Person (other than
pursuant to the Indenture or the Certificate Purchase Agreement) or
make any loans or monetary advances to any other Person;
(v) amend, alter, change or repeal Article III, VII, XI, XIII or
XIV of this Operating Agreement; or
(vi) engage in any other business activity not contemplated by
this Operating Agreement.
2.2. The Company shall conduct its affairs in such a manner that its
assets and liabilities would not be substantively consolidated with those
of any other Person in the event of a bankruptcy or insolvency of such
Person, and in such regard, the Company shall conduct its affairs in
accordance with the following provisions:
(i) it shall not engage in any business or activity other than as
permitted by Article III hereof;
(ii) it shall maintain separate records, financial statements
(showing its assets and liabilities separate and apart from that of
any other Person) and books of account from those of any direct or
ultimate parent of any Related Company and any other Person; provided,
however, that if in addition to such separate financial statements,
the Company's financial statements are included as a part of the
consolidated financial statements of its parent institution, any of
its affiliates and any other Person, such consolidated financial
statements shall contain a footnote to the effect that the Company has
assets and liabilities separate and apart from those of such Person
and those separate assets and liabilities are shown on the separate
financial statements of the Company;
(iii) it shall not commingle the Company's assets with those of
any Related Company and shall hold all of its assets in its own name;
(iv) its Members shall hold meetings, as appropriate to authorize
all action on behalf of the Company and observe all other
organizational formalities of the Company;
(v) it shall not become involved in the day to day management of
any Related Company;
(vi) it shall operate so as not to be substantively consolidated
with any Related Company;
(vii) it shall maintain its assets separately from those of any
Related Company or any other Person (including through the maintenance
of a separate bank account);
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(viii) it shall hold itself out as a separate entity from any
Related Company and shall conduct business in its own name on its own
stationary;
(ix) it shall correct any misunderstanding known to it regarding
its separate identity from any Related Company;
(x) it shall not act as the agent of any Related Company;
(xi) it shall pay its own expenses from its own funds, including
its employees' salaries, and shall fairly allocate expenses shared
with an affiliate including reasonably and fairly allocating overhead
for shared office space;
(xii) it shall maintain adequate capital and a sufficient number
of employees in light of its contemplated business activities;
(xiii) it shall insure that any financial transaction and all
other aspects of the relationship between the Company and any of its
affiliates shall be on commercially reasonable terms; and
(xiv) it shall maintain its own office;
(xv) it shall not guarantee or assume, or make its credit
available to pay the obligations of any other Person;
(xvi) it shall not acquire any of its members' obligations or
securities; and
(xvii) it shall not purchase or hold debt issued by any other
Person (other than cash, investment-grade securities or Eligible
Investments (as defined in the Indenture).
2.3. The Company shall not, without the affirmative vote of 100% of
the Board of Directors of the Managing Member of the Company (including an
affirmative vote of each Independent Director of the Managing Member) and
the affirmative vote of the other Members of the Company, make an
assignment for the benefit of creditors, file a petition in bankruptcy on
behalf of itself, petition or apply to any tribunal for the appointment of
a custodian, receiver or any trustee for the Company or for a substantial
part of the Company's property, commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or
hereinafter in effect, with respect to the Company, consent or acquiesce to
the entry of an order for relief, or in the filing of any such petition,
application, proceeding or appointment of or taking possession by the
custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or any substantial part of the Company's
property, or admit the Company's inability to pay its respective debts
generally as they become due or authorize any of the foregoing or any
action in furtherance of the foregoing, to be done or taken on behalf of
the Company.
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ARTICLE IV
ACCOUNTING AND RECORDS
1. Records to be Maintained. The Company shall maintain the following
records at its registered office:
1.1. A current list of the full name and last known business address
of each Member, separately identifying the Members in alphabetical order;
1.2. A copy of the Certificate of Formation and all amendments
thereto, together with executed copies of any powers of attorney pursuant
to which the Certificate of Formation have been executed;
1.3. Copies of this Operating Agreement, including all amendments
thereto;
2. Accounts. The Managing Member shall maintain a record of Capital Account
for each Member in accordance with Article VIII.
ARTICLE V
NAMES AND ADDRESSES OF MEMBERS
The name and address of the Initial Member are as reflected on Exhibit A
attached hereto and by this reference made a part hereof as if set forth fully
herein.
ARTICLE VI
RIGHTS AND DUTIES OF MEMBERS
1. Management Rights. (a) All Members (other than Assignees) who have not
resigned shall be entitled to vote on any matter submitted to a vote of the
Members. Notwithstanding the foregoing, the following actions require the
unanimous consent of the Members:
1.1. any amendment to this Operating Agreement;
1.2. the admission of Assignees to Management Rights; and
1.3. the continuation of the Company after a Dissolution Event.
(b) Upon the insolvency of a Member, the affirmative vote of a majority in
interest of the remaining Members is required to continue the LLC's existence.
However, if the affirmative vote of a majority in interest of the remaining
Members is not obtained, the Company shall not liquidate any collateral of the
holders of
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rated securities without such holders' consent. The securityholders shall
continue to exercise all their rights under security agreements and shall have
the ability to retain the collateral until the rated securities have been paid
in full or discharged completely.
2. Liability of Members. Subject to Article XV hereof, no Member shall be
liable as such for the liabilities of the Company or any obligations of another
Member. The failure of a limited liability company to observe any formalities or
requirements relating to the exercise of its powers or management of its
business or affairs under this agreement or the Act shall not be grounds for
imposing personal liability on the Members or Managing Member for liabilities of
the limited liability company.
3. Indemnification. The Company shall indemnify the Members and agents for
all costs, losses, liabilities, and damages paid or accrued by such Member or
agent in connection with the business of the Company, as provided in the
Certificate of Formation and to the fullest extent provided or allowed by the
laws of the State.
4. Representations and Warranties. Each Member, and in the case of an
Organization, the Person(s) executing this Operating Agreement on behalf of the
Organization, hereby represents and warrants to the Company and each other
Member that: (a) it is duly organized, validly existing, and in good standing
under the laws of its state of organization and that it has full organizational
power to execute and agree to this Operating Agreement and to perform its
obligations hereunder; (b) that the Member is acquiring its interest in the
Company for the Member's own account as an investment and without an intent to
distribute the interest; (c) the Member acknowledges that the interests have not
been registered under the Securities Act of 1933, as amended, or any state
securities laws, and may not be resold or transferred by the Member without
appropriate registration or the availability of an exemption from such
requirements,
5. Conflicts of Interest.
5.1. A Member shall be entitled to enter into transactions that may be
considered to be competitive with, or a business opportunity that may be
beneficial to, the Company, it being expressly understood that some of the
Members may enter into transactions that are similar to the transactions
into which the Company may enter. Notwithstanding the foregoing, Members
shall account to the Company and hold as trustee for it any property,
profit, or benefit derived by the Member, without the consent of the other
Members, in the conduct and winding up of the Company business or from a
use or appropriation by the Member of Company property including
information developed exclusively for the Company and opportunities
expressly offered to the Company.
5.2. (a) A Member does not violate a duty or obligation to the Company
merely because the Member's conduct furthers the Member's own interest. A
Member may lend money to and transact other business with the Company. The
rights and obligations of a Member who lends money to or transacts business
with the Company are the same as those of a person who is not a Member,
subject to other applicable law. No transaction with the Company shall be
voidable solely because a Member has a direct or
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indirect interest in the transaction if either the transaction is fair to
the Company or the disinterested Members, knowing the material facts of the
transaction and the Member's interest, authorize, approve, or ratify the
transaction.
(b) The Members of the Company must take into consideration the
interests of the Company's creditors in connection with all corporate
actions.
ARTICLE VII
MANAGEMENT
1. Management of the Company.
1.1. The Initial Member shall be the managing member of the Company
(the "Managing Member") and, in such capacity, shall manage the Company in
accordance with this Operating Agreement. The Managing Member is an agent
of the Company in accordance with this Operating Agreement. The Managing
Member is an agent of the Company's business, and the actions of the
Managing Member taken in such capacity and in accordance with this
Operating Agreement shall bind the Company.
1.2. The Managing Member shall have full, exclusive and complete
discretion to manage and control the business and affairs of the Company,
to make all decisions affecting the business and affairs of the Company and
to take all such actions as it deems necessary or appropriate to accomplish
the purpose of the Company as set forth herein. The Managing Member shall
be the sole person or entity with the power to bind the Company, except and
to the extent that such power is expressly delegated to any other person or
entity by the Managing Member, and such delegation shall not cause the
Managing Member to cease to be the Managing Member. There shall not be a
"manager" (within the meaning of the Act) of the Company.
1.3. The Managing Member may appoint individuals with or without such
titles as it may elect, including the titles of President, Vice President,
Treasurer, Secretary, and Assistant Secretary, to act on behalf of the
Company with such power and authority as the Managing Member may delegate
in writing to any such persons.
2. Authority of Managing Member to Bind the Company. Only the Managing
Member and authorized agents of the Company shall have the authority to bind the
Company. Subject to Article III hereof, the Managing Member has the power, on
behalf of the Company, to do all things necessary or convenient to carry out the
business and affairs of the Company (as described in Article III), including,
without limitation:
2.1. the institution, prosecution and defense of any Proceeding in the
Company's name;
2.2. the entering into contracts;
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2.3. investment and reinvestment of the Company's funds, and receipt
and holding of Property as security for repayment;
2.4. the conduct of the Company's business, the establishment of
Company offices, and the exercise of the powers of the Company;
2.5. the appointment of employees and agents of the Company, the
defining of their duties and the establishment of their compensation, and
the dealing with tradespeople, accountants and attorneys, on such terms as
the Managing Member shall determine;
2.6. the indemnification of any Person; and
2.7. the making of such elections under the Code and Tax Regulations
and other relevant tax laws as to the treatment of items of Company income,
gain, loss, deduction and credit, and as to all other relevant matters as
the Managing Member deems necessary or appropriate, including, without
limitation, elections referred to in Section 754 of the Code, the
determination of which items of cash outlay shall be capitalized or treated
as current expenses, and the selection of the method of accounting and
bookkeeping procedures to be used by the Company.
3. Actions of the Managing Member. The Managing Member has the power to
bind the Company as provided in this Article VII. No Person dealing with the
Company shall have any obligation to inquire into the power or authority of the
Managing Member acting on behalf of the Company.
4. Compensation of Managing Member. The Managing Member shall be reimbursed
for all reasonable expenses incurred in managing the Company and shall be
entitled to compensation, in an amount to be determined from time to time by
consent of the Member, in its sole discretion. The Managing Member shall not be
required to devote full time to the management of the Company business, but only
so much time as shall be necessary or appropriate for the proper management of
such business.
5. Managing Member's Standard of Care. The Managing Member shall discharge
its duties to the Company in good faith and with that degree of care that an
ordinarily prudent person in a similar position would use under similar
circumstances. In discharging its duties, the Managing Member shall be fully
protected in relying in good faith upon the records required to be maintained
under Article IV and upon such information, opinions, reports or statements by
any Person as to matters the Managing Member reasonably believes are within such
other Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, including information, opinions,
reports or statements as to the value of the assets, liabilities, profits or
losses of the Company or any other facts pertinent to the existence and amount
of assets from which Distributions to the Member might properly be paid. The
Company shall indemnify and hold harmless the Managing Member against any loss,
damage or expense (including attorneys' fees) incurred by the Managing Member as
a result of any act performed or omitted on behalf of the Company or in
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furtherance of the Company's interests without, however, relieving the Managing
Member of liability for failure to perform his or her duties in accordance with
the standards set forth herein. The satisfaction of any indemnification and any
holding harmless shall be from and limited to Company Property. Such right of
indemnification shall be subordinate and junior in right of payment to the
payment of other debts of the Company.
6. Resignation. The Managing Member shall not resign, dissociate or
withdraw from the Company at any time.
ARTICLE VIII
CONTRIBUTIONS AND CAPITAL ACCOUNTS
1. Capital Contributions. The Initial Member shall make the Capital
Contribution described for that Member on Exhibit A at the time and on the terms
specified on Exhibit A and shall perform that Member's Commitment. If no time
for contribution is specified, the Capital Contributions shall be made upon the
filing of the Certificate of Formation. The value of the Capital Contributions
shall be as set forth on Exhibit A. No interest shall accrue on any Capital
Contribution and no Member shall have the right to withdraw or be repaid any
Capital Contribution except as provided in this Operating Agreement. Each
Additional Member shall make the Initial Capital Contribution described in the
Admission Agreement. The value of the Additional Member's Initial Capital
Contribution and the time for making such contribution shall be set forth in the
Admission Agreement.
2. Additional Contributions. In addition to the Initial Capital
Contributions and Commitments, the Managing Member may determine from time to
time that additional contributions are needed to enable the Company to conduct
its business. Upon making such a determination, the Managing Member shall give
Notice to all Members in writing at least two Business Days prior to the date on
which such contribution is due. Such Notice shall set forth the amount of
additional contribution needed, the purpose for which the contribution is
needed, and the date by which the Members should contribute. Each Member shall
be entitled to contribute a proportionate share of such additional contribution.
Except to the extent of a Member's unpaid Commitment, no Member shall be
obligated to make any such additional contributions. In the event any one or
more Members do not make their additional contribution, the other members shall
be given the opportunity to make the contributions. Each Additional Member shall
make the Capital Contribution to which such Member has agreed, at the time or
times, and upon the terms to which the Managing Member and the Additional Member
agree.
3. Enforcement of Commitments. In the event any Member (a Delinquent
Member) fails to perform the Delinquent Member's Commitment, the Managing Member
shall give the Delinquent Member a Notice of the failure to meet the Commitment.
If the Delinquent Member fails to perform the Commitment (including any costs
associated with the failure to demand compliance with the Commitment and
interest on such
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obligation at the Default Interest Rate) within ten Business Days of the giving
of Notice, the Managing Member may take such action, including, but not limited
to, enforcing the Commitment in the court of appropriate jurisdiction in the
state in which the Principal Office is located or the state of the Delinquent
Member's address as reflected in this Operating Agreement. Each Member expressly
agrees to the jurisdiction of such courts but only for the enforcement of
Commitments. The Managing Member may elect to allow the other Members to
contribute the amount of the Commitment in proportion to such Members' sharing
ratios, with those Members who contribute (Contributing Members) to contribute
additional amounts equal to any amount of the Commitment not contributed. The
Contributing Members shall be entitled to treat the amounts contributed pursuant
to this section as a loan from the Contributing Members bearing interest at the
Default Interest Rate secured by the Delinquent Member's interest in the
Company. Until they are fully repaid, the Contributing Members shall be entitled
to all Distributions to which the Delinquent Member would have been entitled.
Notwithstanding the foregoing, no Commitment or other obligation to make an
additional contribution may be enforced by a creditor of the Company unless the
Member expressly consents to such enforcement or to the assignment of the
obligation to such creditor.
4. Maintenance of Capital Accounts. The Company shall establish and
maintain Capital Accounts for each Member and Assignee. Each Member's Capital
Account shall be increased by (1) the amount of any Money actually contributed
by the Member to the capital of the Company, (2) the fair market value of any
Property contributed, as determined by the Company and the contributing Member
at arm's-length at the time of contribution (net of liabilities assumed by the
Company or subject to which the Company takes such Property, within the meaning
of ss. 752 of the Code), and (3) the Member's share of Net Profits and of any
separately allocated items of income or gain except adjustments of the Code
(including any gain and income from unrealized income with respect to accounts
receivable allocated to the Member to reflect the difference between the book
value and tax basis of assets contributed by the Member). Each Member's Capital
Account shall be decreased by (1) the amount of any money actually distributed
by the Company to the Member, (2) the fair market value of any Property
distributed to the Member, as determined by the Company and the contributing
Member at arm's-length at the time of contribution (net of liabilities of the
Company assumed by the Member or subject to which the Member takes such
Property, within the meaning of ss. 752 of the Code), and (3) the Member's share
of Net Losses and of any separately allocated items of deduction or loss
(including any loss or deduction allocated to the Member to reflect the
difference between the book value and tax basis of assets contributed by the
Member).
5. Contribution of Assets. If the Company at any time distributes any of
its assets in-kind to any Member, the Capital Account of each Member shall be
adjusted to account for that Member's allocable share (as determined under
Article IX below) of the Net Profits or Net Losses that would have been realized
by the Company had it sold the assets that were distributed at their respective
fair market values immediately prior to the distribution.
6. Sale or Exchange of Interest. In the event of a transfer of some or all
of a Membership Interest, the Capital Account of the transferring Member shall
become the
17
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Capital Account of the Assignee, to the extent it relates to the portion of the
Interest transferred, provided that if the transfer causes a termination of the
Company pursuant to Code ss. 708(b)(1)(B), the Capital Accounts for all Persons,
including the transferee, shall be redetermined as of the date of such
termination. In such event, each Person's Capital Account shall be equal to the
net fair market value of his Membership Interest as of such date. Subsequent to
such redetermination, allocations of depreciation, cost recovery deductions,
gain and loss with respect to assets held by the Company on the date of such
determination shall be governed by the principles set forth in Code ss. 704(c)
and the Regulations thereunder.
7. Compliance with Section 704(b) of the Code. The provisions of this
Article VIII as they relate to the maintenance of Capital Accounts are intended,
and shall be construed, and, if necessary, modified to cause the allocations of
profits, losses, income, gain and credit pursuant to Article IX to have
substantial economic effect under the Regulations promulgated under ss. 704(b)
of the Code, in light of the distributions made pursuant to Articles IX and XII
and the Capital Contributions made pursuant to this Article VIII. In the event
the Managing Member determines that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto, are computed in order to
comply with such Regulations, the Managing Member may make such modification,
provided that it is not likely to have a material effect on the amounts
distributable to the Members and Assignees pursuant to Article XIII upon the
dissolution of the Company. The Managing Member shall adjust the amount debited
or credited to Capital Accounts with respect to (a) any Property contributed to
the Company or distributed to the Members and Assignees, and (b) any liabilities
which are secured by such contributed or distributed Property or which are
assumed by the Company or the Members and Assigns, in the event the Managing
Member shall determine such adjustments are necessary or appropriate pursuant to
Regulation ss. 1.704-1(b)(2)(iv). The Managing Member also shall make any
appropriate modifications in the event unanticipated events might otherwise
cause this Operating Agreement not to comply with Regulation ss. 1.704-1(b).
Notwithstanding anything herein to the contrary, this Operating Agreement shall
not be construed as creating a deficit restoration obligation or otherwise
personally obligating any Member to make a Capital Contribution in excess of the
Initial Contribution.
8. Maintenance of GAAP Capital Accounts. In addition to the Capital
Accounts required to be maintained pursuant to Section IV, the Company shall
establish and maintain GAAP Capital Accounts.
ARTICLE IX
ALLOCATIONS AND DISTRIBUTIONS
1. Allocations of Net Profits and Net Losses from Operations. Except as may
be required by ss. 704(c) of the Code and Sections 2, 3 and 4 of this Article
IX, Net Profits, Net Losses, and other items of income, gain, loss, deduction
and credit shall be apportioned among the Members in proportion to their Sharing
Ratios.
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<PAGE>
2. Company Minimum Gain Chargeback. If there is a net decrease in Company
Minimum Gain for Taxable Year, each Member must be allocated items of income and
gain for that Taxable Year equal to that Member's share of the net decrease in
Company Minimum Gain. A Member's share of the net decrease in Company Minimum
Gain is the amount of the total net decrease multiplied by the Member's
percentage share of the Company Minimum Gain at the end of the immediately
preceding Taxable Year. A Member's share of any decrease in Company Minimum Gain
resulting from a revaluation of Company Property equals the increase in the
Member's Capital Account attributable to the revaluation to the extent the
reduction in minimum gain is caused by the revaluation. A Member is not subject
to the Company Minimum Gain Chargeback Requirement to the extent the Member's
share of the net decrease in Company Minimum Gain is caused by a guarantee,
refinancing, or other change in the debt instrument causing it to become
partially or wholly a recourse liability or a Member Nonrecourse Liability, and
the Member bears the economic risk of loss (within the meaning of ss. 1.752-2 of
the Regulations) for the newly guaranteed, refinanced, or otherwise changed
liability.
3. Member Minimum Gain Chargeback. If during a Taxable Year there is a net
decrease in Member Minimum Gain, any Member with a share of that Member Minimum
Gain (as determined under ss. 1.704-2(i)(5) of the Regulations) as of the
beginning of that Taxable Year must be allocated items of income and gain for
that Taxable Year (and, if necessary, for succeeding Taxable Years) equal to
that Member's share of the net decrease in the Company Minimum Gain. A Member's
share of the net decrease in Member Minimum Gain is determined in accordance
with the Regulations. A Member is not subject to this Member Minimum Gain
Chargeback, however, to the extent the net decrease in Member Minimum Gain
arises because the liability ceases to be Member Nonrecourse Liability due to a
conversion, refinancing, or other change in the debt instrument that causes it
to become partially or wholly a Company Nonrecourse Liability. The amount that
would otherwise be subject to the Member Minimum Gain Chargeback is added to the
Member's share of Company Minimum Gain. In addition, rules consistent with those
applicable to Company Minimum Gain shall be applied to determine the shares of
Member Minimum Gain and Member Minimum Gain Chargeback to the extent provided
under the Regulations issued pursuant to ss. 704(b) of the Code.
4. Qualified Income Offset. In the event any Member, in such capacity,
unexpectedly receives an Offsettable Decrease, such Member will be allocated
items of income and gain (consisting of a pro rata portion of each item of
partnership income and gain for such year) in an amount and manner sufficient to
offset such Offsettable Decrease as quickly as possible. Any special allocations
of items of income or gain pursuant to this Section 4 shall be taken into
account in computing subsequent allocations of Net Profits pursuant to this
Section 4, so that the net amount of the Net Profits, Net Losses and all other
items allocated to each Member and Assignee pursuant to this Section 4 shall, to
the extent possible, be equal to the net amount that would have been allocated
to each Member and Assignee pursuant to the provisions of this Section 4 if such
adjustments, allocations or distributions had not occurred.
5. Interim Distributions. From time to time, the Managing Member shall
determine in its reasonable judgment to what extent, if any, the Company's cash
on hand
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exceeds the current and anticipated needs, including, without limitation, needs
for operating expenses, debt service, acquisitions, reserves, and mandatory
Distributions, if any. To the extent such excess exists, the Managing Member may
make Distributions to the Members in accordance with their Sharing Ratios. Such
Distributions shall be in cash or Property (which need not be distributed
proportionately) or partly in both, as determined by the Managing Member.
6. Limitations on Distributions. No Distribution shall be declared and paid
unless, after the distribution is made, the assets of the Company are in excess
of all liabilities of the Company, except liabilities to Members on account of
their Capital Accounts.
ARTICLE X
TAXES
1. Tax Characterization of the Company. For so long as the Company has a
single owner for federal income tax purposes, it will, pursuant to Treasury
Regulations promulgated under section 7701 of the Code, be disregarded as an
entity distinct from the Member for all federal income tax purposes, and all
provisions in this Operating Agreement regarding treatment of the Company as a
partnership for federal income tax purposes should be ignored. Accordingly, for
federal income tax purposes, the Member will be treated as (i) owning all assets
owned by the Company, (ii) having incurred all liabilities incurred by the
Company, and (iii) all transactions between the Company and the Member will be
disregarded. In the event that the Company has two equity owners for federal
income tax purposes, the Company will be treated as a partnership. At any such
time that the Company has two equity owners, all relevant provisions in this
Operating Agreement regarding the treatment of the Company as a partnership for
federal income tax purposes will apply. Moreover, at any such time that the
Company has two equity owners, this Operating Agreement may need to be amended,
in accordance with Article XIV herein, and additional provisions may need to be
added so as to provide for treatment of the Company as a partnership.
2. Elections. The Managing Member may make any tax elections for the
Company allowed under the Code or the tax laws of any state or other
jurisdiction having taxing jurisdiction over the Company.
3. Taxes of Taxing Jurisdictions. To the extent that the laws of any Taxing
Jurisdiction requires, each Member requested to do so by the Managing Member
will submit an agreement indicating that the Member will make timely income tax
payments to the Taxing Jurisdiction and that the Member accepts personal
jurisdiction of the Taxing Jurisdiction with regard to the collection of income
taxes attributable to the Member's income, and interest, and penalties assessed
on such income. If the Member fails to provide such agreement, the Company may
withhold and pay over to such Taxing Jurisdiction the amount of the penalty and
interest determined under the laws of the Taxing Jurisdiction with respect to
such income. Any such payments with respect to the
20
<PAGE>
income of a Member shall be treated as a distribution for purposes of Article
IX. The Managing Member may, where permitted by the rules of any Taxing
Jurisdiction, file a composite, combined or aggregate tax return reflecting the
income of the Company and pay the tax, interest and penalties of some or all of
the Members on such income to the Taxing Jurisdiction, in which case the Company
shall inform the Members of the amount of such tax, interest and penalties so
paid.
4. Tax Matters Member. The Managing Member shall designate a Member as the
tax matters member of the Company pursuant to ss. 6231(a)(7) of the Code. Any
Member designated as tax matters partner shall take such action as may be
necessary to cause each other Member to become a notice partner within the
meaning of ss. 6223 of the Code. Any Member who is designated tax matters
partner may not take any action contemplated by ss.ss. 6222 through 6232 of the
Code without the consent of the Managing Member.
5. Method of Accounting. The records of the Company shall be maintained in
accordance with the method of accounting selected by the Managing Member.
ARTICLE XI
DISPOSITION OF MEMBERSHIP INTERESTS
1. Disposition. Any Member or Assignee may dispose of all or a portion of
the Member's or Assignee's Membership Interest upon compliance with this Section
1. No Membership Interest shall be Disposed of:
1.1. while any amounts are outstanding under the Notes;
1.2. if such disposition, alone or when combined with other
transactions, would result in a termination of the Company within the
meaning of ss. 708 of the Code;
1.3. without an opinion of counsel satisfactory to the Managing Member
that such assignment is subject to an effective registration under, or
exempt from the registration requirements of, the applicable state and
federal securities laws;
1.4. unless and until the Company receives from the Assignee the
information and agreements that the Managing Member may reasonably require,
including but not limited to any taxpayer identification number and any
agreement that may be required by any Taxing Jurisdiction.
2. Dispositions Not in Compliance with this Article Void. Any attempted
Disposition of a Membership Interest, or any part thereof, not in compliance
with this Article is null and void ab initio.
21
<PAGE>
ARTICLE XII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
1. Rights of Assignees. The Assignee of a Membership Interest has no
Management Rights or right to participate in the management of the business and
affairs of the Company or to become a Member. The Assignee is only entitled to
receive the Distributions and return of capital, and to be allocated the Net
Profits and Net Losses attributable the Membership Interest.
2. Admission or Substitute Members. An Assignee of a Membership Interest
shall be admitted as a Substitute Member and admitted to all the rights of the
Member who initially assigned the Membership Interest only with the approval of
all Members and upon execution of an Admission Agreement. The Members may grant
or withhold the approval of such admission for any in their sole and absolute
discretion. If so admitted, the Substitute Member has all the rights and powers
and is subject to all the restrictions and liabilities of the Member originally
assigning the Membership Interest. The admission of a Substitute Member, without
more, shall not release the Member originally assigning the Membership Interest
from any liability to Company that may existed prior to the approval.
3. Admission of Additional Members. The Managing Member may permit the
admission of Additional Members and determine the Capital Contributions of such
Members; provided, however, that there may never be more than ninety-nine (99)
Members at any one time.
4. Forbidden Transfers and Assignments. A Membership Interest may not be
transferred or assigned to a Related Company. A Related Company may, however, be
admitted as an Additional Member.
ARTICLE XIII
DISSOLUTION AND WINDING UP
1. Dissolution. The Company shall be dissolved and its affairs wound up,
upon the first to occur of the following events:
1.1. the expiration of the term of the Company; and
1.2. the unanimous written consent of all of the Members and the
Managing Member, by unanimous written consent of the Board of Managing
Member (including the Independent Director); provided, that, the Company
shall not be dissolved so long as any of the Notes are outstanding.
2. Effect of Dissolution. Upon dissolution, the Company shall cease
carrying on as distinguished from the winding up of the Company business, but
the Company is not
22
<PAGE>
terminated, but continues until the winding up of the affairs of the Company is
completed and the Certificate of Dissolution has been issued by the Secretary of
State.
3. Distribution of Assets on Dissolution. Upon the winding up of the
Company, the Company Property shall be distributed:
3.1. to creditors, including Members who are creditors, to the extent
permitted by law, in satisfaction of Company Liabilities;
3.2. to Members in accordance with positive Capital Account balances
taking into account all Capital Account adjustments for the Company's
taxable year in which the liquidation occurs. Liquidation proceeds shall be
paid within 60 days of the end of the Company's taxable year or, if later,
within 90 days after the date of liquidation. Such distributions shall be
in cash or Property (which need not be distributed proportionately) or
partly in both, as determined by the Managing Member.
4. Winding Up and Certificate of Dissolution. The winding up of the Company
shall be completed when all debts, liabilities, and obligations of the Company
have been paid and discharged or reasonably adequate provision therefor has been
made, and all of the remaining property and assets of the Company have been
distributed to the members. Upon the completion of winding up of the Company, a
certificate of dissolution shall be delivered to the Secretary of State of the
State for filing. The certificate of dissolution shall set forth the information
required by the Act.
5. Resignation of Member. The resignation, withdrawal, dissociation or
bankruptcy of a Member or Members shall not cause such Member or Members to
cease to be a Member or Members of the Company and upon the occurrence of such
an event, the business of the Company shall continue without dissolution.
ARTICLE XIV
AMENDMENT
1. Operating Agreement may be Modified. This Operating Agreement may be
modified as permitted in this Article XIV (as the same may from time to time be
amended). No Member or Manager shall have any vested rights in this Operating
Agreement which may not be modified through an amendment to this Operating
Agreement.
2. Amendment or Modification of Operating Agreement. This Operating
Agreement may be amended or modified from time to time only by a written
instrument adopted by the unanimous written consent of the Members; provided,
however, that for so long as any of the Notes are outstanding, any amendment or
modification to Article III, Article VII, Article XI, Article XIII or this
Article XIV shall require the prior written consent of the Indenture Trustee and
each nationally recognized statistical rating agency rating any of the Company's
issued and outstanding Notes.
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<PAGE>
ARTICLE XV
MISCELLANEOUS PROVISIONS
1. Entire Agreement. This Operating Agreement represents the entire
agreement among all the Members and between the Members and the Company.
2. No Partnership Intended for Non-tax Purposes. The Members have formed
the Company under the Act, and expressly do not intend hereby to form a
partnership under either the State Uniform Partnership Act nor the State Uniform
Limited Partnership Act.
The Members do not intend to be partners one to another, or partners as to
any third party. To the extent any Member, by word or action, represents to
another person that any other Member is a partner or that the Company is a
partnership, the Member making such wrongful representation shall be liable to
any other Member who incurs personal liability by reason of such wrongful
representation.
3. Rights of Creditors and Third Parties Under Operating Agreement. Except
and only to the extent provided herein or by applicable statue, no such creditor
or third party shall have any rights under this Operating Agreement or any
agreement between the Company and any Member with respect to any Capital
Contribution or otherwise.
24
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto executed this Operating
Agreement as of May 17, 1999.
CHARTER FUNDING CORPORATION V
By: /s/ Gary Corr
-------------------------
Name: Gary Corr
Title: President
25
<PAGE>
EXHIBIT A
INITIAL MEMBER
Member Membership Interest Initial Capital Contribution
- ----------------------------- ------------------- ----------------------------
Charter Funding Corporation V 100% $100
530 Fifth Avenue.
New York, NY 10036
DB Draft of August 5, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHARTER EQUIPMENT LEASE 1999-1 LLC,
Issuer
LASALLE BANK NATIONAL ASSOCIATION,
Trustee
and
CHARTER FINANCIAL, INC.,
Servicer
----------------------
INDENTURE
Dated as of August 1, 1999
----------------------
$171,445,172 in aggregate principal amount of Lease-
Backed Notes, Series 1999-1, consisting of:
$50,642,266 of [_]% Class A-1 Lease-Backed Notes
$40,355,556 of [_]% Class A-2 Lease-Backed Notes
$18,990,850 of [_]% Class A-3 Lease-Backed Notes
$48,708,013 of [_]% Class A-4 Lease-Backed Notes
$7,473,251 of [_]% Class B Lease-Backed Notes
$3,956,427 of [_]% Class C Lease-Backed Notes
$1,318,809 of [_]% Class D Lease-Backed Notes
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CHARTER EQUIPMENT LEASE 1999-1 LLC
Reconciliation and Tie between the Indenture
dated as of August 1, 1999 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
ss. 310 (a)(1).........................ss. 7.08
(a)(2)......................... 7.08
(a)(3)......................... Not Applicable
(a)(4)......................... Not Applicable
(b)............................ 7.08; 7.09; 6.07; 1.05; 1.06
(c)............................ Not Applicable
311 (a)............................ 7.14
(b)............................ 7.14
312 (a)............................ 2.11
(b)............................ 11.02
(c)............................ 11.02
313 (a)............................ 7.15
(b)(1)......................... Not Applicable
(b)(2)......................... 7.15
(c)............................ 7.15; 1.06
(d)............................ 7.15
314 (a)............................ 8.06; 8.09; 1.06
(b)............................ Not Applicable
(c)(1)......................... 11.03
(c)(2)......................... 11.03
(c)(3)......................... 11.01
(d)............................ 11.01
(e)............................ 11.04
(f)............................ Not Applicable
315 (a)............................ 7.01(a)
(b)............................ 7.02; 1.06
(c)............................ 7.01(b)
(d)............................ 7.01(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)......................... 6.03(c)
(a)(2)......................... 6.04
(b)............................ 8.03(c)
318 (a)............................ 11.01, 11.02
(c)............................ 11.01
<PAGE>
INDENTURE
This INDENTURE dated as of August 1, 1999, is among CHARTER EQUIPMENT LEASE
1999-1 LLC, a Delaware limited liability company (herein called the "Issuer"),
LASALLE BANK NATIONAL ASSOCIATION, a national banking association organized
under the laws of the United States, as trustee (herein called the "Trustee"),
and CHARTER FINANCIAL, INC., as servicer (herein called the "Servicer" or
"Charter").
RECITALS
The Issuer has duly authorized the issuance of $171,445,172 in aggregate
principal amount of its Lease-Backed Notes, consisting of $50,642,266 aggregate
principal amount of [_]% Class A-1 Lease-Backed Notes (the "Class A-1 Notes"),
$40,355,556 aggregate principal amount of [_]% Class A-2 Lease-Backed Notes (the
"Class A-2 Notes"), $18,990,850 aggregate principal amount of [_]% Class A-3
Lease-Backed Notes (the "Class A-3 Notes"), $48,708,013 aggregate principal
amount of [_]% Class A-4 Lease-Backed Notes (the "Class A-4 Notes", together
with the Class A-1 Notes, Class A-2 Notes, and Class A-3 Notes, the "Class A
Notes"), $7,473,251 aggregate principal amount of [_]% Class B Lease-Backed
Notes (the "Class B Notes"), $3,956,427 aggregate principal amount of [_]% Class
C Lease-Backed Notes (the "Class C Notes"), and $1,318,809 aggregate principal
amount of [_]% Class D Lease-Backed Notes (the "Class D Notes", together with
the Class A Notes, the Class B Notes and the Class C Notes, the "Notes") of
substantially the tenor hereinafter set forth, and to provide therefor the
Issuer has duly authorized the execution and delivery of this Indenture. The
Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes shall
be entitled to payments of interest and principal as set forth herein.
All things necessary to make the Notes, when executed by the Issuer and
authenticated and delivered hereunder, the valid obligations of the Issuer, and
to make this Indenture a valid agreement of the 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
The Issuer hereby Grants to the Trustee on the Issuance Date, for the
benefit and security of the Noteholders, all of the Issuer's right, title and
interest in and to (a) the Leases and all Lease Payments, Casualty Payments,
Lease Repurchase Amounts, Termination Payments and other amounts now due or
becoming due with respect thereto since 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 and any payments due before the Cut-Off Date) and all
Additional Leases and Substitute Leases and all Lease
<PAGE>
Payments, Casualty Payments, Lease Repurchase Amounts, Termination Payments and
other amounts due or becoming due with respect thereto since the respective
Transfer Date (other than any prepayments of rent required by the terms of any
Lease at or before the commencement of the Lease and any payments due before the
effective date of such addition or substitution), (b) all rights of the Issuer
to or under any guarantees of or collateral for the Lessee's obligations under
any Lease, (c) all interests of the Issuer in the Equipment at any time subject
to any Lease, including any security interest of Charter in the Equipment, (d)
all moneys from time to time held by the Trustee pursuant to Section 3.01(a)
hereof pending deposit in one of the accounts referred to therein, (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 rights of the
Issuer under the Seller Contribution and Sale Agreement, and the Transferor
Contribution and Sale Agreement, and (g) all proceeds of the conversion, whether
voluntary or involuntary, of any of the foregoing into cash or other property
(collectively, the "Granted Assets"). Such Grant is made in trust to secure (i)
the payment of all amounts due on the Notes, in accordance with their terms,
equally and ratably without prejudice, priority, or distinction among any of the
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 or otherwise and (iii) compliance with the provisions of this
Indenture with respect to the Notes.
The 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.
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01. General Definitions.
Except as otherwise specified or as the context may otherwise require, the
following terms have the meanings set forth below for all purposes of this
Indenture, 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.
Accredited Investor: as defined in Section 2.03 of this Agreement.
Act: with respect to any Noteholder, as defined in Section 1.04.
Additional Lease: as defined in the Servicing Agreement.
Additional Principal: with respect to each Payment Date equals (a) zero if
each of the Class Target Investor Principal Amounts for Class B Notes, Class C
Notes and Class D Notes exceed their respective Class Floors on such Payment
Date and (b) in
2
<PAGE>
each other case the excess, if any, of (i)(A) the Outstanding Principal Amount
of the Notes plus the Overcollateralization Balance as of the immediately
preceding Payment Date after giving effect to payments on such Payment Date
minus (B) the Aggregate Discounted Lease Balance as of the related Calculation
Date, over (ii) the sum of the Class A Principal Payment, the Class B Principal
Payment, the Class C Principal Payment and the Class D Principal Payment to be
paid on such Payment Date.
Affiliate: of 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.
Aggregate Discounted Lease Balance: for any Calculation Date, the sum of
the Discounted Lease Balances of all Leases as of such Calculation Date.
Authorized Officer: with respect to any matter, any officer of or other
Person representing the Issuer, Charter or the Servicer, as the case may be, who
is authorized to act for the Issuer, Charter or the Servicer, as the case may
be, and who is identified on the lists of Authorized Officers delivered by the
Issuer, Charter and the Servicer, respectively, to the Trustee on the Issuance
Date (as such lists may be modified or supplemented from time to time
thereafter, by written notice). Initially, Exhibits F, G, H represent the lists
of Authorized Officers of the Issuer, Charter and the Servicer, respectively.
Available Funds: with respect to any Payment Date, the amount on deposit in
the Distribution Account with respect to the immediately preceding Collection
Period, net of any Excluded Amounts, including, without limitation, (a) Lease
Payments due during the immediately preceding Collection Period; (b) Servicer
Advances; (c) recoveries from Defaulted Leases to the extent the Servicer has
not substituted Substitute Leases for such Defaulted Leases; (d) proceeds from
repurchases by the Transferor or the Seller, as the case may be, of Leases as a
result of breaches of representations and warranties to the extent the
Transferor or the Seller, as the case may be, has not substituted Substitute
Leases for such Leases; (e) any Casualty Payments and any Prepayment to the
extent not already included in clause (d) hereof; (f) Termination Payments to
the extent the Issuer does not reinvest such Termination Payments in Additional
Leases; (g) payments from the Issuer to effect a redemption of the Notes
pursuant to Section 2.01(b); (h) to the extent there occurs an Available Funds
Shortfall, funds, if any, on deposit in the Reserve Account, and (i) any amounts
transferred from the Reserve Account with respect to the final Payment Date
pursuant to Section 3.04(d).
Available Funds Shortfall: as defined in Section 3.04(b).
Available Reserve Amount: with respect to any date of determination, the
amount on deposit in the Reserve Account as of such date of determination.
Bankruptcy Code: The Bankruptcy Code of 1978, as amended.
3
<PAGE>
Book-Entry Class A-1 Notes: 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 2.05.
Book-Entry Class A-2 Notes: 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 2.05.
Book-Entry Class A-3 Notes: 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 2.05.
Book-Entry Class A-4 Notes: 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 2.05.
Book-Entry Class B Notes: 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 2.05.
Book-Entry Class C Notes: beneficial interests in the Class C Notes, the
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05.
Book-Entry Class D Notes: beneficial interests in the Class D Notes, the
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05.
Business Day: 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 the Servicer are located are authorized or obligated by law or
executive order to remain closed.
Calculation Date: with respect to any Payment Date, the last day of the
month preceding the month of such Payment Date.
Casualty Payment: 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.: the initial registered holder of the Class A Notes, the Class B
Notes, the Class C Notes and the Class D Notes, acting as nominee of The
Depository Trust Company.
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Charter: Charter Financial, Inc., a corporation organized and existing
under the laws of the State of New York, and its successors and permitted
assigns.
Class: with respect to any Notes, the class of such Notes, and reference
thereto shall refer to one or more of the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes
or the Class D Notes, as the context so requires.
Class A Notes: as defined in the Recitals hereto.
Class A Percentage: 86.3062%.
Class A Principal Payment: (a) while the Class A-1 Notes are outstanding,
(i) on all Payment Dates prior to the Class A-1 Stated Maturity Date, the lesser
of (1) the amount necessary to reduce the Outstanding Principal Amount on the
Class A-1 Notes to zero and (2) excess, if any of, (A) the Aggregate Discounted
Lease Balance as of the previous Calculation Date (or with respect to the
Initial Payment Date, the Initial Aggregate Discounted Lease Principal Balance)
over (B) the Aggregate Discounted Lease Balance as of the related Calculation
Date, and (ii) on all Payment Dates on and after the Class A-1 Stated Maturity
Date, 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 for such Payment Date.
Class A Target Investor Principal Amount: with respect to each Payment
Date, an amount equal to the product of (a) the Class A Percentage and (b) the
Aggregate Discounted Lease Balance as of the related Calculation Date.
Class A-1 Initial Principal Amount: $50,642,266.
Class A-1 Note Interest Rate: the rate at which interest accrues on the
Class A-1 Notes, which rate with respect to each Interest Accrual Period shall
be at a rate per annum equal to [_]%.
Class A-1 Note Owner: 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).
Class A-1 Noteholder: (a) with respect to a Book-Entry Class A-1 Note, Cede
& Co. and (b) with respect to a Definitive Class A-1 Note, the Holder of such
Definitive Class A-1 Note.
Class A-1 Notes: as defined in the Recitals hereto.
Class A-1 Stated Maturity Date: August, 2000.
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Class A-2 Initial Principal Amount: $40,355,556.
Class A-2 Note Interest Rate: the rate at which interest accrues on the
Class A-2 Notes, which rate with respect to each Interest Accrual Period shall
be at a rate per annum equal to [_]%.
Class A-2 Note Owner: 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).
Class A-2 Noteholder: (a) with respect to a Book-Entry Class A-2 Note, Cede
& Co.; and (b) with respect to a Definitive Class A-2 Note, to the Holder of
such Definitive Class A-2 Note. Class A-2 Notes: as defined in the Recitals
hereto.
Class A-2 Stated Maturity Date: February, 2002.
Class A-3 Initial Principal Amount: $18,990,850.
Class A-3 Note Interest Rate: the rate at which interest accrues on the
Class A-3 Notes, which rate with respect to each Interest Accrual Period shall
be at a rate per annum equal to [_]%.
Class A-3 Note Owner: 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
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
Class A-3 Noteholder: (a) with respect to a Book-Entry Class A-3 Note, Cede
& Co.; and (b) with respect to a Definitive Class A-3 Note, the Holder of such
Definitive Class A-3 Note.
Class A-3 Notes: as defined in the Recitals hereto.
Class A-3 Stated Maturity Date: September, 2002.
Class A-4 Initial Principal Amount: $48,708,013.
Class A-4 Note Interest Rate: the rate at which interest accrues on the
Class A-4 Notes, which rate with respect to each Interest Accrual Period shall
be at a rate per annum equal to [_]%.
Class A-4 Note Owner: 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
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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).
Class A-4 Noteholder: (a) with respect to a Book-Entry Class A-4 Note, Cede
& Co.; and (b) with respect to a Definitive Class A-4 Note, the Holder of such
Definitive Class A-4 Note.
Class A-4 Notes: as defined in the Recitals hereto.
Class A-4 Stated Maturity Date: January, 2006.
Class B Initial Principal Amount: $7,473,251.
Class B Floor: with respect to each Payment Date, an amount equal to the
total of (a) 2.150% of the Initial Aggregate Discounted Lease Balance, plus (b)
the Cumulative Loss Amount with respect to such Payment Date, minus (c) the sum
of (i) the Outstanding Principal Amount of the Class C Notes, (ii) the
Outstanding Principal Amount of the Class D Notes and (iii) the
Overcollateralization Balance as of the immediately preceding Payment Date after
giving effect to all principal payments made on that day, minus (d) the amount
on deposit in the Reserve Account after giving effect to withdrawals to be made
on such Payment Date.
Class B Note Interest Rate: the rate at which interest accrues on the Class
B Notes, which rate shall be [_]% per annum.
Class B Note Owner: 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).
Class B Noteholder: (a) with respect to a Book-Entry Class B Note, Cede &
Co.; and (b) with respect to a Definitive Class B Note, the Holder of such
Definitive Class B Note.
Class B Notes: as defined in the Recitals hereto.
Class B Percentage: 5.9691%.
Class B Principal Payment: with respect to any Payment Date, (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 for such
Payment Date.
Class B Stated Maturity Date: October, 2006.
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Class B Target Investor Principal Amount: with respect to each Payment
Date, an amount equal to the product of (a) the Class B Percentage and (b) the
Aggregate Discounted Lease Balance as of the related Calculation Date.
Class C Initial Principal Amount: $3,956,427.
Class C Floor: with respect to each Payment Date, the amount equal to the
total of (a) 1.300% of the Initial Aggregate Discounted Lease Balance, plus (b)
the Cumulative Loss Amount with respect to such Payment Date, minus (c) the sum
of the Outstanding Principal Amount of the Class D Notes, and the
Overcollateralization Balance as of the immediately preceding Payment Date after
giving effect to all principal payments made on that day, minus (d) the amount
on deposit in the Reserve Account after giving effect to withdrawals to be made
on such Payment Date.
Class C Note Interest Rate: the rate at which interest accrues on the Class
C Notes, which rate shall be [_]% per annum.
Class C Note Owner: with respect to a Book-Entry Class C Note, the Person
who is the beneficial owner of such Book-Entry Class C 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).
Class C Noteholder: (a) with respect to a Book-Entry Class C Note, Cede &
Co.; and (b) with respect to a Definitive Class C Note, the Holder of such
Definitive Class C Note.
Class C Notes: as defined in the Recitals hereto.
Class C Percentage: 3.1601%.
Class C Principal Payment: with respect to any Payment Date, (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 C Notes to the greater of
the Class C Target Investor Principal Amount and the Class C Floor for such
Payment Date.
Class C Stated Maturity Date: December, 2006.
Class C Target Investor Principal Amount: with respect to each Payment
Date, an amount equal to the product of (a) the Class C Percentage and (b) the
Aggregate Discounted Lease Balance as of the related Calculation Date.
Class D Initial Principal Amount: $1,318,809.
Class D Floor: with respect to each Payment Date, an amount equal to the
total of (a) 0.850% of the Initial Aggregate Discounted Lease Balance, plus (b)
the Cumulative Loss Amount with respect to such Payment Date, minus (c), and the
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Overcollateralization Balance as of the immediately preceding Payment Date after
giving effect to all principal payments made on that day, minus (d) the amount
on deposit in the Reserve Account after giving effect to withdrawals to be made
on such Payment Date; provided, however, that, if the Outstanding Class C
Principal Amount is less than or equal to the Class C Floor on such Payment
Date, the Class D Floor will equal the Outstanding Class D Principal Amount
utilized in the calculation of the Class C Floor Amount for such Payment Date.
Class D Note Interest Rate: the rate at which interest accrues on the Class
D Notes, which rate shall be [_]% per annum.
Class D Note Owner: with respect to a Book-Entry Class D Note, the Person
who is the beneficial owner of such Book-Entry Class D 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).
Class D Noteholder: (a) with respect to a Book-Entry Class D Note, Cede &
Co.; and (b) with respect to a Definitive Class D Note, the Holder of such Class
D Note.
Class D Notes: as defined in the Recitals hereto.
Class D Percentage: 1.0534%.
Class D Principal Payment: with respect to any Payment Date, (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 D Notes to the greater of
the Class D Target Investor Principal Amount and the Class D Floor for such
Payment Date.
Class D Stated Maturity Date: May, 2007.
Class D Target Investor Principal Amount: with respect to each Payment
Date, an amount equal to the product of (a) the Class D Percentage and (b) the
Aggregate Discounted Lease Balance as of the related Calculation Date.
Class Floor: with respect to any Payment Date and any class (other than the
Class A Notes), any of the Class B Floor, the Class C Floor, and/or the Class D
Floor, each as of such Payment Date, as applicable.
Class Target Investor Principal Amount: with respect to any Payment Date
and Class, any of the Class A Target Investor Principal Amount, the Class B
Target Investor Principal Amount, the Class C Target Investor Principal Amount,
and/or the Class D Target Investor Principal Amount, each as of such Payment
Date, as applicable.
Clearing Agency: an organization registered as a "clearing agency" pursuant
to Section 17A of the Securities Exchange Act of 1934, as amended.
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Clearing Agency Participant: 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.
Collection Period: with respect to any Payment Date, the period from and
including the first day of the calendar month preceding the month of such
Payment Date, to and including the last day of such calendar month.
Commission: the Securities and Exchange Commission.
Corporate Trust Office: the principal corporate trust office of the Trustee
located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois 60674
Attention: Asset-Backed Securities Trust Services, Charter Equipment Lease
1999-1 LLC or at such other address as the Trustee may designate from time to
time by notice to the Noteholders, the Issuer and Charter.
Credit and Collection Policies: means those credit and collection policies
and practices of Charter relating to leases and lease receivables generally as
in effect from time to time.
Cumulative Loss Amount: with respect to each Payment Date, an amount equal
to the excess, if any, of (a) the total of (i) the Outstanding Principal Amount
of the Notes as of the immediately preceding Payment Date after giving effect to
all principal payments made on that day, plus (ii) the Overcollateralization
Balance as of the immediately preceding Payment Date, minus (iii) the lesser of
(A) the excess, if any, of (1) the Aggregate Discounted Lease Balance as of the
Calculation Date relating to the immediately preceding Payment Date over (2) the
Aggregate Discounted Lease Balance as of the related Calculation Date and (B)
Available Funds for such Payment Date remaining after the payment of amounts (1)
owed to the Servicer and (2) in respect of interest on the Notes on such Payment
Date over (b) the Aggregate Discounted Lease Balance as of the related
Calculation Date.
Cut-Off Date: the close of business on June 30, 1999.
DCR: Duff & Phelps Credit Rating Co., and any successor thereto.
Default: any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
Defaulted Lease: as of any Calculation Date, any Lease with respect to
which at any time following the Cut-Off Date or the related Transfer Date, as
the case may be, either (a) a Lease Payment, or any portion thereof, was more
than 120 days overdue as of such Calculation Date, unless on or before such
Calculation Date such Lease Payment (or portion thereof) has been paid or (b)
the Servicer has charged off in accordance with the Servicer's customary
practices prior to such Calculation Date.
Definitive Note: a definitive, fully registered Note issued pursuant to
Section 2.07.
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Depository Agreement: the letter of representations, between the Issuer and
The Depository Trust Company, as Clearing Agency.
Discount Rate: with respect to any Calculation Date, [_]%.
Discounted Lease Balance: (a) for any Lease as of the Cut-Off Date or the
related Payment Date, the present value of all Lease Payments due thereon after
the Cut-Off Date or the related Calculation Date, respectively (excluding
payments with respect to (x) Defaulted Leases, (y) Early Termination Leases and
Leases Subject to a Warranty Event which are not substituted for by Substitute
Leases or Additional Leases on or before the related Calculation Date and (z)
Leases subject to Casualty Losses, to the extent of such Casualty Losses, which
are not substituted for by Substitute Leases on or before the related
Calculation Date), discounted monthly, as to each Lease Payment, from the last
day of the Collection Period in which such Lease Payment is to become due at a
rate equal to the product of (i) one-twelfth and (ii) the Discount Rate; and (b)
notwithstanding the foregoing, on the date that a Lease becomes a Defaulted
Lease, the Discounted Lease Balance for such Lease will be reduced to zero.
Distribution Account: the account or accounts by that name established and
maintained by the Trustee pursuant to Section 3.01.
Early Termination Lease: a Lease which is the subject of an early
termination prior to its original stated maturity due to the payment of a
Termination Payment by the Lessee under such Lease.
Eligible Account: either (a) a segregated trust account with an Eligible
Institution or (b) a segregated trust account with the corporate trust
department of a trust 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 notes of such trust depository institution has a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade.
Eligible Institution: means, (a) the corporate trust department of the
Trustee, or (b) a trust 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), which (i) (A) has either
(1) a long-term unsecured debt rating of at least AA- by S&P or which is
otherwise acceptable to the Rating Agencies or (2) a short-term unsecured debt
rating or certificate of deposit rating acceptable to the Rating Agencies or (B)
the parent corporation of which has either (1) a long-term unsecured debt rating
acceptable to the Rating Agencies or (2) a short-term unsecured debt rating or
certificate of deposit rating acceptable to the Rating Agencies and (ii) whose
deposits are insured by the FDIC.
Eligible Investments: any one or more of the following obligations or
securities:
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(a) direct non-callable obligations of, and non-callable obligations
fully guaranteed by, the United States of America, or any agency or
instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America;
(b) demand and time deposits in, certificates of deposits of, and
bankers' acceptances issued by, any depository institution or company
(including the Trustee acting in its commercial capacity) incorporated
under the laws of the United States of America or any state thereof, having
a combined capital and surplus of at least $100,000,000, and subject to
supervision and examination by federal and/or state banking authorities, so
long as at the time of such investment or contractual commitment providing
for such investment the commercial paper or other short-term debt
obligations of such depository institution or company (or, in the case of a
depository institution that is the principal subsidiary of a holding
company, the commercial paper or other short-term debt obligations of such
holding company) have the highest short-term credit ratings available from
S&P and, to the extent rated by DCR, DCR;
(c) repurchase obligations with respect to and collateralized by (i)
any security described in clause (a) above or (ii) any other security
issued or guaranteed by an agency or instrumentality of the United States
of America, in each case entered into with a depository institution or
company (acting as principal) of the type described in clause (b) above;
provided that the Trustee has taken delivery of such security;
(d) commercial paper (including both non-interest bearing discount
obligations and interest-bearing obligations) payable on demand or on a
specified date not more than one year after the date of issuance thereof
having the highest short-term credit ratings from S&P and, to the extent
rated by DCR, DCR at the time of such investment;
(e) money market funds that redeem their shares on demand, invest only
in other Eligible Investments, and are rated AAAm or AAAm-G by S&P;
(f) demand notes payable on demand issued by an institution rated
"A-1+" by S&P, and to the extent rated by DCR, DCR at the time of such
investment;
(g) funding agreements or guaranteed investment contracts provided by
issuers rated "A-1+" by Standard & Poor's (and to the extent rated by DCR,
DCR at the time of such investment) which provide, by their terms, for
receipt by the trustee on or prior to the next Payment Date of a
predetermined fixed dollar amount which cannot vary or change;
(h) money market funds that redeem their shares on demand (including,
without limitation, any fund which the Trustee or an affiliate of the
Trustee serves as an investment advisor, administrator, shareholder,
servicing
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agent and/or custodian or sub-custodian, notwithstanding that (i) the
Trustee or an affiliate of the Trustee charges and collects fees and
expenses from such funds for services rendered, (ii) the Trustee charges
and collects fees and expenses for services rendered pursuant to this
Indenture, and (iii) services performed for such funds and pursuant to this
Indenture may converge at any time (the parties hereto specifically
authorize the Trustee or an affiliate of the Trustee to charge and collect
all fees and expenses from such funds for services rendered to such funds,
in addition to any fees and expenses the Trustee may charge and collect for
services rendered pursuant to this Indenture), and are rated AAAm or AAAm-G
by S&P; and
(i) such other investments as may be approved by S&P, and DCR.
Equipment: with respect to any Lease, each item of property, together with
any replacement parts, additions, and repairs thereto, any replacements thereof,
and any accessories incorporated therein and/or affixed thereto, subject to such
Lease or, following expiration or termination of such Lease to which the same
was previously subject, remaining subject to the lien of this Indenture in
accordance with the provisions hereof.
Event of Default: as defined in Section 6.01.
Exchange Act: the Securities Exchange Act of 1934, as amended.
Excluded Amounts: means amounts exempt from deposit into the Distribution
Account, including (i) collections attributable to any taxes, fees or other
charges imposed by any governmental authority; (ii) collections representing
reimbursements of insurance premiums or payments for services that were not
financed by the Seller; (iii) other non-contract or rental charges reimbursable
to the Servicer in accordance with the Servicer's customary policies and
procedures; (iv) collections with respect to repurchased Leases or Lease which
has been substituted by a Substitute Lease; (v) any servicing charges; and (vi)
late fees or penalties.
Finance Lease: means a Lease whereby the originator is deemed to have made
a loan to the Lessee, which loan is secured by the Lessee's ownership interest
in the related Equipment, and the lease or installment payments thereon
represent repayment on such loan.
Financing Statement: as defined in the Servicing Agreement.
Governmental Authority: any court or federal or state regulatory body,
administrative agency or other tribunal or other governmental instrumentality.
Grant: grant, bargain, sell, 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 Granted Assets effected by this Indenture
shall include all rights, powers, and options (but none of the obligations) of
the Issuer with respect thereto, including, without limitation, the immediate
and continuing right to claim for,
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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 the Issuer or otherwise,
and generally to do and receive anything that the Issuer is or may be entitled
to do or receive thereunder or with respect thereto.
Granted Assets: as defined in the Granting Clause.
Holder: a holder of a Note.
Indenture: this instrument as originally executed and as from time to time
supplemented or amended pursuant to the applicable provisions hereof.
Initial Aggregate Discounted Lease Balance: the sum of the Discounted Lease
Balance of each of the Leases as of the Cut-Off Date.
Initial Payment Date: August 25, 1999.
Interest Accrual Period: with respect to any Payment Date for the Class A-1
Notes, the period from and including the prior Payment Date (or, in the case of
the first Payment Date, from and including the Issuance Date) to, but excluding,
the current Payment Date, with interest being computed on the basis of the
actual number of days in such Interest Accrual Period and a 360-day year. With
respect to any Payment Date for the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes, the Class B Notes, the Class C Notes, and the Class D Notes,
the period from and including the prior Payment Date (or in the case of the
first Payment Date, from and including the Closing Date) to but excluding the
current Payment Date, with interest being computed on the basis of a 30-day
month and a 360-day year.
Interest Payments: as defined in Section 2.01(c).
Issuance Date: August [_], 1999.
Issuer: the Person named as the "Issuer" in the first paragraph of this
instrument.
Issuer Order or Issuer Request: a written order or request delivered to the
Trustee and signed in the name of the Issuer by an Authorized Officer.
Lease: 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 hereto, as the same may
be amended or modified from time to time in accordance with the provisions
hereof and thereof and of the Servicing Agreement unless and until released from
the lien of this Indenture.
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Lease File: means, with respect to any Lease, the file maintained by the
Servicer, as custodian, in which the original Lease documents together with any
amendments or modifications thereto are contained.
Lease Payment: means, with respect to any Lease, the monthly, quarterly,
semi-annual or seasonal payments scheduled to be made under the terms of the
Lease whether received on or after the expiration or other termination of the
Lease. Casualty Payments, Termination Payments, prepayments of rent required
pursuant to Termination Payments, prepayments of rent required pursuant to the
terms of a Lease at or before the commencement of the term of such lease,
payments becoming due before the Cut-Off Date or the Transfer Date as
applicable, and supplemental or additional payments required by the terms of
such a Lease with respect to taxes, insurance, maintenance (including, without
limitation, any maintenance charges), or other specific charges shall not be
considered Lease Payments hereunder.
Lease Receivable: with respect to any Lease, such Lease, the payments
thereunder, the related Equipment and related rights thereto.
Lease Repurchase Amount: with respect to any Lease as of any date of
determination, means an amount equal to the sum of (a) the Discounted Lease
Balance of such Lease as of the prior Payment Date, (b) the next scheduled Lease
Payment on such Lease and (c) any amounts previously due and unpaid with respect
to such Lease, whether as a result of a repurchase by the Seller or the
Transferor as a result of a Warranty Event or otherwise.
Lessee: with respect to any Lease, the lessee thereunder.
Lien: as defined in the Servicing Agreement.
LLC Agreement: the Limited Liability Company Operating Agreement, dated as
of September 18, 1998, as amended as of May 17, 1999 pursuant to which the
Issuer is governed.
Maturity: 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.
Member: any member of the Issuer, as specified in the LLC Agreement from
time to time.
Nonrecoverable Advance: a Servicer Advance which the Servicer reasonably
determines will not be ultimately recovered from the related Lease.
Noteholder: at any time, any Person in whose name a Note is registered in
the Note Register.
Note Interest Rate: with respect to any Class of Notes, the Class A-1 Note
Interest Rate, the Class A-2 Note Interest Rate, the Class A-3 Note Interest
Rate, the
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Class A-4 Interest Rate, the Class B Note Interest Rate, the Class C Note
Interest Rate or the Class D Note Interest Rate, as the case may be.
Note Owner: the owner of a Note issued hereunder.
Note Register: as defined in Section 2.03.
Note Registrar: as defined in Section 2.03.
Notes: any notes authorized by, and authenticated and delivered under, this
Indenture.
Officers' Certificate: a certificate delivered to the Trustee and signed by
the President, or a Vice President of the Issuer, and by another Vice President,
the Treasurer, and Assistant Treasurer, the Secretary, or an Assistant Secretary
of the Issuer who is not the same Person as the other officer signing such
certificate.
Opinion of Counsel: a written opinion, which shall be satisfactory in form
and substance to the Trustee, of counsel who may, except as otherwise expressly
provided in this Indenture, be inside or outside counsel for the Issuer and who
shall be satisfactory to the Trustee.
Other Lease Payments: all payments on or in respect of leases which are not
Lease Payments, Prepayments, Casualty Payments, or Termination Payments.
Outstanding: with respect to the Notes, as of any date of determination,
all Notes theretofore authenticated and delivered under this Indenture except:
(a) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes or portions thereof for whose payment money in the necessary
amount has been theretofore irrevocably deposited with the 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 the Trustee is presented that any such Notes are held by a
Person in whose hands the Note is a valid obligation;
provided, however, 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 the Issuer or any Affiliate of the Issuer shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, or waiver, only Notes that a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded.
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Outstanding Class A Principal Amount: with respect to any time of
determination, the aggregate principal amount of the Class A Notes Outstanding
at such time of determination.
Outstanding Class A-1 Principal Amount: with respect to any time of
determination, the aggregate principal amount of the Class A-1 Notes Outstanding
at such time of determination.
Outstanding Class A-2 Principal Amount: with respect to any time of
determination, the aggregate principal amount of the Class A-2 Notes Outstanding
at such time of determination.
Outstanding Class A-3 Principal Amount: with respect to any time of
determination, the aggregate principal amount of the Class A-3 Notes Outstanding
at such time of determination.
Outstanding Class A-4 Principal Amount: with respect to any time of
determination, the aggregate principal amount of the Class A-4 Notes Outstanding
at such time of determination.
Outstanding Class B Principal Amount: with respect to any time of
determination, the aggregate principal amount of the Class B Notes Outstanding
at such time of determination.
Outstanding Class C Principal Amount: with respect to any time of
determination, the aggregate principal amount of the Class C Notes Outstanding
at such time of determination.
Outstanding Class D Principal Amount: with respect to any time of
determination, the aggregate principal amount of the Class D Notes Outstanding
at such time of determination.
Outstanding Principal Amount: with respect to any time of determination,
the aggregate unpaid principal amount of the Notes Outstanding at such time of
determination.
Overcollateralization Balance: with respect to each Payment Date, an amount
equal to the excess, if any, of (a) the Aggregate Discounted Lease Balance as of
the related Calculation Date over (b) the Outstanding Principal Amount of the
Notes as of such Payment Date after giving effect to all principal payments made
on that day.
Paying Agent: each agent of the Issuer appointed for the purpose of making
payments on the Notes, the initial Paying Agent shall be the Trustee.
Payment Date: the 25th day of each month (or the next Business Day
thereafter if such day is not a Business Day), commencing on the Initial Payment
Date, and ending on the latest Stated Maturity.
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Permitted Encumbrance: means any of the following:
(a) liens, charges or other encumbrances for taxes and assessments
which are not yet due and payable;
(b) liens, charges or other encumbrances or priority claims incidental
to the conduct of business or the ownership of properties and assets
(including warehousemen's and attorneys' liens and statutory landlords'
liens) and deposits, pledges or liens to secure statutory obligations,
surety or appeal bonds or other liens of like general nature incurred in
the ordinary course of business and not in connection with the borrowing of
money; provided in each case, the obligation secured is not overdue or, if
overdue, is being contested in good faith by appropriate actions or
proceedings;
(c) liens, charges or encumbrances in favor of the Trustee under the
Indenture;
(d) with respect to Equipment, the interest of a Lessee in such
Equipment under the related Lease; or
(e) interests of third parties in any Lease, Lease Receivables,
Equipment and/or related security subject to a lease participation or a
Rent Stream Obligation.
Person: 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: the Placement Agent Agreement, among the Issuer,
Charter, and First Union Capital Markets Corp.
Predecessor Notes: 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 2.04 in lieu of a lost, destroyed or stolen Note (or
a mutilated Note surrendered to the Trustee) shall be deemed to evidence the
same debt as the lost, destroyed or stolen Note (or a mutilated Note surrendered
to the Trustee).
Prepayment: any voluntary partial or full payment of a Lease, any partial
or full prepayment upon the liquidation of a Defaulted Lease, payments upon
acquisitions by the Servicer or the Transferor of Leases from the Granted Assets
on account of a breach of certain representations and warranties in the related
Transaction Document or payments upon an optional acquisition by the Servicer or
the Transferor of Leases from the Granted Assets.
Prepayment Amount: means (a) with respect to any Lease other than a
Synthetic Lease as of any date of determination, the present value (as
determined in such Lease) of all meaning unpaid Lease Payments under such Lease
as of such date of determination, and (b) with respect to any Synthetic Lease as
of any date of
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determination, an amount as specified in such Lease which is no less than 79% of
the present value (as determined in such Lease) of all remaining unpaid Lease
Payments under such Lease as of such date of determination. To the extent that
the amounts received in the liquidation of a Synthetic Lease and the related
Equipment together with the Prepayment Amount thereon exceeds all remaining
unpaid Lease Payments under such Synthetic Lease, the Prepayment Amount for such
a Synthetic Lease is reduced by such excess.
Principal Payments: as defined in Section 2.01(b).
Rating Agencies: S&P and DCR.
Record Date: with respect to any Payment Date, the last Business Day
immediately preceding such Payment Date.
Rent Stream Obligation: means a Lease (a) where only the related Lease
Receivables due under such Lease are conveyed as part of the Granted Assets, and
(b) with respect to which the Equipment thereunder, the related originator or
the Issuer.
Required Deposit Date: as defined in Section 3.03(a).
Reserve Account: the account or accounts by that name established and
maintained by the Trustee pursuant to Section 3.01.
Reserve Required Amount: means $1,714,451.72.
Responsible Officer: with respect to the Trustee, any person regularly
engaged in the administration or supervision of corporate trust accounts
(including, in the case of the original Trustee hereunder, any officer in its
Asset-Backed Securities Trust Services group) 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.
S&P: Standard & Poor's Ratings Services, a division of the McGraw-Hill
Companies Inc. and any successor thereto.
Securities Act: the Securities Act of 1933, as amended.
Seller: Charter Financial, Inc., and its successors and permitted assigns.
Seller Contribution and Sale Agreement: the Seller Contribution and Sale
Agreement, dated as of August 1, 1999 between Charter, the Issuer and the
Trustee, as the same may be amended or modified from time to time in accordance
with the provisions hereof and thereof.
Servicer: Charter and any successor Servicer appointed pursuant to the
terms hereof and of the Servicing Agreement and, to the extent that it at any
time is
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performing the functions of the Servicer, the Trustee, subject to the terms of
Section 5.01 hereof.
Servicer Advance: as defined in the Servicing Agreement.
Servicer Event of Default: as defined in the Servicing Agreement.
Servicer Order: a written order or request delivered to the Trustee and
signed in the name of the Servicer by an Authorized Officer.
Servicing Agreement: the Servicing Agreement dated as of August 1, 1999
among the Issuer, the Trustee and Charter, as the same may be amended or
modified from time to time in accordance with the provisions hereof and thereof.
Servicing Fee: with respect to any Payment Date, the Servicing Fee payable
pursuant to the Servicing Agreement.
Servicing Fee Rate: with respect to any Payment Date, the applicable
Servicing Fee Rate pursuant to the Servicing Agreement.
Servicing Report: as defined in the Servicing Agreement.
Stated Maturity: with respect to any Class of Notes, the stated maturity
date with respect to such Class, which shall refer to one or more of the Class
A-1 Stated Maturity Date, the Class A-2 Stated Maturity Date, the Class A-3
Stated Maturity Date, the Class A-4 Stated Maturity Date, the Class B Stated
Maturity Date, the Class C Stated Maturity Date or the Class D Stated Maturity
Date, as applicable.
Substitute Lease: as defined in the Servicing Agreement.
Synthetic Lease: means a Lease with respect to which the Equipment related
thereto (a) is owned by the "lessor" thereof for accounting purposes and (b) is
owned by the "lessee" thereof for tax purposes.
Termination Payment: 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
beneficial owner thereof, and the Lessee in accordance with the provisions of
the Servicing Agreement.
Transaction Documents: means any and all agreements relating to the
establishment of the Issuer, the sale and contribution of the Lease Receivables,
the servicing of the Lease Receivables and the issuance of Notes, including,
without limitation, the LLC Agreement, the Transferor Contribution and Sale
Agreement, the Seller Contribution and Sale Agreement, the Servicing Agreement
and this Indenture.
Transfer Date: with respect to a Substitute Lease or an Additional Lease,
the date specified with respect to such Substitute Lease or such Additional
Lease on Schedule 1 as to which all Lease Payments and all other payments
described herein in
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respect thereof which are due on or after such date are subject of the Grant
herein and are subject to the lien of this Indenture.
Transferor: Charter Funding Corporation V, a New York corporation, and its
successors.
Transferor Contribution and Sale Agreement: the Transferor Contribution and
Sale Agreement, dated as of August 1, 1999 between the Transferor and the Issuer
as the same may be amended or modified from time to time in accordance with the
provisions hereof and thereof.
Trust Accounts: the Reserve Account and the Distribution Account.
Trust Indenture Act: the Trust Indenture Act of 1939 as in effect on the
date on which this Indenture is qualified under the Trust Indenture Act, except
as provided in Section 9.06 hereof.
Trustee: the Person named as the "Trustee" in the first paragraph of this
instrument until a successor Person shall have become the Trustee pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Person; provided, that the provisions of Section 7.07 and Section
8.11, as applicable to any Person at any time serving as Trustee hereunder,
shall survive the termination of such Person's status as Trustee hereunder and
the succession of any other Person to such status.
Trustee Fee: with respect to any Payment Date, an amount equal to the
product of (i) one-twelfth, (ii) the Trustee Fee Rate, and (iii) the Aggregate
Discounted Lease Balance as of the first day of the related Collection Period.
Trustee Fee Rate: with respect to any Payment Date, 0.05% per annum.
Trustee Priority Expense Amount: means with respect to any Payment Date,
the difference between (x) $50,000, and (y) the aggregated amounts paid to the
Trustee pursuant to Section 3.03(b)(i)(B) on all prior Payment Dates.
Underwriting Agreement: the Underwriting Agreement, among the Issuer,
Charter, and First Union Capital Markets Corp.
Uniform Commercial Code or UCC: with respect to a particular jurisdiction,
the Uniform Commercial Code, as in effect from time to time in such
jurisdiction, or any successor statute thereto.
Warranty Event: with respect to a Lease shall occur and exist when one or
more of the representations and warranties given with respect to such Lease
under Section 3.04 or Section 3.05 of the Seller Contribution and Sale Agreement
or Section 3.04 or Section 3.05 of the Transfer Contribution and Sale Agreement
shall have been breached and remain uncured for a period of 30 days after notice
of such occurrence.
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SECTION 1.02. Compliance Certificates and Opinions.
Upon any written application or request (or oral application with prompt
written or telecopied confirmation) by the Issuer to the Trustee to take any
action under any provision of this Indenture, other than any request that (a)
the Trustee authenticate the Notes specified in such request, (b) the Trustee
invest moneys in any of the Trust Accounts pursuant to the written directions
specified in such request, or (c) the Trustee pay moneys due and payable to the
Issuer hereunder to the Issuer's assignee specified in such request, the Trustee
shall require the Issuer to furnish to the 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 this 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 1.03. Form of Documents Delivered to Trustee.
(a) In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
(b) Any certificate or opinion of an officer of the Issuer delivered to the
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 officer's 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 the Issuer 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 the Trustee may reasonably rely upon the opinion
of such other counsel.
(c) 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.
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(d) Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the 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 the Issuer to have such application granted or to the sufficiency
of such certificate or report. The foregoing shall not, however, be construed to
affect the Trustee's right to rely upon the truth and accuracy of any statement
or opinion contained in any such document as provided in Section 7.01(a)(ii).
(e) 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 the Trustee
at the request or direction of the Issuer, then, notwithstanding that the
satisfaction of such condition is a condition precedent to the Issuer's right to
make such request or direction, the Trustee shall be protected in acting in
accordance with such request or 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, the Trustee shall not be
deemed to have knowledge of any Default or Event of Default nor shall the
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
6.01(a)) or Servicer Event of Default unless a Responsible Officer of the
Trustee shall have actual knowledge thereof or shall have been notified in
writing thereof by the Issuer, the Servicer, or any Noteholder.
SECTION 1.04. 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 herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 7.01) conclusive in favor of
the Trustee and the Issuer, if made in the manner provided in this Section 1.04.
(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 his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any
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such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the 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 the Trustee or the Issuer in reliance thereon,
whether or not notation of such action is made upon such Note.
(d) By accepting the Notes issued pursuant to this Indenture, each
Noteholder irrevocably appoints the 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 1.04(d) shall be deemed to confer upon the 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 1.05. Notices, etc., to 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, the Trustee, the Issuer or the
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 the Trustee, at the Corporate Trust Office, Attention: Asset
Backed Securities Trust Services - Charter Equipment Lease 1999-1 LLC (Number
for telecopy: (312) 904-2084), or at any other address previously furnished in
writing to the Issuer and the Servicer by the Trustee; or
(b) if to the Issuer at 530 Fifth Avenue, New York, New York 10036, with a
copy to the Servicer, or at any other address previously furnished in writing to
the Trustee and the Servicer by the Issuer; or
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(c) if to the Servicer, at 530 Fifth Avenue, New York, New York 10036,
Attention: David Oplanich (Number for telecopy: 212-805-1050), or at any other
address previously furnished in writing to the Trustee and the Issuer by the
Servicer.
(d) if to the Rating Agencies: to Standard & Poor's Ratings Group, 55 Water
Street, New York, New York 10041, Attention: Asset Backed Surveillance Group,
and to Duff & Phelps Credit Rating Co., 55 East Monroe Street, Chicago, Illinois
60603, Attention: Structured Finance Monitoring Group.
SECTION 1.06. 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 service 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 the 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 1.06(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 the Trustee shall constitute a sufficient notification
for every purpose hereunder.
SECTION 1.07. 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 1.08. Successors and Assigns.
All covenants and agreements in this Indenture by the Issuer or the Trustee
shall bind its respective successors and permitted assigns, whether so expressed
or not.
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SECTION 1.09. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF. THIS INDENTURE IS SUBJECT TO THE TRUST
INDENTURE ACT OF 1939, AS AMENDED, 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. Inspection.
The Issuer agrees that, on reasonable prior notice, it will permit the
representatives of the Trustee or any Noteholder holding Notes, or a beneficial
interest therein, evidencing at least 25% of the Outstanding Principal Amount of
the Notes, during the Issuer's normal business hours, to examine all of the
books of account, records, reports and other papers of the Issuer, to make
copies thereof and extracts therefrom, to cause such books to be audited by
independent accountants selected by the Issuer and reasonably acceptable to the
Trustee or such Noteholder, as the case may be, and to discuss its affairs,
finances and accounts with its officers, employees and independent accountants
(and by this provision the Issuer hereby authorizes its accountants to discuss
with such representatives such affairs, finances and accounts), 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 the Issuer or the
performance of and compliance with the covenants and undertakings of the Issuer
in this Indenture, the Servicing Agreement or any of the other documents
referred to herein or therein. Any expense incident to the exercise by the
Trustee at any time or any Noteholder during the continuance of any Default or
Event of Default, of any right under this Section 1.12 shall be borne by the
Issuer.
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SECTION 1.13. Survival of Representations, Warranties and Covenants.
The representations, warranties, covenants and certifications of the Issuer
made in this Indenture or in any certificate or other writing delivered by the
Issuer pursuant hereto shall survive the authentication and delivery of the
Notes hereunder.
ARTICLE II
THE NOTES
SECTION 2.01. General Provisions.
(a) The Notes shall consist of $50,642,266 principal amount of Class A-1
Notes, $40,355,556 principal amount of Class A-2 Notes, $18,990,850 principal
amount of Class A-3 Notes, $48,708,013 principal amount of Class A-4 Notes,
$7,473,251 principal amount of Class B Notes, $3,956,427 principal amount of
Class C Notes and $1,318,809 principal amount of Class D Notes and the forms
thereof and of the Trustee's certificate of authentication shall be in
substantially the forms set forth in Exhibit A through Exhibit D hereto, as
applicable, with such appropriate insertions, 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 $1,000, for the Class A Notes and
the Class B Notes except for Class A Notes or Class B Notes authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Class A Notes or Class B Notes pursuant to Section 2.03, 2.04, or 9.05.
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 2.03 of any Class A Notes or Class B Notes having a
remaining Outstanding Principal Amount of other than an integral multiple of
$1,000, or the issuance of a single Note of each Class, with a denomination less
than $1,000. The denomination for the Class C Notes and the Class D Notes will
be [x] and [y], respectively.
(b) For each Payment Date, payments of principal (the "Principal Payments")
on the Notes will be made in accordance with Sections 3.03(b) or 6.06, as
applicable. Except as otherwise provided in Section 6.02, 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
2.01(b), except that the Issuer may redeem the Notes in their entirety
(including any unpaid interest due and any other amounts due and owing under
this Indenture), without premium, as of any Payment Date on which the Aggregate
Discounted Lease Balance is less than or equal to Ten percent (10%) of the
Aggregate Discounted Lease Balance as of the Cut-Off Date (after giving effect
to all Principal Payments on such Payment Date). The Issuer will give notice of
any such redemption to each Noteholder and the 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
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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 Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class B Notes, Class C Notes and Class D Notes will be
the interest that has accrued on the respective Notes during the related
Interest Accrual Period, at the Class A-1 Note Interest Rate, Class A-2 Note
Interest Rate, Class A-3 Note Interest Rate, Class A-4 Note Interest Rate, Class
B Note Interest Rate, Class C Note Interest Rate and Class D Note 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, Class B Notes, Class C
Notes and Class D Notes, respectively, on the preceding Payment Date. With
respect to the Class A-1 Notes, the Interest Payments will be calculated on the
basis of the actual days elapsed in such Interest Accrual Period and a 360-day
year. With respect to the Notes, other than the Class A-1 Notes, the Interest
Payments will be calculated on the basis of a year of 360 days comprised of
twelve 30-day months. Interest Payments will be made in accordance with Sections
3.03(b) and 6.06, as applicable.
(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
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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.
(j) The Class C Notes shall be subordinated to the Class A Notes and the
Class B Notes to the extent set forth herein. All Class C 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 C Notes shall be made pro rata among all Outstanding Class C Notes,
without preference or priority of any kind.
(k) The Class D Notes shall be subordinated to the Class A Notes, the Class
B Notes and Class C Notes to the extent set forth herein. All Class D 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 D Notes shall be made pro rata among all
Outstanding Class D Notes, without preference or priority of any kind.
SECTION 2.02. Execution, Authentication, Delivery, and Dating.
(a) The Notes shall be manually executed in the name and on behalf of the
Issuer by its Member.
(b) Any Note bearing the signature of an individual who was at the time of
execution thereof the Member of the Issuer shall bind the 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 the 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 the Issuer and delivered
to the Trustee for authentication together with a Issuer Request to the Trustee
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directing the authentication and delivery of such Notes and thereupon the same
shall be authenticated and delivered by the Trustee in accordance with such
Issuer Request.
SECTION 2.03. Transfer and Exchange.
(a) The Trustee shall cause to be kept at the Corporate Trust Office a
register (the "Note Register") in which the Trustee shall provide for the
registration of Notes and of transfers of Notes. The Trustee is hereby appointed
"Note Registrar" for the purpose of registering Notes and transfers of Notes as
herein provided.
(b) No transfer of any Class C or Class D Note may be made unless that
transfer is made pursuant to an effective registration statement under the
Securities Act and an effective registration or a qualification under applicable
state securities laws, or is made in a transaction that does not require such
registration or qualification because the transfer satisfies one of the
following: (i) such transfer is in compliance with Rule 144A under the
Securities Act, to a person who the transferor reasonably believes is a
Qualified Institutional Buyer (as defined in Rule 144A) that is purchasing for
its own account or for the account of a Qualified Institutional Buyer and to
whom notice is given that such transfer is being made in reliance upon Rule 144A
under the Securities Act as certified by such transferee in a letter in the form
of Exhibit E hereto; (ii) after the appropriate holding period, such transfer is
pursuant to an exemption from registration under the Securities Act provided by
Rule 144 under the Securities Act; (iii) such transfer is to a transferee who is
an "Accredited Investor" (as defined in Rule 501 of the Securities Act) in a
transaction exempt from the registration requirements of the Securities Act, in
each case in accordance with any applicable securities laws of any State of the
United States or (iv) such transfer is otherwise exempt from the registration
requirements of the Securities Act. If any resale or other transfer of the Class
C or the Class D Notes is proposed, the Trustee will require, in order to assure
compliance with such laws, that the Class C or the Class D Noteholder's
prospective transferee referred to in the preceding clauses (iii) or (iv)
deliver an investment letter certifying to the Issuer and the Trustee as to the
facts surrounding such transfer in the form of Exhibit E hereto. Except in the
case of a transfer of Class C or Class D Notes to a transferee referred to in
the preceding clause (i) or, in general, a transfer that is to be made after two
years from the Issuance Date, the Trustee shall require an opinion of counsel
satisfactory to it to the effect that such transfer may be made pursuant to an
exemption from the Securities Act without such registration (which opinion of
counsel shall not be an expense of the Trustee or the Servicer or the Issuer).
None of the Issuer, the Servicer or the Trustee is obligated to register or
qualify the Class C and Class D Notes under the Securities Act or any other
securities law or to take any action not otherwise required under this Indenture
to permit the transfer of any Class C or Class D Note without registration.
The Trustee shall not register the transfer of any Note (other than the
transfer of a Note to the nominee of the Clearing Agency) unless the transferee
has executed and delivered to the Trustee a certification to the effect that
either (i) the transferee is not (A) an employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA or (B) a plan
(as defined in
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Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the
"Code")) that is subject to Section 4975 of the Code (each of the foregoing, a
"Benefit Plan"), and is not acting on behalf of or investing the assets of a
Benefit Plan, or (ii) the transferee's acquisition and continued holding of the
Note will be covered by a U.S. Department of Labor Prohibited Transaction Class
Exemption. Each transferee of a book-entry Note shall be deemed to make one of
the foregoing representations.
(c) Subject to Section 2.03(a), upon surrender for registration of transfer
of any Note at the office of the Issuer designated pursuant to Section 8.02 for
such purpose, the Issuer shall execute and the 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. The Trustee shall make a notation on any
such new Note of the amount of principal, if any, that has been paid on such
Note.
(d) All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(e) Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Issuer or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Issuer and the Trustee duly executed, by the holder thereof or his
attorney-in-fact duly authorized in writing.
(f) No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer or the 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 9.05 not involving any
transfer.
SECTION 2.04. Mutilated, Destroyed, Lost and Stolen Notes.
(a) If any mutilated Note is surrendered to the Trustee, the Issuer shall
execute and the 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 the Issuer and the 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
the Issuer or the Trustee that such Note has been acquired by a bona fide
purchaser, the Issuer shall execute and upon its request the 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.
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(c) In case the final installment of principal on a mutilated, destroyed,
lost or stolen Note has become, or will at the next Payment Date become, due and
payable, the Issuer in its discretion may, instead of issuing a replacement
Note, pay such Note.
(d) Upon the issuance of any replacement Note under this Section, the
Issuer or the 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 2.04 in lieu of
any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Note shall be at any 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 2.04 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 2.05. Book-Entry Registration of Class A Notes, Class B Notes,
Class C Notes and Class D Notes.
(a) Each of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class
A-4 Notes, the Class B Notes, the Class C Notes and the Class D Notes, upon
original issuance, shall be issued in the forms attached as Exhibit A through
Exhibit D hereto, as applicable, and delivered to The Depository Trust Company,
the initial Clearing Agency, by, or on behalf of, the Issuer. Each of the Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes,
Class C Notes and Class D 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, Class B Note Owner, Class C
Note Owner or Class D Note Owner will receive a definitive note representing
such Note Owner's interest, except as provided in Section 2.07. Unless and until
Definitive Class A-1 Notes, Definitive Class A-2 Notes, Definitive Class A-3
Notes, Definitive Class A-4 Notes, Definitive Class B Notes, Definitive Class C
Notes or Definitive Class D Notes ("Definitive Notes") have been issued to the
applicable Note Owners pursuant to Section 2.07:
(i) the provisions of this Section 2.05 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, the Class B Notes, Class C Notes or Class D Notes, as the case may be;
(ii) the Issuer, the Servicer and the 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, Class B
Notes, Class C Notes or Class D Notes, as the case may be (including the making
of distributions on the
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Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B
Notes, Class C Notes and Class D Notes, as the case may be), as the authorized
representatives of the respective Note Owners;
(iii) to the extent that the provisions of this Section 2.05 conflict with
any other provisions of this Indenture, the provisions of this Section 2.05
shall control; and
(iv) 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 Notes, are issued
pursuant to Section 2.07, 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, Class B Notes, Class C Notes and
Class D Notes, as the case may be, to such Clearing Agency Participants.
(b) For purposes of any provision of this Indenture requiring or permitting
actions with the consent of, or at the direction of, holders of Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes, Class C Notes
or Class D Notes, as the case may be, evidencing a specified percentage of the
Outstanding Principal Amount of the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class B Notes, Class C Notes or Class D Notes,
respectively, such direction or consent may be given by Note Owners (acting
through the Clearing Agency and the Clearing Agency Participants) owning Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes,
Class C Notes or Class D Notes, evidencing the requisite percentage of the
Outstanding Principal Amount of such Notes, respectively.
SECTION 2.06. 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, Class B
Noteholders, Class C Noteholders or Class D Noteholders is required under this
Agreement, unless and until Definitive Notes shall have been issued to the
related Note Owners pursuant to Section 2.07, the 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, Class B Note Owners, Class C Note Owners or Class
D Note Owners in accordance with its applicable rules, regulations and
procedures.
SECTION 2.07. Definitive Class A Notes, Class B Notes, Class C Notes and
Class D Notes.
If (a) (i) the Issuer advises the Trustee in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
under the Depository
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Agreement with respect to the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, the Class B Notes, Class C Notes and/or Class D Notes and (ii)
the Trustee or the Issuer is unable to locate a qualified successor, (b) the
Issuer, at its option, advises the 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, the Class B Notes, Class C Notes and/or
Class D Notes, through the Clearing Agency or (c) after the occurrence of a
Servicer Event of Default, the Class A-1 Note Owners, Class A-2 Note Owners,
Class A-3 Note Owners, Class A-4 Note Owners, Class B Note Owners, Class C Note
Owners and Class D Note Owners with respect to the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes, Class C Notes and Class
D Notes, evidencing not less than 50% 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, Class B Notes, Class C Notes and Class D Notes, respectively, advise
the 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, Class B Notes,
Class C Notes and Class D 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, Class B Note Owners, Class
C Note Owners or Class D Note Owners, as the case may be, the Trustee shall use
its best efforts to notify all Class A-1 Note Owners, Class A-2 Note Owners,
Class A-3 Note Owners, Class A-4 Note Owners, Class B Note Owners, Class C Note
Owners and Class D Note Owners with respect to the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes, Class C Notes and Class
D Notes, respectively, through the Clearing Agency, of the occurrence of any
such event and of the availability of Definitive Notes, to Class A-1 Note
Owners, Class A-2 Note Owners, Class A-3 Note Owners, Class A-4 Note Owners,
Class B Note Owners, Class C Note Owners or Class D Note Owners, respectively,
requesting the same. Upon surrender to the Trustee of the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes, Class C Notes or
Class D Notes, as the case may be, by the Clearing Agency, accompanied by
registration instructions from the Clearing Agency for registration, the Issuer
shall execute and the Trustee shall authenticate and deliver the relevant
Definitive Notes. Neither the Issuer nor the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions. Upon the issuance of Definitive
Notes, 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 the Trustee, to the extent applicable with respect to such
Definitive Notes, and the Trustee shall recognize the holders of the relevant
Definitive Notes as Noteholders hereunder. Definitive Notes will not be eligible
for clearing or settlement through DTC.
SECTION 2.08. 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 the 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
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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, to surrender such Note at the Corporate Trust
Office against payment of the final installment of principal of such Note.
SECTION 2.09. Persons Deemed Owners.
Prior to due presentment of a Note for registration of transfer, the
Issuer, the Trustee, and any agent of the Issuer or the Trustee may treat the
registered 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 the Issuer, the
Trustee, nor any agent of the Issuer or the 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 the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Issuer may
at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
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 the Trustee may be disposed of in the
normal course of its business or as directed by a Issuer Order.
SECTION 2.11. Noteholder Lists.
The 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 the Trustee no longer serves as the Note Registrar,
the Issuer (or any other obligor upon the Notes) shall furnish to the Trustee at
least five Business Days before each Payment Date (and in all events in
intervals of not more than 6 months) and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Noteholders, and the Issuer
shall otherwise comply with Section 312(a) of the Trust Indenture Act.
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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 the Issuer, any other obligor upon the Notes or an
Affiliate of the Issuer shall be considered as though not outstanding, except
that for the purposes of determining whether the 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.
ARTICLE III
ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION
AND APPLICATION OF MONEYS; REPORTS
SECTION 3.01. Trust Accounts; Investments by Trustee.
(a) On or before the Issuance Date, the Trustee shall establish in the name
of the Trustee for the benefit of the Noteholders and the Issuer to the extent
of their interests therein as provided in this Indenture, the Seller
Contribution and Sale Agreement, the Transferor Contribution and Sale Agreement
and in the Servicing Agreement, the following accounts, which accounts shall be
Eligible Accounts:
(i) the Distribution Account; and
(ii) the Reserve Account.
The Reserve Account and the Distribution Account shall be maintained at the
Corporate Trust Office. Subject to the further provisions of this Section
3.01(a), the Trustee shall, upon receipt or upon transfer from another account,
as the case may be, deposit into such accounts all amounts received by it which
are required to be deposited therein in accordance with the provisions of this
Indenture. All such amounts (other than investments made with such amounts,
which shall be payable on each Payment Date to the Servicer as additional
servicing compensation), shall be held by the Trustee in such accounts as part
of the Granted Assets as herein provided, subject to withdrawal by the Trustee
in accordance with, and for the purposes specified in the provisions of, this
Indenture.
(b) The Trustee shall hold in trust but shall not be required to deposit in
any account specified in Section 3.01(a) any payment received by it until such
time as the Trustee shall have identified to its reasonable satisfaction the
nature of such payment and, on the basis thereof, the proper account or accounts
into which such payment is to be deposited. In determining into which of the
accounts, if any, referred to above any amount received by the Trustee is to be
deposited, the Trustee may conclusively rely (in the absence of bad faith on the
part of the Trustee) on the advice of the Servicer. Unless the Trustee is
advised differently in writing by the Lessee making the payment or by the
Servicer in writing (with the Servicer's instruction controlling), the Trustee
shall assume that any amount remitted to it by such Lessee is to be deposited
into the Distribution
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Account pursuant to Section 3.03. The Trustee may establish from time to time
such deadline or deadlines as it shall determine are reasonable or necessary in
the administration of the Granted Assets after which all amounts received or
collected by the Trustee on any day shall not be deemed to have been received or
collected until the next succeeding Business Day.
(c) Neither the Servicer nor the Trustee shall have any right of set-off
with respect to the Reserve Account or the Distribution Account, or any
investment therein.
(d) If on any Payment Date, the aggregate amounts on deposit in the
Distribution Account as of the end of the related Collection Period and the
Reserve Account are greater than or equal to the sum of (i) the remaining
Outstanding Principal Amount of the Notes, (ii) the accrued and unpaid interest
on the Notes, (iii) the accrued and unpaid Servicing Fee and Trustee Fee, (iv)
the amount of unreimbursed Servicing Advances, if any, and (v) any other amounts
owed under the Indenture, the amount on deposit in the Reserve Account will be
deposited into the Distribution Account and used together with the other funds
therein to redeem the Notes.
(e) So long as no Event of Default shall have occurred and be continuing,
all or a portion of the amounts in the Distribution Account and the Reserve
Account, shall be invested and reinvested by the Trustee pursuant to a Servicer
Order in one or more Eligible Investments. Subject to the restrictions on the
maturity of investments set forth in Section 3.01(f), each such Servicer Order
may authorize the Trustee to make the specific Eligible Investments set forth
therein, to make Eligible Investments from time to time consistent with the
general instructions set forth therein, or to make specific Eligible Investments
pursuant to instructions received in writing or by telegraph or facsimile
transmission from the employees or agents of the Servicer identified therein, in
each case in such amounts as such Servicer Order shall specify. The Servicer
agrees to give appropriate and timely investment directions to the Trustee so
that there will not be more than two Business Days in any one calendar year at
the end of which funds in the Distribution Account and the Reserve Account are
not invested, directly or indirectly, pursuant to a Servicer Order in Eligible
Investments that mature on or after the opening of business on the next Business
Day.
(f) In the event that either (i) the Servicer, as the case may be, shall
have failed to give investment directions to the 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, the Trustee shall promptly invest and
reinvest the funds then in the Reserve Account and the Distribution Account, as
the case may be, to the fullest extent practicable in one or more Eligible
Investments. In the absence of written instructions from the Servicer such funds
will be invested in an Eligible Investment which satisfies the requirements of
clause (h) of the definition thereof. All investments made by the Trustee shall
mature no later than the maturity date therefore permitted by Section 3.01(f)
unless the Trustee shall have received written confirmation from each Rating
Agency, that the liquidation of such Eligible Investments prior to their
respective maturity dates,
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will not result in the reduction or withdrawal of such Rating Agency's
then-current rating of the Notes.
(g) Unless payable on demand, no investment of any amount held in the Trust
Accounts 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 Distribution Account and the Reserve Account shall be
transferred by the Trustee to the Servicer in accordance with the written
instructions of the Servicer then in effect on such Payment Date.
(h) Any investment of any funds in the Distribution Account and the Reserve
Account and any sale of any investment held in such accounts, shall be made
under the following terms and conditions:
(i) each such investment shall be made in the name of the Trustee or in the
name of a nominee of the Trustee, in each case in such manner as shall be
necessary to maintain the identity of such investments as assets of the Granted
Assets;
(ii) any certificate or other instrument evidencing such investment shall
be delivered directly to the Trustee or its agent and the Trustee shall have
sole possession of such instrument, and all income on such investment for the
benefit of the Servicer; and
(iii) the proceeds of any sale of an investment shall be remitted by the
purchaser thereof directly to the Trustee for distribution as provided in
paragraph (f) hereof.
(i) If any amounts are needed for disbursement from the Distribution
Account or the Reserve Account and sufficient uninvested funds are not collected
and available therein to make such disbursement, in the absence of a Servicer
Order for the liquidation of investments held therein in an amount sufficient to
provide the required funds, the Trustee may select and cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
accounts.
(j) The Trustee shall not in any way be held liable by reason of any
insufficiency in the Trust Accounts resulting from losses on investments made in
accordance with the provisions of this Section 3.01 (but the institution serving
as Trustee shall at all times remain liable for its own debt obligations, if
any, constituting part of such investments). The Trustee shall not be liable for
any investment made by it in accordance with this Section 3.01 on the grounds
that it could have made a more favorable investment or a more favorable
selection for sale of an investment.
(k) The Servicer shall promptly reimburse the Trustee for the benefit of
the Noteholders for any investment loses resulting from any investment resulting
from a Servicer Order.
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SECTION 3.02. Collection of Moneys.
(a) On or before the Issuance Date, the Servicer shall designate an address
for the receipt directly from Lessees of all Lease Payments, Casualty Payments
and Termination Payments on or in respect of each Lease (which payments may be
aggregated by the Lessee paying the same with Other Lease Payments and which
designated address may be the same designated address to which Other Lease
Payments may be sent). The Servicer shall, within two Business Days of receipt
of any payment at such designated address, deposit such payment, or cause such
payment to be deposited into the Distribution Account. All Lease Payments,
Casualty Payments, Termination Payments and other payments relating to a Lease
received at such designated address and so deposited shall constitute part of
the Granted Assets. Any Other Lease Payments from time to time received at such
designated address or otherwise received by the Servicer shall not constitute
part of the Granted Assets.
(b) The Servicer shall from time to time, deposit any amounts which
constitute a part of the Granted Assets within two Business Days of the receipt
of such amounts into the Distribution Account.
(c) If at any time the Issuer shall receive any payment on or in respect of
any Lease, it shall hold such Payment in trust for the benefit of the Trustee
and the Holders of the Notes, shall segregate such payment from the other
property of the Issuer, and shall, promptly (but in no event later than the
second following Business Day) upon receipt, deposit such payment in the form
received to the Distribution Account for the benefit of the Trustee for the
benefit of the Noteholders.
SECTION 3.03. Distribution Account; Payments.
(a) The Servicer shall within two Business Days of receipt (a "Required
Deposit Date") deposit, or cause to be deposited, the following funds, as
received, into the Distribution Account:
(i) Lease Payments;
(ii) Servicer Advances;
(iii) recoveries from Defaulted Leases to the extent Servicer has not
substituted Substitute Leases for such Defaulted Leases;
(iv) proceeds from repurchases by the Transferor or the Seller, as the case
may be, of Leases due to a Warranty Event or otherwise to the extent the
Transferor, or the Seller, as applicable, has not substituted Substitute Leases
for such Leases;
(v) any Casualty Payments and Prepayments to the extent not already
included in clause (iv) hereof;
(vi) Termination Payments to the extent the Issuer does not reinvest such
Termination Payments in Additional Leases; and
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(vii) payments from the Issuer to effect a redemption of the Notes pursuant
to Section 2.01(b).
(b) Unless the Notes have been declared due and payable pursuant to Section
6.02 and moneys collected by the Trustee are being applied in accordance with
Section 6.06, Available Funds on deposit in the Distribution Account shall be
applied on the related Payment Date by the Trustee in the following order of
priority, to make the following required payments:
(i) (A) to pay the Trustee Fee for such Payment Date and (B) to pay to the
Trustee an amount not to exceed the lesser of (x) any unreimbursed expenses or
liabilities incurred by the Trustee pursuant to the terms of the Indenture, or
(y) the Trustee Priority Expense Amount for such Payment Date;
(ii) to pay the Servicing Fee for such Payment Date;
(iii) to reimburse unreimbursed Servicer Advances in respect of a prior
Payment Date;
(iv) concurrently and pro rata: (A) to make Interest Payments for such
Payment Date on the Class A-1 Notes; (B) to make Interest Payments for such
Payment Date on the Class A-2 Notes; (C) to make Interest Payments for such
Payment Date on the Class A-3 Notes; and (D) to make Interest Payments for such
Payment Date on the Class A-4 Notes;
(v) to make Interest Payments for such Payment Date on the Class B Notes;
(vi) to make Interest Payments for such Payment Date on the Class C Notes;
(vii) to make Interest Payments for such Payment Date on the Class D Notes;
(viii) to make the Class A Principal Payment for such Payment Date (A) to
the Class A-1 Noteholders only, until the Outstanding Principal Amount on the
Class A-1 Notes is reduced to zero, then (B) to the Class A-2 Noteholders only,
until the Outstanding Principal Amount on the Class A-2 Notes is reduced to
zero, then (C) to the Class A-3 Noteholders only, until the Outstanding
Principal Amount on the Class A-3 Notes is reduced to zero and finally, and (D)
to the Class A-4 Noteholders until the Outstanding Principal Amount on the Class
A-4 Notes is reduced to zero;
(ix) to pay the Class B Principal Payment for such Payment Date to the
Class B Noteholders;
(x) to pay the Class C Principal Payment for such Payment Date to the Class
C Noteholders;
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(xi) to pay the Class D Principal Payment for such Payment Date to the
Class D Noteholders;
(xii) to pay the Additional Principal for such Payment Date, if any, as an
additional reduction of principal, first to the Class A-1 Noteholders until the
Outstanding Class A-1 Principal Amount has been reduced to zero, second to the
Class A-2 Noteholders until the Outstanding Class A-2 Principal Amount has been
reduced to zero, third to the Class A-3 Noteholders until the Outstanding Class
A-3 Principal Amount has been reduced to zero, fourth to the Class A-4
Noteholders until the Outstanding Class A-4 Principal Amount has been reduced to
zero, thereafter to the Class B Noteholders as an additional reduction of
principal until the Outstanding Class B Principal Amount has been reduced to
zero, thereafter to the Class C Noteholders until the Outstanding Class C
Principal Amount has been reduced to zero; and thereafter to the Class D
Noteholders until the Outstanding Class D Principal Amount has been reduced to
zero;
(xiii) to make a deposit to the Reserve Account in an amount equal to the
excess, if any, of the Required Reserve Amount over the Available Reserve
Amount, for such Payment Date;
(xiv) to reimburse the Trustee for any expenses or liabilities pursuant to
the terms of this Indenture to the extent not already paid pursuant to Section
3.03(b)(i)(B) hereof; and
(xv) to the Issuer, the balance, if any.
(c) Notwithstanding the foregoing, the Trustee shall retain in the
Distribution Account an amount equal to all Lease Payments received that were
due since the related Calculation Date, and all Casualty Payments, Termination
Payments and other payments received by the Trustee after the Calculation Date
for such Payment Date and shall not distribute any such amounts on such Payment
Date. If at any time any amount or portion thereof previously distributed
pursuant to this Section 3.03(c) shall have been recovered, or shall be subject
to recovery, in any proceeding with respect to the Issuer or otherwise, then for
purposes of determining future distributions pursuant to this Section 3.03(c)
such amount or portion thereof shall be deemed to have not been previously so
distributed.
SECTION 3.04. The Reserve Account.
(a) On the Issuance Date, the Issuer has made an initial deposit of
$1,714,451.72 into the Reserve Account. On each Payment Date, the Trustee shall
transfer to the Reserve Account from the Distribution Account such amounts as
shall be required by Section 3.04(b)(xiii).
(b) If by 12:00 noon, New York City time, one Business Day preceding any
Payment Date, the amount of collected funds on deposit in the Distribution
Account available for distribution under Section 3.03(b) is insufficient to
permit on such Payment Date all distributions required by Section 3.03(b)(i)
through 3.03(b)(xii) and Section 3.03(b)(xiv) (such payments, the "Required
Payments" and such shortfall, an "Available
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Funds Shortfall"), then, to the extent of the Available Reserve Amount on
deposit in the Reserve Account, the Trustee shall transfer, not later than the
end of such Business Day, from the Reserve Account to the Distribution Account
such amount to the extent available as shall be necessary to make on such
Payment Date all Required Payments.
(c) In the event that after giving effect to all the disbursements required
to be made on any Payment Date, the Available Reserve Amount exceeds the
Required Reserve Amount, the Trustee shall transfer, not later than the end of
business on such Payment Date, an amount equal to such excess to the Issuer.
(d) If on any Payment Date, the aggregate amount on deposit in the
Distribution Account as of the end of the related Collection Period and the
Reserve Account are greater than or equal to the sum of (i) the remaining
Outstanding Principal Amount of the Notes, (ii) the accrued and unpaid interest
on the Notes, (iii) the accrued and unpaid Servicing Fee and Trustee Fee, (iv)
the amount of unreimbursed Servicing Advances, if any, and (v) any other amounts
owed under the Indenture, the amount on deposit in the Reserve Account will be
deposited into the Distribution Account and used together with the other funds
therein to redeem the Notes.
(e) Upon termination of this Indenture, any balance remaining in the
Reserve Account, after all obligations to the Noteholders hereunder have been
fully satisfied, shall be paid to reimburse the Trustee for any amounts owing to
it arising from the performance of its obligations under this Indenture and,
then, to the Issuer.
SECTION 3.05. Reports by Trustee; Notices of Certain Payments.
(a) The Trustee shall within two Business Days after the request of the
Issuer, the Servicer or any Noteholder, deliver to the requesting person a
written report setting forth the amounts on deposit in the Reserve Account and
the Distribution 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, and based solely on, the Monthly Report from the Servicer pursuant
to the Servicing Agreement, the Trustee shall mail to the Issuer, Charter, each
Rating Agency and the Servicer and make available to each Noteholder the
following information:
(i) the Outstanding Principal Amount of all Outstanding Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes, Class C Notes
and Class D Notes, respectively;
(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, Class B Notes, Class C Notes and Class D 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 3.03(b)(i) and Section
3.03(b)(ii); and
(iv) the amount on deposit in the Reserve Account and the Distribution
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 3.02 and 3.03.
(c) With each report of the Trustee furnished pursuant to this Section 3.05
following any Payment Date, the Trustee shall enclose a copy of the relevant
Servicing Report and the report required to be furnished to the Trustee by the
Servicer following such Payment Date pursuant to the Servicing Agreement or, if
such reports have not been received, a statement to such effect. The Trustee may
elect to deliver the reports described in this Section 3.05 electronically or by
facsimile.
(d) Upon request of a Noteholder, the Trustee will provide information as
to the Outstanding Principal Amount of each Class of Notes.
SECTION 3.06. Trustee May Rely on Certain Information from Charter and
Servicer.
Pursuant to the Servicing Agreement and Section 3.02 through 3.05 hereof,
the Servicer is required to furnish to the Trustee from time to time certain
information and make various calculations which are relevant to the performance
of the Trustee's duties in this Article Three and in Article Four of this
Indenture. The 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 the 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.
ARTICLE IV
RELEASE OF LEASES AND EQUIPMENT
SECTION 4.01. Release of Equipment.
Subject to the satisfaction of the provisions of Section 4.02, the 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
3.03(b) of the Servicing Agreement (unless retained by the 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, (c) the repurchase of the
related Lease in accordance with the provisions of the Servicing Agreement, (d)
the addition of an Additional Lease to the extent new Equipment is provided in
replacement of such Equipment in accordance with the provisions of the Servicing
Agreement and (e) upon the substitution of a Substitute Lease in accordance with
the provisions of the Servicing Agreement. The proceeds of any such
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sale, repurchase or releasing shall be deposited in the Distribution Account for
disposition under this Indenture.
SECTION 4.02. Release of Leases Upon Final Lease Payment.
In the event that the Trustee shall have received notice (either in writing
or orally with prompt written or telecopied confirmation) from the Servicer that
the 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, (ii) a Termination
Payment in respect of such Lease, (iii) a Lease Repurchase Amount in respect of
such Lease, (iv) a Casualty Payment under such Lease (and, following such final
Lease Payment, Casualty Payment, Lease Repurchase Amount 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 recoveries with respect to such
Defaulted Lease, such Lease shall be released from the lien of this Indenture.
SECTION 4.03. Execution of Documents.
The Trustee shall promptly execute and deliver such documents, including,
without limitation, partial releases and termination statements (which shall be
furnished to the Trustee by the Issuer), and take such other actions as the
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 4.01 or 4.02.
ARTICLE V
SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER
SECTION 5.01. Servicer Events of Default.
If a Servicer Event of Default shall have occurred and be continuing, the
Trustee shall, upon the written request of the holders of 66-2/3% of the then
Outstanding Principal Amount of the Notes, give notice in writing to the
Servicer of the termination of all of the rights and obligations of the Servicer
under the Servicing Agreement. On and after the giving of such written notice,
all rights and obligations of the Servicer under the Servicing Agreement,
including, without limitation, the Servicer's right thereunder to receive the
Servicing Fee, shall pass to, be vested in, and be assumed by the Trustee, and
the Trustee shall be authorized to, and shall, execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such termination and of such passing,
vesting, and assumption; provided that in performing the duties of the Servicer
under the Servicing Agreement the Trustee shall at all times be deemed to be
acting as the 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 the Trustee, including, without limitation, those set
forth in Article Seven hereof.
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SECTION 5.02. Substitute Servicer.
Notwithstanding the provisions of Section 5.01, the Trustee may, if it
shall be unwilling to continue to act as the successor to the Servicer in
accordance with Section 5.01, or shall, if it is unable to continue to so act or
is so instructed in writing by the holders of 66-2/3% of the then Outstanding
Principal Amount of the Notes, appoint a successor to the Servicer in accordance
with the provisions of Section 7.03 of the Servicing Agreement.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
SECTION 6.01. 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 (i) Principal Payments at the Stated Maturity of
the relevant Notes or (ii) Interest Payments within 4 days of the date on which
the Notes when such become due and payable;
(b) the failure of the Seller, the Transferor, or the Servicer to make
payments or deposits required under the Transaction Documents within three (3)
Business Days;
(c) the failure of the Seller or the Servicer, the Transferor, the Issuer,
or the Trustee to perform any covenant with respect to the Transaction
Documents, which failure has a material adverse effect on the Noteholders and
which continues unremedied for a period of 60 days after discovery or notice of
such failure (provided no such cure period shall apply to the Seller's failure
to accept the reassignment of any Lease that is not an Eligible Lease, and
further provided, only a five (5) day cure period will apply to the Seller's,
the Transferor's, the Issuer's or the Trustee's covenant not to grant a security
interest in or otherwise create a lien on the Leases);
(d) any representation or warranty by the Seller, the Transferor, the
Trustee or the Issuer is not correct in any material respect and continues for a
period of 60 days after discovery or notice of such failure (provided that the
Transferor and/or the Seller can "cure" such misrepresentation by purchasing the
Leases related thereto);
(e) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Issuer or the Transferor 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 the Issuer or the Transferor a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization,
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arrangement, adjustment, or composition of or in respect of the Issuer or the
Transferor under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator, or other similar official
of the Issuer or the Transferor 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;
(f) the commencement by the Issuer or the Transferor of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Issuer or the Transferor 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 the Issuer
or the Transferor or of any substantial part of its property, or the making by
it of an assignment for the benefit of creditors, or the Issuer's failure or the
Transferor's failure to pay its debts generally as they become due, or the
taking of corporate action by the Issuer or the Transferor in furtherance of any
such action; or
(g) the Issuer has become an "Investment Company" as defined under the
Investment Company Act of 1940, as amended.
SECTION 6.02. Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default occurs, the unpaid Outstanding 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 the Issuer.
(b) At any time after such an Event of Default has occurred and before a
final judgment or decree for payment of the money due has been obtained by the
Trustee as hereinafter in this Article provided, the holders of Notes evidencing
66-2/3% of the then Outstanding Principal Amount of the Notes by written notice
to the Issuer and the Trustee, may rescind and annul such declaration and its
consequences if the Issuer has paid or deposited with the Trustee a sum
sufficient to pay:
(i) all Principal Payments on any Class A Notes, Class B Notes, Class
C Notes and Class D 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 a rate per
annum equal to the appropriate Note Interest Rate,
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(ii) all Interest Payments due with respect to any Class A Notes,
Class B Notes, Class C Notes and Class D 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
(iii) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements, and advances of the
Trustee, its agents and counsel.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 6.03. Remedies.
(a) If an Event of Default occurs and is continuing of which a Responsible
Officer has actual knowledge, the Trustee shall immediately give notice to each
Noteholder as set forth in Section 7.02.
(b) Following any acceleration of the Notes, the Trustee shall have all of
the rights, powers and remedies with respect to the Granted Assets as are
available to secured parties under the Uniform Commercial Code or other
applicable law. Such rights, powers and remedies may be exercised by the Trustee
in its own name as trustee of an express trust.
(c) If an Event of Default specified in Section 6.01(a) through Section
6.01(d), or Section 6.01(g), occurs and is continuing, the Trustee is authorized
to recover judgment in its own name and as trustee of an express trust against
the Issuer for the whole amount of principal and interest remaining unpaid.
(d) In exercising its rights and obligations under this Section 6.03, the
Trustee may sell the Granted Assets; provided that if the Event of Default
involves other than non-payment of principal or interest on the Notes, then such
sale must be for an amount greater than or equal to amounts due under Section
6.06 unless directed otherwise by the Holders of 66-2/3% of the then Outstanding
Principal Amount of the Notes. Neither the Trustee nor any Noteholder shall have
any rights against the Issuer other than to enforce the Lien against the Leases
and the Equipment and to sell the Granted Assets.
SECTION 6.04. 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 the Issuer, Charter, the Servicer or any other
obligor upon the Notes or the other obligations secured hereby or relating to
the property of the Issuer, Charter, the Servicer or of such other obligor or
their creditors, the Trustee (irrespective of whether the principal of the Notes
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Issuer, Charter or the Servicer for the payment of overdue principal or
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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 the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the 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 the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07.
(b) Nothing herein contained shall be deemed to authorize the 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 the Trustee to vote in respect
of the claim of any Noteholder in any such proceeding; however, the Trustee may
be a member, voting or otherwise, of any committee of creditors appointed in
such matter.
SECTION 6.05. 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 the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the 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
the 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 6.06. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article following an
Event of Default, and any moneys that may then be held or thereafter received by
the Trustee shall be applied in the order specified in Section 3.03(b); provided
that, for the purpose of such application, the Principal Payment for each Class
shall be deemed to equal the Outstanding Principal Amount of such Class, at the
date or dates fixed by the
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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.
SECTION 6.07. 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 the Trustee of a
continuing Event of Default;
(ii) the Holders of not less than 66-2/3% of the then Outstanding Principal
Amount of the Notes shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(iii) such Noteholder or Noteholders have offered to the Trustee adequate
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(iv) the Trustee for 30 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 the Trustee during such
30-day period by the Holders of 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 6.07 shall be construed as limiting the
rights of otherwise qualified Noteholders to petition a court for the removal of
a Trustee pursuant to Section 7.09(h) hereof.
SECTION 6.08. 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 the Granted Assets, 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 Payment Dates applicable for such payments,
including the Stated Maturity, and to institute suit for the enforcement of any
such payment, and such rights shall not be impaired without the consent of such
Noteholder.
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SECTION 6.09. Restoration of Rights and Remedies.
If the 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
the Trustee or to such Noteholder, then and in every such case, subject to any
determination in such proceeding, the Issuer, the Trustee and the Noteholders
shall be restored severally and respectively to their former positions hereunder
and thereafter all rights and remedies of the 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 2.04(f), no right or
remedy herein conferred upon or reserved to the 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 the 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
the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the 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 10.01(a)(i) and (ii) have been satisfied in
full, the Holders of 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 the Trustee or exercising any trust
or power conferred on the Trustee. Notwithstanding the foregoing,
(i) no such direction shall be in conflict with any rule of law or with
this Indenture;
(ii) the Trustee shall not be required to follow any such direction which
the Trustee reasonably believes might result in any liability on the part of the
Trustee for which the Trustee is not adequately indemnified by the Noteholders,
or otherwise; and
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(iii) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with any such direction; provided that the Trustee
shall give notice of any such action to each Noteholder.
SECTION 6.13. Sale of Granted Assets.
(a) The power to effect any sale of any portion of the Granted Assets
described pursuant to Section 6.03 shall not be exhausted by any one or more
sales as to any portion of the Granted Assets remaining unsold, but shall
continue unimpaired until the entire Granted Assets shall have been sold or all
amounts payable on the Notes shall have been paid. The 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 Granted Assets, the 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, the Trustee shall not in any
private sale sell to a third party the Granted Assets, or any portion thereof,
unless,
(i) until such time as the conditions specified in Sections 10.01(a)(i) and
(ii) have been satisfied in full, the holders of 66-2/3% of the then Outstanding
Principal Amount of each Class of the Notes voting separately consent to or
direct the 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 the Trustee hereunder and the entire unpaid principal amount of
the Notes and interest due or to become due thereon in accordance with Section
6.06 on the Payment Date next succeeding the date of such sale.
The foregoing provisions shall not preclude or limit the ability of the Trustee
to purchase all or any portion of the Granted Assets at a private sale.
(c) In connection with a sale of all or any portion of the Granted Assets:
(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) the Trustee shall execute and deliver an appropriate instrument of
conveyance transferring its interest in any portion of the Granted Assets in
connection with a sale thereof;
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(iii) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its interest in any
portion of the Granted Assets 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
the 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 Granted Assets shall be commercially reasonable.
(e) The provisions of this Section 6.13 shall not be construed to restrict
the ability of the Trustee to exercise any rights and powers against the Issuer
or the Granted Assets that are vested in the Trustee by this Indenture,
including, without limitation, the power of the 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.
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
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
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
applicable Payment Dates for such payments, including the Stated Maturity as
applicable.
SECTION 6.15. Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE VII
THE TRUSTEE
SECTION 7.01. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default known to the
Trustee,
(i) the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically required
to be furnished to the Trustee, the Trustee shall be under a duty to examine the
same 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 the Trustee, the 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 the
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) the 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
7.03(f) hereof, that the Trustee was negligent in ascertaining the pertinent
facts;
(iii) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Noteholders in accordance with Section 6.12 relating to the time, method, and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture;
and
(iv) no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have
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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 the Trustee shall be subject to the provisions of this Section.
SECTION 7.02. Notice of Defaults or Events of Default.
Within five Business Days after a Responsible Officer obtaining actual
knowledge of the occurrence of any Default or Event of Default hereunder, the
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, and the Rating Agencies notice of such Default or
Event of Default hereunder known to the Trustee, unless such Default or Event of
Default shall have been cured or waived.
SECTION 7.03. Certain Rights of Trustee.
Subject to the provisions of Section 7.01:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, 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 the Issuer mentioned herein shall be
sufficiently evidenced by a Issuer Request or Issuer Order and any action of the
Issuer may be sufficiently evidenced by a Issuer Order;
(c) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;
(d) the Trustee may consult with counsel as to legal matters and the
written advice of any such counsel selected by the 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) the 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 the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report,
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notice, request, direction, consent, order, note, debenture, other evidence of
indebtedness, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Issuer, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 7.04. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the Trustee's
certificates of authentication, shall be taken as the statements of the Issuer,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture,
the Servicing Agreement, the Seller Contribution and Sale Agreement, the
Transferor Contribution and Sale Agreement, the Grant by the Issuer, or of the
Notes or the Granted Assets. The Trustee shall not be accountable for the use or
application by the Issuer of the proceeds of the Notes.
SECTION 7.05. May Hold Notes.
The Trustee, in its individual or any other capacity, may become the owner
or pledgee of Notes and may otherwise deal with the Issuer with the same rights
it would have if it were not Trustee.
SECTION 7.06. Money Held in Trust.
Money and investments held by the 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 7.07. Compensation, Reimbursement, etc.
(a) Except as provided by Section 8.11, the Trustee shall be paid its
monthly Trustee Fee on each Payment Date to the extent that amounts are
available pursuant to Section 3.03(b)(i)(A) hereof, solely from and only to the
extent that amounts are available therefrom, such compensation for all services
rendered by it hereunder as the Servicer and the Trustee may agree in writing
(which compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust).
(b) Except as provided by Section 8.11, the Trustee shall be reimbursed
solely from and only to the extent that amounts are available pursuant to
Section 3.03(b)(i)(B) and (xiv), for all reasonable expenses, disbursements, and
advances
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incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement,
or advance as may be attributable to its negligence or bad faith.
(c) Not withstanding anything to the contrary, to the extent that amounts
described in this Section 7.07 are not paid, such amounts shall not be recourse
obligations of the Issuer.
SECTION 7.08. Corporate Trustee Required; Eligibility.
There shall at all times be a 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 the 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 "A-" from S&P.
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 the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
This Indenture shall always have a Trustee who satisfies the requirements
of Section 310(a)(1) of the Trust Indenture Act. The Trustee is subject to the
provisions of Section 310(b) of the Trust Indenture Act regarding
disqualification of a trustee upon acquiring any conflicting interest.
SECTION 7.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 7.10.
(b) The Trustee may resign at any time by giving written notice thereof to
the Issuer and by mailing notice of resignation by first-class mail, postage
prepaid, to Noteholders at their addresses appearing on the Note Register.
(c) The Trustee may be removed at any time by Act of the holders of not
less than a majority of the then Outstanding Principal Amount of the Notes,
delivered to the Trustee and the Issuer.
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(d) If the Trustee shall resign, be removed, or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Issuer,
with the consent of the holders of 66-2/3% of the Outstanding Principal Amount
of the Notes, by an act of the Issuer, shall promptly appoint a successor
Trustee.
(e) If no successor Trustee shall have been so appointed by the 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, the Trustee or any
Noteholder may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(f) The Issuer shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor 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 Trustee and the address of
its Corporate Trust Office.
(g) The Issuer may remove the Trustee if the Trustee fails to comply with
Section 7.08 of this Indenture.
(h) If the 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 the Trustee and the appointment of a successor
Trustee.
SECTION 7.10. Acceptance of Appointment by Successor.
(a) Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuer and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Issuer or the
successor Trustee, such retiring Trustee shall, upon payment of its charges and
expenses, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Issuer shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
(b) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Notes shall have been authenticated, but not delivered, by the Trustee then
in office, any successor by merger, conversion, or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Notes. The 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 Trustees.
(a) At any time or times, if the Issuer, the Trustee or any Noteholder
determines that it is necessary for the purpose of meeting the legal
requirements of any jurisdiction in which any assets of the Granted Assets may
at the time be located, the Issuer and the Trustee shall have power to appoint,
and, upon the written request of the Trustee or the Holders of a majority of the
then Outstanding Principal Amount of the Notes, the Issuer shall for such
purpose join with the Trustee in the execution, delivery, and performance of all
instruments and agreements necessary or proper to appoint one or more Persons
approved by the Trustee either to act as co-trustee, jointly with the Trustee,
of all or any part of the Granted Assets, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Issuer does not join in
such appointment within 15 days after the receipt by it of a request so to do,
or in case an Event of Default has occurred and is continuing, the Trustee, or
the holders of a majority of the then Outstanding Principal Amount of the Notes,
alone shall have power to make such appointment. Any co-trustee or separate
trustee appointed hereunder need not satisfy the requirements of Section 7.08.
(b) Should any written instrument from the 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 the 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
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personal property held by, or required to be deposited or pledged with, the
Trustee hereunder, shall be exercised, solely by the Trustee;
(ii) the rights, powers, duties, and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such appointment
shall be conferred or imposed upon and exercised or performed by the Trustee or
by the Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate trustee,
except to the extent that, under any law of any jurisdiction in which any
particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-trustee or separate
trustee;
(iii) the Trustee at any time, by an instrument in writing executed by it,
with the concurrence of the Issuer evidenced by a Issuer 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, the
Trustee shall have power to accept the resignation of, or remove, any such
co-trustee or separate trustee without the concurrence of the Issuer; upon the
written request of the Trustee, the Issuer shall join with the Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to effectuate such resignation or removal. A successor to any
co-trustee or separate trustee 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 the Trustee or any other such trustee
hereunder and the 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
the Trustee with due care or appointed in accordance with directions to the
Trustee pursuant to Section 6.12; and
(v) any Act of Noteholders delivered to the Trustee shall be deemed to have
been delivered to each such co-trustee and separate trustee.
SECTION 7.13. Acceptance by Trustee.
The Trustee hereby acknowledges the conveyance of the Granted Assets and
the receipt of the Leases and the other Granted Assets granted by the Issuer
hereunder and declares that the Trustee, through a custodian, will hold such
Leases and other Granted Assets conveyed by the 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 the Issuer.
The Trustee is subject to Trust Indenture Act Section 311(a), excluding any
creditor relationship listed in Trust Indenture Act Section 311(b). A Trustee
who has resigned or been removed shall be subject to Trust Indenture Act Section
311(a) to the extent indicated therein.
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SECTION 7.15. Reports by 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, the 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). The Trustee also shall comply with Trust
Indenture Act Section 313(b). The 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. The Issuer or any other obligor upon the Notes shall notify
the Trustee if the Notes become listed on any stock exchange or market trading
system.
SECTION 7.16. No Proceedings.
The Trustee hereby agrees that it will not, with respect to its fees and
expenses, directly or indirectly institute, or cause to be instituted, against
the Issuer any proceeding of the type referred to in Section 6.01(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 VIII
COVENANTS
SECTION 8.01. Payment of Principal and Interest.
The 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 8.02. Maintenance of Office or Agency; Chief Executive Office.
(a) The 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 the Issuer in respect of the Notes and
this Indenture may be served. The Issuer hereby appoints the Trustee as its
agent to receive all such presentations, surrenders, notices and demands.
(b) The chief executive office of the Issuer, and the office at which the
Issuer maintains its records with respect to the Leases, the interests in the
Equipment, and the transactions contemplated hereby, is currently located at 530
Fifth Avenue, New York, New York; and records with respect to certain of the
Leases are maintained at 530 Fifth Avenue, New York, New York. The Issuer will
not change the location of such offices without giving the Trustee at least 30
days prior written notice thereof.
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SECTION 8.03. 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 Distribution Account pursuant to
Section 3.03(b) or Section 6.06 shall be made on behalf of the Issuer by the
Trustee, and no amounts so withdrawn from the Distribution Account for payments
of Notes shall be paid over to the Issuer under any circumstances except as
provided in this Section 8.03 or in Section 3.03(b) or Section 6.06.
(b) In making payments hereunder, the Trustee will:
(i) allocate all sums received for payment to the Noteholders on each
Payment Date among such Noteholders pursuant to Section 3.03(b) or Section 6.06,
as applicable, in accordance with the information known to the 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 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 the Issuer shall have one or more Paying Agents, it will, prior to
each Payment Date, 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 the Trustee) the Issuer will promptly notify the Trustee of
its action or failure so to act.
The Issuer will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the 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 the Trustee notice of any default by the Issuer (or any other
obligor upon the Notes) in the making of any payment of principal or
interest.
(c) Except as required by applicable law, any money held by the 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
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Noteholder shall be discharged from such trust and, subject to applicable
escheat laws, paid to the Issuer upon request; and such Noteholder shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Trustee with respect to such trust money shall
thereupon cease.
SECTION 8.04. Corporate Existence; Merger; Consolidation, etc.
(a) The Issuer will keep in full effect its existence and rights as a
limited liability company under the laws of the State of Delaware.
(b) The Issuer shall at all times observe and comply in all material
respects with (i) all laws applicable to it, (ii) all requisite and appropriate
organizational and other formalities in the management of its business and
affairs and the conduct of the transactions contemplated hereby and by the
Underwriting Agreement, the Seller Contribution and Sale Agreement, the
Transferor Contribution and Sale Agreement and the Servicing Agreement.
(c) The Issuer shall not (i) consolidate or merge with or into any other
Person or convey or transfer its properties and assets substantially as an
entirety to any other Person or (ii) commingle its assets with those of any
other Person, except as permitted under the Transaction Documents.
SECTION 8.05. Protection of Granted Assets; Further Assurances.
The Issuer will from time to time execute and deliver all such supplements
and amendments hereto and all such Financing Statements, continuation
statements, instruments of further assurance, and other instruments, and will
take such other action as may be necessary or advisable to:
(i) Grant more effectively all or any portion of the Granted Assets;
(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 the Trustee in each of the Leases, in the Equipment and all other
property included in the Granted Assets; provided, that the Issuer shall not be
required to file Financing Statements with respect to the interests in the
Equipment in addition to those contemplated by the Servicing Agreement;
(iv) enforce or cause the 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 the Granted Assets and preserve and defend the
rights of the Trustee and the Noteholders in such Leases (including the right to
receive all payments due or to
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become due thereunder), interests in the Equipment and other property against
the claims of all Persons and parties.
The Issuer, upon the Issuer's failure to do so, hereby designates the Trustee
its agent and attorney-in-fact to execute any Financing Statement or
continuation statement required pursuant to this Section 8.05; provided,
however, that such designation shall not be deemed to create a duty in the
Trustee to monitor the compliance of the Issuer with the foregoing covenants;
and provided, further, that the duty of the Trustee to execute any instrument
required pursuant to this Section 8.05 shall arise only if a Responsible Officer
of the Trustee has actual knowledge of any failure of the Issuer to comply with
the provisions of this Section 8.05.
SECTION 8.06. Commission Reports; Reports to Trustee; Reports to
Noteholders.
To the extent it has not satisfied the following requirements by reporting
under Section 8.09 hereof, the Issuer shall:
(a) file with the Trustee, within 15 days after the Issuer is required to
file the same with the Commission, copies of the annual reports and of the
information, documents and other reports which the 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 the Issuer is 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 the Issuer will file with the 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 the 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 the Issuer with the
conditions and covenants provided for in this Indenture as may be required by
such rules and regulations; and
(c) furnish to the 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 the Trustee
pursuant to the provisions of Subsections (a) and (b) of this Section 8.06 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.
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SECTION 8.07. Performance of Obligations; Servicing Agreement.
(a) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Servicing Agreement, the Seller
Contribution and Sale Agreement, the Transferor Contribution and Sale Agreement,
the Notes, the Underwriting Agreement and the Placement Agent Agreement.
(b) The 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 the Granted
Assets, 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 instrument, except as expressly provided in this Indenture
or the Servicing Agreement.
(c) If any Authorized Officer shall have knowledge of the occurrence of a
default under the Servicing Agreement, the Issuer shall promptly notify the
Trustee and the Noteholders thereof, and shall specify in such notice the
action, if any, the Issuer is taking in respect of such default. Unless
consented to by the Holders of 66-2/3% of the then Outstanding Principal Amount
of the Notes and, unless the Issuer has confirmed with the Rating Agencies that
such waiver will not cause the then existing rating of the Notes to be
decreased, the Issuer may not waive any default under or amend the Servicing
Agreement.
SECTION 8.08. Negative Covenants.
The Issuer will not:
(a) sell, transfer, exchange or otherwise dispose of any portion of the
Granted Assets except as expressly permitted by this Indenture;
(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 Granted Assets;
(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 the 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,
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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 the Granted Assets or any part thereof or any interest therein or the
proceeds thereof other than the lien of this Indenture, or (iii) subject to
Section 4.01(c) of the Servicing Agreement, permit the lien of this Indenture
not to constitute a valid first priority security interest in the Granted
Assets; or
(g) make any loan or advance to any Affiliate of the Issuer or to any other
Person.
SECTION 8.09. Information as to Issuer.
The Issuer shall deliver to the Trustee and, the Trustee shall deliver to
each Rating Agency and to each holder of outstanding Notes (and, upon the
request of any Noteholder, to any prospective transferee of any Notes):
(a) Notice of Event of Default - immediately upon becoming aware of the
existence of any condition or event which constitutes a Default or an Event of
Default, a written notice describing its nature and period of existence and what
action the Issuer is taking or proposes to take with respect thereto; and
(b) Report on Proceedings - promptly upon the Issuer's becoming aware of
(i) any proposed or pending investigation of it by any governmental authority or
agency, or (ii) any pending or proposed court or administrative proceeding which
involves or may involve the possibility of materially and adversely affecting
the properties, business, prospects, profits or condition (financial or
otherwise) of the Issuer, a written notice specifying the nature of such
investigation or proceeding and what action the Issuer is taking or proposes to
take with respect thereto and evaluating its merits.
SECTION 8.10. Taxes.
The Issuer shall pay all taxes when due and payable or levied against its
assets, properties or income, including any property that is part of the Granted
Assets.
SECTION 8.11. Indemnification.
(a) The Issuer agrees to indemnify and hold harmless the Trustee and each
Noteholder (each an "Indemnified Party") against any and all liabilities, unpaid
fees, 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 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 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 the 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
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the United States or any state or local government or governmental authority;
provided that, all amounts payable pursuant to this Section 8.11 shall, except
to the extent payable pursuant to Section 3.03(b)(i) hereof, be fully
subordinated to amounts payable under the Notes, shall be without recourse to
the 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 the Issuer except to
the extent that all amounts otherwise due and payable under the terms of this
Indenture have been fully paid.
(b) To the extent that the Trustee remains unpaid for its fee or
unreimbursed for its expenses and liabilities after application of all amounts
pursuant to Section 3.03 and after giving effect to all amounts which may be
recovered pursuant to Section 8.11(a), Charter Financial, Inc. agrees to
indemnify the Trustee for all such unpaid or unreimbursed amounts.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of any Noteholders, the Issuer, by an Issuer Order,
and the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(i) to add to the covenants of the Issuer for the benefit of the
Noteholders, or to surrender any right or power herein conferred upon the
Issuer;
(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 the Trustee any property subject or required to be subjected to the lien of
this Indenture; provided such action pursuant to this Section 9.01(a) shall not
adversely affect the interests of the Noteholders in any respect or result in
the reduction or withdrawal of the then current ratings of the Outstanding
Notes.
(b) The Trustee shall promptly deliver to each Noteholder and each Rating
Agency a copy of any supplemental indenture entered into pursuant to Section
9.01(a).
SECTION 9.02. Supplemental Indentures with Consent of Noteholders.
(a) With the consent of the holders of not less than 66-2/3% of the then
Outstanding Principal Amount of the Notes and by Act of said Noteholders
delivered to
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the Issuer and the Trustee, the Issuer, by a Issuer Order, and the 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
be entered into if it would result in the reduction or withdrawal of the then
current ratings of the Outstanding Notes and 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 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 the Granted Assets or,
except as provided in Sections 4.01 or 4.02, 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) The Trustee shall promptly deliver to the Servicer, each Noteholder and
each Rating Agency a copy of any supplemental indenture entered into pursuant to
Section 9.02(a).
SECTION 9.03. Execution of Supplemental Indentures.
In executing any supplemental indenture (a) pursuant to Article 9.01 of
this Indenture or (b) pursuant to Section 9.02 of this Indenture without the
consent of each holder of the Notes to the execution of the same, the Trustee
shall be entitled to receive, and (subject to Section 7.01) shall be, fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into
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any supplemental indenture which affects the Trustee's own rights, duties,
liabilities, or immunities under this Indenture or otherwise.
SECTION 9.04. 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 9.05. 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 the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Issuer shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the Issuer, to any
such supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
SECTION 9.06. 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 X
SATISFACTION AND DISCHARGE
SECTION 10.01. 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 the Trustee, on demand of and at the expense of the
Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(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 2.04 and (2) Notes for whose
payment money has theretofore been deposited in trust or segregated and
held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 8.03(c)) have been
delivered to the Trustee for cancellation; or
(B) the final installments of principal on all such Notes not
theretofore delivered to the Trustee for cancellation
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(1) have become due and payable, or
(2) will become due and payable at their Stated Maturity, as
applicable, within one year,
and the Issuer has irrevocably deposited or caused to be deposited with the
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 the 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) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer for the benefit of the Noteholders or otherwise; and
(iii) the Issuer has delivered to the 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, the Trustee shall deliver to the Issuer or, upon Issuer Order, its
assignee, all cash, securities and other property held by it as part of the
Granted Assets other than funds deposited with the Trustee pursuant to Section
10.01(i)(B), for the payment and discharge of the Notes.
(b) Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuer to the Trustee under Sections 7.07 and 8.11, and, if
money shall have been deposited with the Trustee pursuant to Section
10.01(a)(i)(B), the obligations of the Trustee under Section 10.02 and Section
8.03(c) shall survive.
(c) The Trustee shall provide prompt written notice to each Rating Agency
of any satisfaction and discharge of this Indenture pursuant to this Article X.
SECTION 10.02. Application of Trust Money.
Subject to the provisions of Section 8.03(c), all money deposited with the
Trustee pursuant to Sections 10.01 and 8.03 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 the Trustee.
SECTION 10.03. Redemption.
The Notes are subject to redemption (a) following an optional redemption by
the Issuer pursuant to Section 2.01(b), (b) once the conditions in Section
3.03(d) are satisfied, or (c) following a Clean-Up Call as defined in the
Servicing Agreement.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. 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 11.02. 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. The Issuer, the Trustee, the Note Registrar and all other parties
shall have the protection of Trust Indenture Act Section 312(c).
SECTION 11.03. Officers' Certificate and Opinion of Counsel as to
Conditions Precedent.
Upon any request or application by the Issuer (or any other obligor upon
the Notes) to the Trustee to take any action under this Indenture, the Issuer
(or such other Obligor) shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements set forth
in Section 11.04) 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
(b) an Opinion of Counsel (which shall include the statements set forth in
Section 11.04) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been complied with.
SECTION 11.04. 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;
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(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 11.05. Nonpetition.
The Trustee shall not petition or otherwise invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its respective property, or ordering the winding up or liquidation of the
affairs of the Issuer.
SECTION 11.06. Limitation of Liability of Members.
It is expressly understood and agreed by the parties hereto that (i) this
Agreement is executed and delivered by the Issuer, a special purpose Delaware
limited liability company governed under the LLC Agreement, in the exercise of
the powers and authority conferred and vested in it, (ii) the representations,
undertakings and agreements herein made on the part of the Issuer are made and
intended not as personal representations, undertakings and agreements by any
Member but are made and intended for the purpose of binding only the Issuer,
(iii) nothing herein contained shall be construed as creating any liability for
any Member, individually or personally, to perform any covenant either expressed
or implied contained herein, all such liability, if any, being expressly waived
by any Person claiming by, through or under this Agreement and (iv) under no
circumstances shall any Member be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Issuer under this Agreement.
SECTION 11.07. Location of Leases.
The Servicer shall maintain the Leases at its office in 530 Fifth Avenue,
New York, New York 10036 or at such other offices of the Servicer as shall from
time to time be identified by prior written notice to the Trustee. Subject to
the foregoing, the Servicer may temporarily move individual Leases or any
portion thereof without notice as necessary to conduct collection and other
servicing activities.
SECTION 11.08. Income Tax Characterization.
The parties hereto agree that it is their mutual intent that, for all
applicable tax purposes, the Notes will constitute indebtedness and that for all
applicable tax purposes, accordingly, the Issuer will be treated as sole and
exclusive owner of the Granted Assets. Further, each party hereto and each
Noteholder (by receiving and holding a Note), hereby covenants to every other
party hereto and to every other
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Noteholder to treat the Notes as indebtedness for all applicable tax purposes in
all tax filings, reports and returns and otherwise, and further covenants that
neither it nor any of its Affiliates will take, or participate in the taking of
or permit to be taken, any action that is inconsistent with the treatment of the
Notes as indebtedness for tax purposes. All successors and assigns of the
parties hereto shall be bound by the provisions hereof.
SECTION 11.09. Trustee Authorization.
The Trustee is hereby authorized to execute, deliver and perform the letter
of representations provided by The Depository Trust Company.
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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.
CHARTER EQUIPMENT LEASE 1999-1 LLC
By: CHARTER FUNDING CORPORATION V
By: ______________________________________
Name:
Title:
LASALLE BANK NATIONAL ASSOCIATION,
as Trustee
By: ______________________________________
Name:
Title:
CHARTER FINANCIAL, INC., as Servicer
By: ______________________________________
Name:
Title:
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SCHEDULE 1
SCHEDULE OF LEASES
<PAGE>
EXHIBIT A-1
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.
CHARTER EQUIPMENT LEASE 1999-1 LLC
[_]% CLASS A-1 LEASE-BACKED NOTE, SERIES 1999-1
CUSIP NO. [________________]
No. R-1 $50,642,266
Charter Equipment Lease 1999-1 LLC, a limited liability company 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 fifty million six hundred forty two thousand, two hundred sixty
six dollars ($50,642,266), payable in monthly installments beginning on August
25, 1999, 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
August 25, 1999 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 August 25, 1999, 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
<PAGE>
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 the
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 August, 2000, 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 the
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
the Issuer designated as its "[_]% Class A-1 Lease-Backed Notes, Series 1999-1"
(herein called the "Class A-1 Notes") limited in aggregate principal amount of
$50,642,266, issued under the Indenture, dated as of August 1, 1999 (herein
called the "Indenture"), among the Issuer, Charter Financial, Inc., as Servicer,
and LaSalle Bank National Association, as Trustee (herein called the "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 the Issuer, the 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 the Indenture.
This Class A-1 Note will be secured by the pledge to the Trustee of the
Granted of Assets.
If an Event of Default under the Indenture has been declared by the
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 the 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 the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Holders of 66-2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, on behalf of all the
Holders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any
A-1-2
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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 here for 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 the Trustee in 135 South LaSalle Street, Chicago, Illinois 60674
and at any other office or agency maintained by the 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.
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 the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee and any agent of the Issuer or the 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 the Issuer, the 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, without
regard to the conflict of law provisions thereof.
A-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: [__________], 1999
CHARTER EQUIPMENT LEASE 1999-1 LLC
By: CHARTER FUNDING
CORPORATION V
By: _______________________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class A-1 Notes referred to in the within mentioned
Indenture.
LASALLE BANK NATIONAL
ASSOCIATION, as Trustee
By: _______________________________________
Authorized Officer
A-1-4
<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 the 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-1-5
<PAGE>
EXHIBIT A-2
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.
CHARTER EQUIPMENT LEASE 1999-1 LLC
[_]% CLASS A-2 LEASE-BACKED NOTE, SERIES 1999-1
CUSIP NO. [_______________]
No. R-1 $40,355,556
Charter Equipment Lease 1999-1 LLC, a limited liability company 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 forty million three hundred fifty five thousand
five hundred fifty six dollars ($40,355,556), payable in monthly installments
beginning on August 25, 1999, in accordance with the Indenture. Interest will
accrue on the unpaid principal hereof from [____], 1999, 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 August 25, 1999, 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
<PAGE>
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 the
Trustee or at the principal office of any Paying Agent appointed pursuant to the
Indenture.
The Stated Maturity of the Class A-2 Notes is February, 2002, 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 the
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
the Issuer designated as its "[_]% Class A-2 Lease-Backed Notes, Series 1999-1"
(herein called the "Class A-2 Notes") limited in aggregate principal amount of
$40,355,556, issued under the Indenture, dated as of August 1, 1999 (herein
called the "Indenture"), among the Issuer, Charter Financial, Inc., as Servicer,
and LaSalle Bank National Association, as Trustee (herein called the "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 the Issuer, the 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 the Indenture.
This Class A-2 Note will be secured by the pledge to the Trustee of the
Granted of Assets.
If an Event of Default under the Indenture has been declared by the
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 the 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 the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Holders of 66 2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, on behalf of all the
Holders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any
A-2-2
<PAGE>
such consent or waiver by the Holder of this Class A-2 Note shall be conclusive
and binding upon 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 here for 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 the Trustee in 135 South LaSalle Street, Chicago, Illinois 60674,
and at any other office or agency maintained by the 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.
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 the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee and any agent of the Issuer or the 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 the Issuer, the Trustee nor any such agent shall be affected by notice
to the contrary.
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, without
regard to the conflict of law provisions thereof.
A-2-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: [_________________], 1999
CHARTER EQUIPMENT LEASE 1999-1
LLC
By: CHARTER FUNDING
CORPORATION V
By: ____________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class A-2 Notes referred to in the within mentioned
Indenture.
LASALLE BANK NATIONAL
ASSOCIATION, as Trustee
By: ____________________________
Authorized Signatory
A-2-4
<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 the 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-2-5
<PAGE>
EXHIBIT A-3
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.
CHARTER EQUIPMENT LEASE 1999-1 LLC
[_]% CLASS A-3 LEASE-BACKED NOTE, SERIES 1999-1
CUSIP NO. [______________]
No. R-1 $18,990,850
Charter Equipment Lease 1999-1 LLC, a limited liability company 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 eighteen million nine hundred thousand eight
hundred fifty dollars ($18,990,850), payable in monthly installments beginning
on August 25, 1999, in accordance with the Indenture. Interest will accrue on
the unpaid principal hereof from [ ], 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 August 25, 1999, 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
<PAGE>
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 the
Trustee or at the principal office of any Paying Agent appointed pursuant to the
Indenture.
The Stated Maturity of the Class A-3 Notes is September, 2002, 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 the
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
the Issuer designated as its "[_]% Class A-3 Lease-Backed Notes, Series 1999-1
(herein called the "Class A-3 Notes") limited in aggregate principal amount of
$18,990,850, issued under the Indenture, dated as of August 1, 1999 (herein
called the "Indenture"), among the Issuer, Charter Financial, Inc., as Servicer,
and LaSalle Bank National Association, as Trustee (herein called the "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 the Issuer, the 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 the Indenture.
This Class A-3 Note will be secured by the pledge to the Trustee of the
Granted of Assets.
If an Event of Default under the Indenture has been declared by the
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 the 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 the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Holders of 66-2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, on behalf of all the
Holders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any
A-3-2
<PAGE>
such consent or waiver by the Holder of this Class A-3 Note shall be conclusive
and binding upon 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 here for 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 the Trustee in 135 South LaSalle Street, Chicago, Illinois 60674,
and at any other office or agency maintained by the 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.
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 the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee and any agent of the Issuer or the 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 the Issuer, the Trustee nor any such agent shall be affected by notice
to the contrary.
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, without
regard to the conflict of law provisions thereof.
A-3-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: [_________________], 1999
CHARTER EQUIPMENT LEASE 1999-1
LLC
By: CHARTER FUNDING
CORPORATION V
By: ____________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class A-3 Notes referred to in the within mentioned
Indenture.
LASALLE BANK NATIONAL
ASSOCIATION, as Trustee
By: ____________________________
Authorized Signatory
A-3-4
<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 the 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-3-5
<PAGE>
EXHIBIT A-4
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.
CHARTER EQUIPMENT LEASE TRUST 1999-1 LLC
[_]% CLASS A-4 LEASE-BACKED NOTE, SERIES 1999-1
CUSIP NO. [______________________]
No. R-1 $48,708,013
Charter Equipment Lease 1999-1 LLC, a limited liability company 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 forty eight million seven hundred eight thousand
thirteen dollars ($48,708,013), payable in monthly installments beginning on
August 25, 1999, in accordance with the Indenture. Interest will accrue on the
unpaid principal hereof from [_], 1999, 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 August 25, 1999, 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
<PAGE>
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 the
Trustee or at the principal office of any Paying Agent appointed pursuant to the
Indenture.
The Stated Maturity of the Class A-4 Notes is January 2006, 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 the
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
the Issuer designated as its "[ ] % Class A-4 Lease-Backed Notes, Series 1999-1"
(herein called the "Class A-4 Notes") limited in aggregate principal amount of
$48,708,013, issued under the Indenture, dated as of August 1, 1999 (herein
called the "Indenture"), among the Issuer, Charter Financial, Inc., as Servicer,
and LaSalle Bank National Association, as Trustee (herein called the "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 the Issuer, the 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 the Indenture.
This Class A-4 Note will be secured by the pledge to the Trustee of the
Granted Assets.
If an Event of Default under the Indenture has been declared by the
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 the 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 the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Holders of 66-2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, on behalf of all the
Holders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any
A-4-2
<PAGE>
such consent or waiver by the Holder of this Class A-4 Note shall be conclusive
and binding upon 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 here for 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 the Trustee in 135 South LaSalle Street, Chicago, Illinois 60674,
and at any other office or agency maintained by the 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.
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 the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee and any agent of the Issuer or the 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 the Issuer, the Trustee nor any such agent shall be affected by notice
to the contrary.
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, without
regard to the conflict of law provisions thereof.
A-4-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: [_________________], 1999
CHARTER EQUIPMENT LEASE 1999-1
LLC
By: CHARTER FUNDING
CORPORATION V
By: ____________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class A-4 Notes referred to in the within mentioned
Indenture.
LASALLE BANK NATIONAL
ASSOCIATION, as Trustee
By: ____________________________
Authorized Signatory
A-4-4
<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 the 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-4-5
<PAGE>
EXHIBIT B
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.
CHARTER EQUIPMENT LEASE 1999-1 LLC
[_]% CLASS B LEASE-BACKED NOTE, SERIES 1999-1
CUSIP No. [______________]
No. R-1 $7,473,251
Charter Equipment Lease 1999-1 LLC, a limited liability company 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 seven million four hundred seventy three thousand
two hundred fifty one dollars ($7,473,251), payable in monthly installments
beginning on August 25, 1999, in accordance with the Indenture. Interest will
accrue on the unpaid principal hereof from [ ], 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 August 25, 1999, 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
<PAGE>
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 the Trustee or at the principal office of any Paying Agent
appointed pursuant to the Indenture. The Stated Maturity of the Class B Notes is
October 2006, 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 the
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 the
Issuer designated as its "[_]% Class B Lease-Backed Notes, Series 1999-1"
(herein called the "Class B Notes"), limited in aggregate principal amount of
$7,473,251, issued under the Indenture, dated as of August 1, 1999 (herein
called the "Indenture"), among the Issuer, Charter Financial, Inc., as Servicer,
and LaSalle Bank National Association, as Trustee (herein called the "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 the Issuer, the 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 the Indenture.
This Class B Note will be secured by the pledge of the Trustee of the
Granted Assets.
If an Event of Default under the Indenture has been declared by the
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 the 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 the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Holders of 66-2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time outstanding, on behalf of all the
Holders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this 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 or in exchange here for or in
B-2
<PAGE>
lieu hereof, whether or not notation of such consent or waiver is made upon this
Class B Note or any Class B Note.
No sale or transfer of this Class B Note may be made unless such sale or
transfer complies with or is exempt from registration requirements of the
Securities Act and applicable state securities laws. Prospective transferees of
this Class B Note will be required to deliver a certificate pursuant to the
terms of the Indenture relating to compliance with the Securities Act and
applicable state securities law.
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 the Trustee in 135 South LaSalle Street, Chicago, Illinois 60674,
and at any other office or agency maintained by the 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.
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 the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee and any agent of the Issuer or the 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 the Issuer, the 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, without
regard to the conflict of law provisions thereof.
B-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: [_________________], 1999
CHARTER EQUIPMENT LEASE 1999-1
LLC
By: CHARTER FUNDING
CORPORATION V
By: ____________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class B Notes referred to in the within mentioned
Indenture.
LASALLE BANK NATIONAL
ASSOCIATION, as Trustee
By: ____________________________
Authorized Signatory
B-4
<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 the 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
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.
B-5
<PAGE>
EXHIBIT C
CLASS C 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.
CHARTER EQUIPMENT LEASE 1999-1 LLC
[_]% CLASS C LEASE-BACKED NOTE, SERIES 1999-1
CUSIP No. [_________________]
No. R-1 $3,956,427
Charter Equipment Lease 1999-1 LLC, a limited liability company 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 three million nine hundred fifty six thousand four
hundred twenty seven dollars ($3,956,427), payable in monthly installments
beginning on August 25, 1999, in accordance with the Indenture. Interest will
accrue on the unpaid principal hereof from [_], 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 C 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 August 25, 1999, either by check to the registered
address of the Holder of this Class C 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
<PAGE>
final payment of principal and interest in respect of the Class C Notes during
the Principal Amortization Period shall be payable to the Holder of this Class C
Note only upon presentation and surrender of this Class C Note at the Corporate
Trust Office of the Trustee or at the principal office of any Paying Agent
appointed pursuant to the Indenture.
The Stated Maturity of the Class C Notes is December 2006, on which date
the Outstanding Principal Amount of the Class C Notes shall be due and payable.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Class C Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class C Note is one of a duly authorized issue of Class C Notes of the
Issuer designated as its "[_]% Class C Lease-Backed Notes, Series 1999-1"
(herein called the "Class C Notes"), limited in aggregate principal amount of
$3,956,427, issued under the Indenture, dated as of August 1, 1999 (herein
called the "Indenture"), among the Issuer, Charter Financial, Inc., as Servicer,
and LaSalle Bank National Association, as Trustee (herein called the "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 the Issuer, the Trustee and the Holders and of the terms upon
which the Class C Notes are authenticated and delivered. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings set
forth in the Indenture.
This Class C Note will be secured by the pledge of the Trustee of the
Granted Assets.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class C Notes (but not less than all the Class
C 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 the Issuer with respect to the payment of
principal and interest on this Class C Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Holders of 66-2/3% in aggregate
principal amount of the Notes at the time outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time outstanding, on behalf of all the
Holders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Class C Note shall be
conclusive and binding upon such Holder and upon all future Holders of this
Class C Note and of any
C-2
<PAGE>
Class C Note issued upon the registration of transfer hereof or in exchange here
for or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Class C Note or any Class C Note.
No sale or transfer of this Class C Note may be made unless such sale or
transfer complies with or is exempt from registration requirements of the
Securities Act and applicable state securities laws. Prospective transferees of
this Class C Note will be required to deliver a certificate pursuant to the
terms of the Indenture relating to compliance with the Securities Act and
applicable state securities law.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Class C Note is registrable in the Note Register,
upon surrender of this Class C Note for registration of transfer at the office
or agency of the Trustee in 135 South LaSalle Street, Chicago, Illinois 60674
and at any other office or agency maintained by the 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 C
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class C Notes are issuable only in registered form without coupons in
minimum denominations of [x]. As provided in the Indenture and subject to
certain limitations therein set forth, Class C Notes are exchangeable for a like
aggregate principal amount of Class C 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 the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class C Note is registered as the owner
hereof for all purposes, whether or not this Class C Note may be overdue, and
neither the Issuer, the Trustee nor any such agent shall be affected by notice
to the contrary.
The Indenture and this Class C 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, without
regard to the conflict of law provisions thereof.
C-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: [_________________], 1999
CHARTER EQUIPMENT LEASE 1999-1
LLC
By: CHARTER FUNDING
CORPORATION V
By: ____________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class C Notes referred to in the within mentioned
Indenture.
LASALLE BANK NATIONAL
ASSOCIATION, as Trustee
By: ____________________________
Authorized Signatory
C-4
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Class C Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Class C 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 C Note on the
books of the 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
C 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 C 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 C Note and the signed "power of attorney" in separate envelopes.
For added protection, use certified or registered mail for a Class C Note.
C-5
<PAGE>
EXHIBIT D
CLASS D 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.
CHARTER EQUIPMENT LEASE 1999-1 LLC
[_]% CLASS D LEASE-BACKED NOTE, SERIES 1999-1
CUSIP No. [____________________]
No. R-1 $1,318,809
Charter Equipment Lease 1999-1 LLC, a limited liability company 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 one million three hundred eighteen thousand eight hundred nine
dollars ($1,318,809), payable in monthly installments beginning on August 25,
1999, in accordance with the Indenture. Interest will accrue on the unpaid
principal hereof from [_], 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 D 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 August 25, 1999, either by check to the registered
address of the Holder of this Class D 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
<PAGE>
payment of principal and interest in respect of the Class D Notes during the
Principal Amortization Period shall be payable to the Holder of this Class D
Note only upon presentation and surrender of this Class D Note at the Corporate
Trust Office of the Trustee or at the principal office of any Paying Agent
appointed pursuant to the Indenture.
The Stated Maturity of the Class D Notes is May.2007, on which date the
Outstanding Principal Amount of the Class D Notes shall be due and payable.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Class D Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class D Note is one of a duly authorized issue of Class D Notes of the
Issuer designated as its "[_]% Class D Lease-Backed Notes, Series 1999-1"
(herein called the "Class D Notes"), limited in aggregate principal amount of
$1,318,809, issued under the Indenture, dated as of August 1, 1999 (herein
called the "Indenture"), among the Issuer, Charter Financial, Inc., as Servicer,
and LaSalle Bank National Association, as Trustee (herein called the "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 the Issuer, the Trustee and the Holders and of the terms upon
which the Class D Notes are authenticated and delivered. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings set
forth in the Indenture.
This Class D will be secured by the pledge of the Trustee of the Granted
Assets.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class D Notes (but not less than all the Class
D 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 the Issuer with respect to the payment of
principal and interest on this Class D Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Holders of 66-2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time outstanding, on behalf of all the
Holders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Class D Note shall be
conclusive and binding upon such Holder and upon all future Holders of this
Class D Note and of any
D-2
<PAGE>
Class D Note issued upon the registration of transfer hereof or in exchange here
for or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Class D Note or any Class D Note.
No sale or transfer of this Class D Note may be made unless such sale or
transfer complies with or is exempt from registration requirements of the
Securities Act and applicable state securities laws. Prospective transferees of
this Class D Note will be required to deliver a certificate pursuant to the
terms of the Indenture relating to compliance with the Securities Act and
applicable state securities law.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Class D Note is registrable in the Note Register,
upon surrender of this Class D Note for registration of transfer at the office
or agency of the Trustee in 135 South LaSalle Street, Chicago, Illinois, 60674,
and at any other office or agency maintained by the 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 D
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class D Notes are issuable only in registered form without coupons in
minimum denominations of [y]. As provided in the Indenture and subject to
certain limitations therein set forth, Class D Notes are exchangeable for a like
aggregate principal amount of Class D 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 the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class D Note is registered as the owner
hereof for all purposes, whether or not this Class D Note may be overdue, and
neither the Issuer, the Trustee nor any such agent shall be affected by notice
to the contrary.
The Indenture and this Class D 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, without
regard to the conflict of law provisions thereof.
D-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: [_________________], 1999
CHARTER EQUIPMENT LEASE 1999-1
LLC
By: CHARTER FUNDING
CORPORATION V
By: ____________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class D Notes referred to in the within mentioned
Indenture.
LASALLE BANK NATIONAL
ASSOCIATION, as Trustee
By: ____________________________
Authorized Signatory
D-4
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Class D Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Class D 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 D Note on the
books of the 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
D 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 D 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 D Note and the signed "power of attorney" in separate envelopes.
For added protection, use certified or registered mail for a Class D Note.
D-5
<PAGE>
EXHIBIT E
[FORM OF
INVESTOR'S LETTER]
(Date)
Charter Equipment Lease 1999-1 LLC
530 Fifth Avenue
New York, New York 10036
First Union Capital Markets Corp.
301 South College Street
One First Union Center, TW-6
Charlotte, NC 28288
LaSalle Bank National Association
135 South LaSalle Street
Suite 1625
Chicago, IL 60674
Attention: Asset-Backed Securities Trust Services
Charter Equipment Lease 1999-1 LLC
Ladies and Gentlemen:
We propose to purchase $___________ in original aggregate principal amount
of Charter Equipment Lease 1999-1 LLC _____% Class C or D Lease-Backed Notes,
Series 1999-1, (the "Notes"). The Notes were issued pursuant to an Indenture
(the "Indenture"), dated as of August 1, 1999, among Charter Equipment Lease
1999-1 LLC, LaSalle Bank National Association and Charter Financial, Inc.
Capitalized terms used herein but not otherwise defined shall have the same
meaning as in the Indenture.
In connection with our proposed purchase of Notes, we agree to the
following terms and conditions and make the representations and warranties
stated herein with the express understanding that they will be relied upon by
Charter Equipment Lease 1999-1 LLC and the parties to the Placement Agent
Agreement.
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") or registered or
qualified under any state securities or "Blue Sky" laws and are being sold to us
in a transaction that is exempt from the registration requirements of the
Securities Act and the registration or qualification requirements of such state
laws.
2. We are (Check one):
_____ (a) a "Qualified Institutional Buyer" (as defined in Rule
<PAGE>
144A under the Securities Act), in the case of a
transfer of Certificates to be made in reliance on Rule
144A.
_____ (b) an institutional investor that has such knowledge and
experience in financial and business matters as to be
capable of evaluating the merits and risks of an
investment in the Notes and is able to bear the
economic risk of investment in the Notes.
_____ (c) an "accredited investor" as defined in Rule 501
promulgated under the Securities Act that has such
knowledge and experience in financial and business
matters as to be capable of evaluating the merits and
risks of investment in the Notes and is able to bear
the economic risk of investment in the Notes.
3. We agree that, to the extent that Section 2(a) of this letter is
applicable, that the Notes will not be transferred unless such transfer is made
in reliance on Rule 144A or unless some other exemption from the registration
requirements of the Securities Act, or any applicable state securities law, is
available.
4. To the extent that Section 2(b) or (c) of this letter is applicable,
that we are acquiring the Notes (i) solely for investment purposes for our own
account or for accounts as to which we exercise sole investment discretion and
not with a view to any resale or distribution of the Notes in whole or in part,
or (ii) otherwise for purposes which will not constitute a distribution of
securities under the Securities Act, or under any state securities or "Blue Sky"
laws subject, nevertheless, to the understanding that disposition of our
property shall at all times be and remain within our control, and under no
circumstances will we attempt to sell, pledge, hypothecate or otherwise transfer
all or any portion of our interest in the Notes except in accordance with the
terms of the Notes and the Indenture.
5. We agree not to sell the Notes in whole or in part, unless the
subsequent purchaser agrees to be subject to the same representations and
warranties as were applicable to us in acquiring the Notes.
6. We understand that each of the Notes shall bear a legend substantially
as set forth in the form of Note included in the Indenture.
7. We understand that there is no public market for the Notes and it is
unlikely that such market will develop.
8. We are authorized to invest in the Notes and we are sophisticated
institutional investors and have knowledge and experience in financial and
business matters and we are capable of evaluating the merits and risks of its
investment in the Notes and we are able to bear the economic risk of such
investment for an indefinite
E-2
<PAGE>
period of time. We have been given such information concerning the Notes as we
have requested.
9. The Purchaser represents that either (a) it is not (i) 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 the provisions
of Title I of ERISA, (ii) a plan described in section 4975(e)(1) of the Internal
Revenue Code of 1986, or (iii) an entity whose underlying assets are deemed to
be assets of a plan described in (i) or (ii) above by reason of such plan's
investment in the entity (any such entity described in clauses (i) through
(iii), a "Benefit Plan Entity") or (b) it is a Benefit Plan Entity and its
acquisition and holding of the Notes is covered by a Department of Labor
Prohibited Transaction Class Exemption.
10. We certify that, in acquiring the Notes, we have complied with any
applicable guidelines or regulations for or limitations on investments
established by each regulatory agency or body, if any, which has jurisdiction
over investments made by us and that our acquisition and retention of the Notes
will not violate the limitations on possession contained in any such guidelines,
regulations or limitations.
11. We will comply with all applicable federal and state securities laws in
connection with any subsequent resale of the Notes.
Very truly yours,
[ ]
E-3
<PAGE>
EXHIBIT F
List of Authorized Officers of the Issuer
<PAGE>
EXHIBIT G
List of Authorized Offers of Charter
<PAGE>
EXHIBIT H
List of Authorized Officers of the Servicer
<PAGE>
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION........................................2
SECTION 1.01. General Definitions......................................................2
SECTION 1.02. Compliance Certificates and Opinions....................................22
SECTION 1.03. Form of Documents Delivered to Trustee..................................22
SECTION 1.04. Acts of Noteholders, etc................................................23
SECTION 1.05. Notices, etc., to Trustee, Servicer, Issuer and Rating Agencies.........24
SECTION 1.06. Notice to Noteholders; Waiver...........................................25
SECTION 1.07. Effect of Headings and Table of Contents................................25
SECTION 1.08. Successors and Assigns..................................................25
SECTION 1.09. GOVERNING LAW...........................................................26
SECTION 1.10. Legal Holidays..........................................................26
SECTION 1.11. Execution in Counterparts...............................................26
SECTION 1.12. Inspection..............................................................26
SECTION 1.13. Survival of Representations, Warranties and Covenants...................27
ARTICLE II THE NOTES 27
SECTION 2.01. General Provisions......................................................27
SECTION 2.02. Execution, Authentication, Delivery, and Dating.........................29
SECTION 2.03. Transfer and Exchange...................................................30
SECTION 2.04. Mutilated, Destroyed, Lost and Stolen Notes.............................31
SECTION 2.05. Book-Entry Registration of Class A Notes, Class B Notes, Class C
Notes and Class D Notes.................................................32
SECTION 2.06. Notice to Clearing Agency...............................................33
SECTION 2.07. Definitive Class A Notes, Class B Notes, Class C Notes and
Class D Notes...........................................................33
SECTION 2.08. Payment of Interest and Principal; Rights Preserved.....................34
SECTION 2.09. Persons Deemed Owners...................................................35
SECTION 2.10. Cancellation............................................................35
SECTION 2.11. Noteholder Lists........................................................35
SECTION 2.12. Treasury Securities.....................................................36
ARTICLE III ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION AND APPLICATION OF MONEYS; REPORTS...............36
SECTION 3.01. Trust Accounts; Investments by Trustee..................................36
SECTION 3.02. Collection of Moneys....................................................39
SECTION 3.03. Distribution Account; Payments..........................................39
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SECTION 3.04. The Reserve Account.....................................................41
SECTION 3.05. Reports by Trustee; Notices of Certain Payments.........................42
SECTION 3.06. Trustee May Rely on Certain Information from Charter and Servicer.......43
ARTICLE IV RELEASE OF LEASES AND EQUIPMENT..............................................................43
SECTION 4.01. Release of Equipment....................................................43
SECTION 4.02. Release of Leases Upon Final Lease Payment..............................44
SECTION 4.03. Execution of Documents..................................................44
ARTICLE V SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER...............................................44
SECTION 5.01. Servicer Events of Default..............................................44
SECTION 5.02. Substitute Servicer.....................................................45
ARTICLE VI EVENTS OF DEFAULT; REMEDIES..................................................................45
SECTION 6.01. Events of Default.......................................................45
SECTION 6.02. Acceleration of Maturity; Rescission and Annulment......................46
SECTION 6.03. Remedies................................................................47
SECTION 6.04. Trustee Shall File Proofs of Claim......................................47
SECTION 6.05. Trustee May Enforce Claims Without Possession of Notes..................48
SECTION 6.06. Application of Money Collected..........................................48
SECTION 6.07. Limitation on Suits.....................................................49
SECTION 6.08. Unconditional Right of Noteholders to Receive Principal and Interest....49
SECTION 6.09. Restoration of Rights and Remedies......................................50
SECTION 6.10. Rights and Remedies Cumulative..........................................50
SECTION 6.11. Delay or Omission Not Waiver............................................50
SECTION 6.12. Control by Noteholders..................................................50
SECTION 6.13. Sale of Granted Assets..................................................51
SECTION 6.14. Undertaking for Costs...................................................52
SECTION 6.15. Waiver of Stay or Extension Laws........................................52
ARTICLE VII THE TRUSTEE.................................................................................53
SECTION 7.01. Certain Duties and Responsibilities.....................................53
SECTION 7.02. Notice of Defaults or Events of Default.................................54
SECTION 7.03. Certain Rights of Trustee...............................................54
SECTION 7.04. Not Responsible for Recitals or Issuance of Notes.......................55
SECTION 7.05. May Hold Notes..........................................................55
SECTION 7.06. Money Held in Trust.....................................................55
SECTION 7.07. Compensation, Reimbursement, etc........................................55
SECTION 7.08. Corporate Trustee Required; Eligibility.................................56
SECTION 7.09. Resignation and Removal; Appointment of Successor.......................56
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SECTION 7.10. Acceptance of Appointment by Successor..................................57
SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business.............58
SECTION 7.12. Co-trustees and Separate Trustees.......................................58
SECTION 7.13. Acceptance by Trustee...................................................59
SECTION 7.14. Preferential Collection of Claims Against the Issuer....................59
SECTION 7.15. Reports by Trustee to Noteholders.......................................60
SECTION 7.16. No Proceedings..........................................................60
ARTICLE VIII COVENANTS..................................................................................60
SECTION 8.01. Payment of Principal and Interest.......................................60
SECTION 8.02. Maintenance of Office or Agency; Chief Executive Office.................60
SECTION 8.03. Money for Payments to Noteholders to be Held in Trust...................61
SECTION 8.04. Corporate Existence; Merger; Consolidation, etc.........................62
SECTION 8.05. Protection of Granted Assets; Further Assurances........................62
SECTION 8.06. Commission Reports; Reports to Trustee; Reports to Noteholders..........63
SECTION 8.07. Performance of Obligations; Servicing Agreement.........................64
SECTION 8.08. Negative Covenants......................................................64
SECTION 8.09. Information as to Issuer................................................65
SECTION 8.10. Taxes...................................................................65
SECTION 8.11. Indemnification.........................................................65
ARTICLE IX SUPPLEMENTAL INDENTURES......................................................................66
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders..................66
SECTION 9.02. Supplemental Indentures with Consent of Noteholders.....................66
SECTION 9.03. Execution of Supplemental Indentures....................................67
SECTION 9.04. Effect of Supplemental Indentures.......................................68
SECTION 9.05. Reference in Notes to Supplemental Indentures...........................68
SECTION 9.06. Compliance with Trust Indenture Act.....................................68
ARTICLE X SATISFACTION AND DISCHARGE....................................................................68
SECTION 10.01. Satisfaction and Discharge of Indenture.................................68
SECTION 10.02. Application of Trust Money..............................................69
SECTION 10.03. Redemption..............................................................69
ARTICLE XI MISCELLANEOUS................................................................................70
SECTION 11.01. Trust Indenture Act Controls............................................70
SECTION 11.02. Communication by Noteholders with Other Noteholders.....................70
SECTION 11.03. Officers' Certificate and Opinion of Counsel as to Conditions Precedent.70
SECTION 11.04. Statements Required in Certificate or Opinion...........................70
SECTION 11.05. Nonpetition.............................................................71
SECTION 11.06. Limitation of Liability of Members......................................71
SECTION 11.07. Location of Leases......................................................71
SECTION 11.08. Income Tax Characterization.............................................71
SECTION 11.09. Trustee Authorization...................................................72
</TABLE>
iii
<PAGE>
SCHEDULES
SCHEDULE 1 Schedule of Leases
EXHIBITS
EXHIBIT A-1 Form of Class A-1 Note and Form of Trustee's
Certificate of Authentication
EXHIBIT A-2 Form of Class A-2 Note and Form of Trustee's
Certificate of Authentication
EXHIBIT A-3 Form of Class A-3 Note and Form of Trustee's
Certificate of Authentication
EXHIBIT A-4 Form of Class A-4 Note and Form of Trustee's
Certificate of Authentication
EXHIBIT B Form of Class B Note and Form of Trustee's
Certificate of Authentication
EXHIBIT C Form of Class C Note and Form of Trustee's
Certificate of Authentication
EXHIBIT D Form of Class D Note and Form of Trustee's
Certificate of Authentication
EXHIBIT E Form of Investor Letter
EXHIBIT F Initial List of Authorized Officers of the Issuer
EXHIBIT G Initial list of Authorized Officers of Charter
EXHIBIT H Initial List of Authorized Officers of the Servicer
[LETTERHEAD OF DEWEY BALLANTINE LLP]
August 12, 1999
Charter Equipment Lease 1999-1 LLC
530 Fifth Avenue
New York, NY 10036
Re: Charter Equipment Lease
1999-1 LLC
Registration Statement on Form S-1
(File No. 333-64045)
Ladies and Gentlemen:
We have acted as special counsel to Charter Equipment Lease 1999-1 LLC a
Delaware limited liability company (the "Issuer") in connection with the
preparation and filing of the above-referenced registration statement on Form
S-1 (the "Registration Statement"), filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, in respect of
Charter Equipment Lease 1999-1 LLC Class A-1 Lease-Backed Notes, Class A-2
Lease-Backed Notes, Class A-3 Lease-Backed Notes, Class A-4 Lease-Backed Notes
and Class B Lease-Backed Notes (collectively the "Offered Notes").
We have examined and relied on the originals or copies certified or
otherwise identified to our satisfaction of all such documents and records of
Issuer and such other instruments and other certificates of public officials,
officers and representatives of Issuer and such other persons, and we have made
such investigations of law, as we have deemed appropriate as a basis for the
opinions expressed below. We have assumed that (i) the Indenture, dated as of
August 1, 1999, among the Issuer, Charter Financial, Inc. and LaSalle Bank
National Association (the "Indenture"), (ii) the Offered Notes, and (iii) the
other Transaction Documents will be executed and delivered in substantially the
form filed as exhibits to the Registration Statement.
We are admitted to the Bar of the State of New York and we express no
opinion as to the laws of any other jurisdiction except as to matters that are
governed by Federal law or the laws of the State of New York. All opinions
expressed herein are based
<PAGE>
on laws, regulations and policy guidelines currently in force and may be
affected by future regulations.
Based upon the foregoing, we are of the opinion that:
1. When, in respect of the Offered Notes, the Indenture has been duly
executed and delivered by the Issuer, the Servicer and the Trustee, the
Indenture will be a valid and legally binding obligation of the Issuer; and
2. When the Indenture for the Offered Notes has been duly executed and
delivered by the Issuer, the Servicer and the Trustee, and when the Offered
Notes have been duly executed and authenticated in accordance with the
provisions of the Indenture, and issued and sold as contemplated in the
Registration Statement and the Prospectus, as amended or supplemented and
delivered pursuant to Section 5 of the Act in connection therewith, such
Offered Notes will be legally and validly issued, fully paid and
nonassessable, and the Holders of such Offered Notes will be entitled to
the benefits of the Indenture.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to Dewey Ballantine LLP in the
prospectus contained in the Registration Statement under the heading "Legal
Matters." In giving this opinion, we do not concede that we are experts within
the meaning of the Act or the rules and regulations therewith, or that this
consent is required by Section 7 of the Act. Capitalized terms which are used
herein which are not otherwise defined herein shall have the meanings set forth
in the Indenture.
Very truly yours,
DEWEY BALLANTINE LLP
[LETTERHEAD OF DEWEY BALLANTINE LLP]
August 12, 1999
Charter Equipment Lease 1999-1 LLC
530 Fifth Avenue
New York, NY 10036
Re: Charter Equipment Lease 1999-1
LLC
Registration Statement on Form S-1
(File No. 333-64045)
Ladies and Gentlemen:
We have acted as special counsel for Charter Equipment Lease 1999-1 LLC, a
Delaware limited liability company (the "Issuer") in connection with the
preparation and filing of the above-referenced registration statement on Form
S-1 (the "Registration Statement"), filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, in respect of the
Charter Equipment Lease 1999-1 LLC Class A-1 Lease-Backed Notes, Class A-2
Lease-Backed Notes, Class A-3 Lease-Backed Notes, Class A-4 Lease-Backed Notes
and Class B Lease-Backed Notes (collectively, the "Offered Notes").
In addition, assuming (i) the Indenture, dated as of August 1, 1999, among
Charter Equipment Lease 1999-1 LLC, Charter Financial, Inc., and LaSalle Bank
National Association (the "Indenture") is fully executed, delivered and
enforceable against the parties thereto in accordance with its terms and (ii)
the transaction described in the prospectus is completed on substantially the
terms and conditions set forth therein, it is our opinion that:
o the Offered Notes will be characterized as indebtedness for federal
income tax purposes; and
o subject to the assumptions and limitations described therein, the
discussion under the heading "Material Federal Income Tax
Considerations" in the prospectus contained in the Registration
Statement sets forth all the material federal income tax consequences
to the original purchasers of the Offered Notes and is accurate in all
material respects.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this opinion, we do not concede that we are
experts within the meaning of the Act or the rules and regulations therewith, or
that this consent is required by Section 7 of the Act. Capitalized terms which
are used herein which are not otherwise defined herein shall have the meanings
set forth in the Indenture.
Very truly yours,
DEWEY BALLANTINE LLP
DB Draft 8/5/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHARTER FINANCIAL, INC.
SELLER
AND
CHARTER FUNDING CORPORATION V,
TRANSFEROR
-------------------------
SELLER CONTRIBUTION AND SALE AGREEMENT
Dated as of August 1, 1999
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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RECITALS..........................................................................................................1
AGREEMENTS.........................................................................................................2
ARTICLE I. DEFINITIONS............................................................................................2
ARTICLE II. SALE AND CAPITAL CONTRIBUTION.........................................................................2
Section 2.01 Sale and Capital Contribution of Leases and Equipment, Lease Receivables.......................2
Section 2.02 Treatment as a Sale and Contribution; Grant of Security Interest...............................3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER.........................................................4
Section 3.01 Corporate Organization and Authority...........................................................4
Section 3.02 Business and Property..........................................................................4
Section 3.03 Financial Statements...........................................................................4
Section 3.04 Equipment and Leases...........................................................................5
Section 3.05 Payments.......................................................................................8
Section 3.06 Full Disclosure................................................................................8
Section 3.07 Pending Litigation.............................................................................8
Section 3.08 Title to Properties............................................................................8
Section 3.09 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 Ability to Perform............................................................................10
Section 3.14 Ordinary Course; No Insolvency................................................................10
Section 3.15 Assets and Liabilities........................................................................10
Section 3.16 Fair Consideration............................................................................11
Section 3.17 Ability to Pay Debts..........................................................................11
Section 3.18 Bulk Transfer Provisions......................................................................11
Section 3.19 Transfer Taxes................................................................................11
Section 3.20 Principal Executive Office....................................................................11
Section 3.21 Sale and Contribution Treatment...............................................................12
Section 3.22 Nonconsolidation..............................................................................12
Section 3.23 Lease Repurchase..............................................................................12
ARTICLE IV. THE SELLER...........................................................................................13
Section 4.01 Merger or Consolidation of the Seller.........................................................13
Section 4.02 Control of Transferor.........................................................................13
Section 4.03 Books and Records.............................................................................13
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Section 4.04 Communications................................................................................13
ARTICLE V. SUBSTITUTION AND ADDITION OF LEASES...................................................................13
Section 5.01 Substitution and Addition.....................................................................13
Section 5.02 Procedure.....................................................................................14
Section 5.03 Seller's Subsequent Obligations...............................................................15
ARTICLE VI. ASSIGNMENT...........................................................................................16
Section 6.01 Assignment to Trustee.........................................................................16
Section 6.02 Assignment by Seller..........................................................................16
ARTICLE VII. NATURE OF OBLIGATIONS AND SECURITY THEREFOR.........................................................16
Section 7.01 Obligations Absolute..........................................................................16
Section 7.02 Further Assurances; Financing Statements......................................................17
ARTICLE VIII. MISCELLANEOUS......................................................................................17
Section 8.01 Continuing Obligations........................................................................17
Section 8.02 GOVERNING LAW.................................................................................17
Section 8.03 Successors and Assigns........................................................................17
Section 8.04 Modification..................................................................................17
Section 8.05 No Petition or Proceedings....................................................................18
Section 8.06 Notices.......................................................................................18
Section 8.07 Counterparts..................................................................................18
</TABLE>
Schedule 1 - Schedule of Leases
ii
<PAGE>
SELLER CONTRIBUTION AND SALE AGREEMENT
This SELLER CONTRIBUTION AND SALE AGREEMENT is made and dated as of August
1, 1999, by and between CHARTER FUNDING CORPORATION V, a New York corporation,
as purchaser hereunder (the "Transferor") and CHARTER FINANCIAL, INC., a New
York corporation, as seller of the Leases (the "Seller").
R E C I T A L S
WHEREAS, pursuant to this Seller Contribution and Sale Agreement, Charter
Financial, Inc. (the "Seller") is selling and making certain capital
contributions to Charter Funding Corporation V (the "Transferor") with respect
to the Leases, the related Equipment and other assets described therein (the
"Transferred Assets").
WHEREAS, pursuant to the Transferor Contribution and Sale Agreement, the
Transferor is selling and making certain capital contribution to Charter
Equipment Lease 1999-1 LLC (the "Issuer"), with respect to the Transferred
Assets.
WHEREAS, pursuant to the Indenture, the Issuer is pledging the Transferred
Assets thereunder for the benefit of the Holders of the Notes (as detailed
below) and is issuing one class of [ ]% Class A-1 Lease-Backed Notes, [ ] in the
aggregate principal amount of $[ ] (the "Class A-1 Notes"), one class of [ ]%
Class A-2 Lease-Backed Notes, [ ] in the aggregate principal amount of $[ ] (the
"Class A-2 Notes"), one class of [ ]% Class A-3 Lease-Backed Notes, [ ] in the
aggregate principal amount of $[ ] (the "Class A-3 Notes"), one class of [ ]%
Class A-4 Lease-Backed Notes, [ ] in the aggregate principal amount of $[ ] (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"), one class of [ ]% Class B
Leased-Backed Notes, [ ] (the "Class B Notes"), in the aggregate principal
amount of $[ ], one class of [ ]% Class C Lease-Backed Notes, [ ], in the
aggregate principal amount of $[ ] (the "Class C Notes"), one class of [ ]%
Class D Leased-Backed Notes, [ ] in the aggregate principal amount of $[ ] (the
"Class D Notes"); together with the Class A Notes, the Class B Notes, the Class
C Notes, and the Class D Notes, are referred to collectively as the "Notes").
WHEREAS, pursuant to the Indenture, the Issuer is granting, inter alia, to
the Trustee, for the benefit of the Holders from time to time of the Notes, a
security interest in all right, title and interest of the Issuer in, to and
under the Leases, the interests in the Equipment and the other Transferred
Assets and the Servicing Agreement.
NOW, THEREFORE, the parties hereto agree, in consideration of the mutual
agreements set forth herein and other valuable consideration provided, as
follows:
<PAGE>
A G R E E M E N T S
ARTICLE I. DEFINITIONS
As used in this Seller Contribution and Sale Agreement, the following terms
have the respective meanings set forth below or set forth in the Section hereof
or in any other agreement indicated:
Lease - 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 hereto, as the same may
be amended or modified from time to time in accordance with the provisions
hereof and thereof and of the Servicing Agreement.
Predecessor Lease - as defined in Section 5.01 hereof.
Schedule of Leases - the schedule of Leases, annexed hereto as Schedule 1
as may be amended from time to time.
Servicing Agreement - the Servicing Agreement dated as of August 1, 1999
among Charter Equipment Lease 1999-1 LLC, LaSalle Bank National Association, as
Trustee and Charter Financial, Inc. as the same may be amended or modified from
time to time in accordance with the provisions hereof and thereof.
Substitute Lease - as defined in Section 5.01 hereof.
Transfer Taxes - as defined in Section 3.19 hereof.
To the extent capitalized terms are used herein which are not otherwise
defined, such terms shall have meanings defined in the Servicing Agreement.
ARTICLE II. SALE AND CAPITAL CONTRIBUTION
Section 2.01 Sale and Capital Contribution of Leases and Equipment, Lease
Receivables.
By their execution and delivery of this Seller Contribution and Sale
Agreement, the Seller hereby sells, contributes and assigns to the Transferor,
and the Transferor hereby acquires from the Seller without recourse (except to
the extent of the Seller's purchase obligations as set forth herein), all of the
Seller's right, title and interest in and to each of the Leases and the Lease
Receivables (including the right to receive all payments due or to become due
thereunder since the Cut-Off Date, or the related Transfer Date with respect to
Additional Leases or Substitute Leases), as shown on the Schedule of Leases from
time to time. The Seller and the Transferor each acknowledge and confirm that
contemporaneously with the sale and the contribution of the Leases as
hereinabove provided, the Seller, as the holder of the common stock of the
Transferor, is selling, contributing and transferring to the Transferor, and in
connection with each transfer and assignment of Additional Leases and Substitute
Leases the Seller will sell, contribute and transfer to the Transferor, without
recourse, all right, title and interest of the Seller in and to each item of
Equipment subject to each Lease, Additional Lease
2
<PAGE>
and Substitute Lease. After such sale, contribution and transfer by the Seller
to the Transferor, all right, title and interest of the Seller in and to each
item of Equipment subject to each Lease shall be vested in the Transferor. In
each instance, the transfer of the Leases, the Lease Receivables and the
Equipment shall be regarded as a sale, however to the extent that the sale price
for the Lease, the Lease Receivables and the Equipment is less than the fair
market value thereof, the difference shall be deemed to be a capital
contribution by the Seller to the Transferor.
Section 2.02 Treatment as a Sale and Contribution; Grant of Security
Interest.
It is the intention of the parties hereto that each transfer of Leases,
Additional Leases, Substitute Leases, Lease Payments and all other amounts due
or becoming due with respect thereto and Equipment (or interests therein) being
made hereunder shall constitute a sale and a capital contribution, as desired in
Section 2.01 hereof, and not a loan. The Seller shall not take any action
inconsistent with the treatment of such transfers as sales and capital
contributions, as desired in Section 2.01 hereof, or with the Transferor's
ownership of the Leases, the Lease Receivables and all other amounts due or
becoming due with respect thereto and the interests in the Equipment. The Seller
shall indicate in its records that ownership of each of the Leases, the Lease
Receivables and the interests in the Equipment is held by the Transferor, and
each shall respond to any inquiries from third parties by indicating that its
ownership in the Leases, Additional Leases, Substitute Leases, the Lease
Receivables and all other amounts due or becoming due with respect thereto and
the interests in the Equipment is held by the Transferor. In the event, however,
that a court of competent jurisdiction were to hold that any transaction
evidenced hereby constitutes a loan and not a capital contribution, it is the
intention of the parties hereto that this Agreement shall constitute a security
agreement under applicable law and that the Transferor shall be deemed to have
been granted a first priority security interest in (a) the Leases and all Lease
Payments, Casualty Payments, Termination Payments, and other amounts now due or
becoming due with respect thereto since 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 and any payments due before the Cut-Off Date) and all
Additional Leases and Substitute Leases and all Lease Payments, Casualty
Payments, Termination Payments and other amounts due or becoming due with
respect thereto since the effective date of their respective addition or
substitution (other than any prepayments of rent required by the terms of any
Lease at or before the commencement of the Lease and any payments due before the
effective date of such addition or substitution), (b) all rights of the
Transferor to or under any guarantees of or collateral (including all rights of
the Transferor in any security deposits) for the Lessee's obligations under any
Lease, (c) all interests of the Transferor in the Equipment at any time subject
to any Lease including any security interest of the Seller in the Equipment and
(d) all proceeds of the conversion, whether voluntary or involuntary, of any of
the foregoing into cash or other property.
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the accuracy and correctness
of the statements set forth in Section 3.01 through Section 3.22.
Section 3.01 Corporate Organization and Authority.
The 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 business or
condition (financial or otherwise) of the Seller or impair the
enforceability of any Lease) and to enter into and perform its
obligations under this Seller Contribution and Sale Agreement, and the
transactions contemplated hereby, including the 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
Transferred Assets or the business or condition (financial or
otherwise) of the Seller or impair the enforceability of any Lease).
Section 3.02 Business and Property.
The Prospectus and the Private Placement Memoranda, accurately describe in
all material respects the general nature of the business of the Seller.
Section 3.03 Financial Statements.
Except as disclosed in the Prospectus and the Private Placement Memoranda,
there has been no change in the business, condition or prospects (financial or
otherwise) of the Seller except changes in the ordinary course of business, none
of which individually or in the aggregate has been materially adverse. Neither
the Seller nor any of its subsidiaries has any material liabilities or
obligations not incurred in the ordinary course of business other than those for
which adequate reserves are reflected in such financial statements and certain
contingent obligations of the Seller relating to other asset securitization
transactions involving the Seller.
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Section 3.04 Equipment and Leases.
(a) The transfer to the Transferor of the Leases and all of the 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
the Seller is a party or by which it is bound.
(b) Upon completion of the transfer described in Article II hereof, the
Transferor will (i) be the legal owner of the Leases (including the
right to receive all payments due or to become due thereunder), (ii)
have a valid security interest in each item of Equipment subject to
any Lease other than a Rent Stream Obligation. At such time, the
Leases (including the right to receive all payments due or to become
due thereunder) and the Seller's interest in the Equipment will be
free and clear of all Liens other than Permitted Encumbrances.
(c) With respect to any Lease, other than an Additional Lease or a
Substitute Lease, as of the Cut-Off Date, or with respect to any
Additional Lease or any Substitute Lease, as of the related Transfer
Date, the Seller represents and warrants that each Lease shall comply
with the following:
(i) the Lease is a valid and binding obligation of the Lessee
enforceable against such Lessee in accordance with its terms (except as may
be limited by bankruptcy laws, other laws affecting creditor's rights in
similar transactions generally, and judicial powers of equity);
(ii) the Lease constitutes a non-cancellable, "hell or high water"
obligation of the Lessee and requires the Lessee to make all Lease Payments
thereon regardless of the condition of the Equipment to which the Lease
relates;
(iii) the Lease is non-cancellable by the Lessee and does not contain
early termination options (except for a Lease which contains early
termination or prepayment clauses, which requires the Lessee to pay the
Prepayment Amount for such Lease upon such cancellation or prepayment);
(iv) all payments payable under the Lease are absolute, unconditional
obligations of the Lessee without right to offset for any reason;
(v) the Lease requires the Lessee or a third party to maintain the
Equipment in good working order, to bear all the costs of operating the
Equipment, including taxes and insurance relating thereto;
(vi) the Lease does not materially violate any U.S. or state laws;
(vii) the Lease provides for periodic payments;
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(viii) in the event of a Casualty Loss with respect to the Lease, the
Lessee, at the Lessee's expense, is required to replace the Equipment with
like equipment in good repair, acceptable to the Servicer or pay at a
minimum the outstanding principal or net book value of the Leases and any
applicable make whole premium, if any;
(ix) the Lease was originated by the Seller, or was acquired by the
Seller in a "true sale" in the ordinary course of its business and in a
manner which satisfies the underwriting practices set forth in the Credit
and Collection Policy as in effect from time to time;
(x) the Lease has been sold to the Seller free and clear of any Liens
other than Permitted Encumbrances;
(xi) the Lease is assignable without prior written consent of the
Lessee;
(xii) the Lease is denominated and payable only in U.S. dollars, the
Lessor is located in the United States and one or more Obligors who are
fully liable under the Lease are located in the United States;
(xiii) the Lease is not a "consumer lease" within the meaning of
Article 2A of the UCC in any jurisdiction where such Article 2A has been
adopted and governs the construction thereof;
(xiv) the lease, to the extent such Lease was reacquired by the Seller
from an affiliate prior to its conveyance in this transaction, was acquired
by the Seller in a "true sale";
(xv) no adverse selection was used in selecting the Lease for transfer
to the Transferor;
(xvi) the Lessee has represented to the Seller or Vendor that it has
accepted the Equipment;
(xvii) the Lessee is not a subject of an insolvency or bankruptcy
proceeding at the time of the transfer;
(xviii) the Lease is not a Defaulted Lease;
(xix) the maximum remaining term of the Lease does not exceed 84
months;
(xx) the Lease is not more than 60 days past due at time of transfer
to the Transferor;
(xxi) (A) with respect to any Lease other than a Rent Stream
Obligation, such Lease is a Finance Lease, and (B) with respect to any
Lease other than a Rent Stream Obligation or a Synthetic Lease, such Lease
provides that by the end of the lease
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term, the Lessee may elect to purchase the related Equipment upon the
exercise of a nominal purchase option;
(xxii) at least one Lease Payment has been paid by the Obligor on such
Lease;
(xxiii) at the time that the Seller conveyed its right, title and
interest in the Lease and the related Equipment, the Seller had no
knowledge that any item of such Equipment had suffered any loss or damage
which has not been repaired;
(xxiv) at the time that the Seller conveyed its right, title and
interest in the Lease and the related Equipment, such Lease shall not have
been amended, altered or modified in any respect, except in writing and all
such writings shall be contained in the Lease File in which the Lease
itself is contained;
(xxv) if a Synthetic Lease, such Lease was originated by the Seller
and not acquired by the Seller from a third party;
(xxvi) at the time that the Seller conveyed its right title and
interest in the Lease and the related Equipment, (A) except to the extent
that payments have been previously received on such Lease, the Obligor will
not have been released, in whole or in part, from any of its obligations in
respect of such Lease, (B) except as shown in the Lease File, no Equipment
related to such Lease will have been released, in whole or in part, from
such Lease, and (C) except as shown in the Lease File, neither the
operation of the Lease nor the exercise of any rights thereunder, nor the
execution of any instrument, nor the occurrence of any facts or
circumstances, has rendered or will render such Lease unenforceable, in
whole or in part, or subject such Lease or any related Equipment to any
right of rescission, setoff, counterclaim or defense (including, without
limitation, the defense of usury);
(xxvii) with respect to a Lease which had been acquired by Charter
Financial, Inc. from a third party originator, other than an affiliate of
Charter Financial, Inc., UCC filings have been filed to reflect the
assignment of the security interest from the third party originator to
Charter Financial, Inc.; and
(xxviii) with respect to a Lease which is a Financial Lease, Charter
Financial, Inc. has made all necessary UCC filings in all states where the
related Equipment is located, naming the Lessee as debtor and Charter
Financial, Inc. as secured party, to perfect the security interest of
Charter Financial, Inc. in such Equipment.
(d) the Transferor represents and warrants that as of the Cut-Off-Date:
(i) no more than 2.5% of the Leases by Discounted Lease Balance have
Equipment which is subject to certificate of title regulations in any
jurisdiction;
(ii) the information set forth in the Schedule of Leases is true and
correct;
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(iii) no less than 98% of the Leases by Discounted Lease Balance have
Lease Payments which are scheduled to be paid in monthly intervals; and
(iv) the Leases which are Rent Stream Obligations which were issued by
any individual third party issuer (including, without limitation, an
affiliate of Charter) do not represent more than 1.5% of the Aggregate
Discounted Lease Balance.
Section 3.05 Payments.
The portfolio detail delivered or to be delivered to the 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 3.06 Full Disclosure.
The Prospectus and the Private Placement Memoranda (including, without
limitation, 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 the Seller or any Affiliate of the Seller or, to the knowledge of
the Seller, any Lease, Lessee or item of Equipment, which the Seller has not or
will not disclose in the Prospectus or the Private Placement Memoranda which
materially affects adversely nor, so far as the Seller can now reasonably
foresee, will materially affect adversely the ability of the Seller to perform
the transactions contemplated by this Seller Contribution and Sale Agreement.
Section 3.07 Pending Litigation.
There are no proceedings or investigations pending, or to the knowledge
(after due inquiry) of the Seller threatened, against or affecting the Seller or
any subsidiary in or before any court, governmental authority or agency or
arbitration board or tribunal, including, but not limited to, any such
proceeding or investigation with respect to any environmental or other liability
resulting from the ownership or use of any of the Equipment, which, individually
or in the aggregate, involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Seller and its subsidiaries, or the ability of the Seller
to perform its obligations under this Seller Contribution and Sale Agreement.
The Seller is not in default with respect to any order of any court,
governmental authority or agency or arbitration board or tribunal.
Section 3.08 Title to Properties.
Immediately following the transfer by the Seller to the Transferor of the
Leases and the Seller's interest in the Equipment, the Leases (including the
right to receive all payments
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due or to become due thereunder) and the interest in the Equipment will be free
and clear of all Liens other than Permitted Encumbrances.
Section 3.09 Transactions Legal and Authorized.
The transfer by the Seller of all of its right, title and interest in and
to each item of Equipment and each Lease (including the right to receive all
payments due or to become due thereunder) and compliance by the Seller with all
of the provisions of this Seller Contribution and Sale Agreement:
(a) have been duly authorized by all necessary corporate action on the
part of the Seller, and do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of the Seller except such as have been duly obtained;
(b) are within the corporate powers of the 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 the Seller under the
provisions of, any agreement, charter, instrument, by-law or other
instrument to which the 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 the Seller or its
properties, or any order to which the 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 the Seller in connection with the execution and delivery of this Seller
Contribution and Sale Agreement or the contribution of the Leases and Equipment.
Section 3.11 Taxes.
(a) All tax returns required to be filed by the Seller or any subsidiary
in any jurisdiction have in fact been filed or a valid extension
obtained, and all taxes, assessments, fees and other governmental
charges upon the Seller or any subsidiary, or upon any of their
respective properties, income or franchises, shown to be due and
payable on such returns have been paid. To the best of the Seller's
knowledge all such tax returns were true and correct and neither the
Seller nor any subsidiary knows of any proposed additional tax
assessment against it in any material amount nor of any basis
therefor.
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(b) The provisions for taxes on the books of the Seller and each of its
subsidiaries are in accordance with generally accepted accounting
principles.
Section 3.12 Compliance with Law.
The 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 might
materially adversely affect the business or condition (financial or otherwise)
of the Seller and its subsidiaries.
Section 3.13 Ability to Perform.
At the date hereof, the Seller does not believe, nor does it have any
reasonable cause to believe, that it cannot perform each and every covenant
contained in this Seller Contribution and Sale Agreement.
Section 3.14 Ordinary Course; No Insolvency.
The transactions contemplated by the Notes, the Indenture and this Seller
Contribution and Sale Agreement are being consummated by the Seller in
furtherance of the Seller's ordinary business purposes and constitute a
practical and reasonable course of action by the Seller designed to improve the
financial position of the Seller, with no contemplation of insolvency and with
no intent to hinder, delay or defraud any of its present or future creditors.
The Seller will not, either as a result of the transaction contemplated by this
Seller Contribution and Sale Agreement, or immediately before or after such
transaction, be insolvent or have an unreasonably small capital for the conduct
of its business and the payment of anticipated obligations.
Section 3.15 Assets and Liabilities.
(a) Both immediately before and after any transfer of Leases (including the
right to receive all payments due or to become due thereunder) and the transfer
of the interests in the Equipment contemplated by this Seller Contribution and
Sale Agreement, the present fair salable value of the Seller's assets was or
will be in excess of the amount that will be required to pay the Seller's
probable liabilities as they then exist and as they become absolute and matured;
and
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(b) Both immediately before and after any transfer of Leases (including the
right to receive all payments due or to become due thereunder) and the transfer
of the interests in the Equipment contemplated by this Seller Contribution and
Sale Agreement, the sum of the Seller's assets was or will be greater than the
sum of the Seller's debts, valuing the Seller's assets at a fair salable value.
Section 3.16 Fair Consideration.
The consideration received by the Seller, in exchange for the Leases
(including the right to receive all payments due or to become due thereunder)
and the transfer of its interests in the Equipment, is fair consideration having
value equivalent to or in excess of the value of the assets being transferred by
the Seller.
Section 3.17 Ability to Pay Debts.
Neither as a result of the transaction contemplated by this Seller
Contribution and Sale Agreement nor otherwise does the Seller believe that it
will incur debts beyond its ability to pay or which would be prohibited by its
charter documents or by-laws. The Seller's assets and cash flow enable it to
meet its present obligations in the ordinary course of business as they become
due.
Section 3.18 Bulk Transfer Provisions.
The transfer, assignment and conveyance of the Leases and its interests in
the Equipment by the Seller pursuant to this Seller Contribution and Sale
Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
Section 3.19 Transfer Taxes.
The transfer, assignment and conveyance of the Leases (including all
payments due or to become due thereunder) and its interests in the Equipment by
the Seller pursuant to this Seller Contribution and Sale Agreement is not
subject to and will not result in any tax, fee or governmental charge payable by
the Seller to any federal, state or local government ("Transfer Taxes"). In the
event that the Transferor receives actual notice of any Transfer Taxes arising
out of the transfer, assignment and conveyance of the Leases and/or its
interests in the Equipment, on written demand by the Transferor, or upon the
Seller otherwise being given notice thereof, the Seller shall pay, and otherwise
indemnify and hold the Transferor, the Trustee and the holders of the Notes
harmless, on an after-tax basis, from and against any and all such Transfer
Taxes (it being understood that the holders of the Notes and the Trustee shall
have no obligation to pay such Transfer Taxes).
Section 3.20 Principal Executive Office.
The principal executive office of the Seller is located at 530 Fifth
Avenue, New York, New York 10036.
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Section 3.21 Sale and Contribution Treatment.
The Seller will treat the transfer to the Transferor of the Leases and the
Lease Receivables as a sale and a capital contribution as described in Section
2.06 hereof and absolute assignment for tax reporting and accounting purposes.
Section 3.22 Nonconsolidation.
The Seller is and at all times since its incorporation has been operated in
such a manner that it would not be substantively consolidated with the
Transferor, such that the separate existence of the Seller and the Transferor
would be disregarded in the event of a bankruptcy or insolvency of the Seller or
the Transferor, and in such regard:
(a) the Seller maintains separate corporate records and books of account
from the Transferor and otherwise observes corporate formalities and has
separate business office space from the Transferor;
(b) the financial statements and books and records of the Seller prepared
after the Issuance Date will reflect the separate existence of the Transferor;
(c) the Seller maintains its assets separately from the assets of the
Transferor (including through the maintenance of a separate bank account), the
Seller's funds and assets, and records relating thereto, have not been and are
not commingled with those of the Transferor;
(d) all business correspondence of the Seller and other communications are
conducted in the Seller's own name and on its own stationery; and
(e) the Transferor does not act as an agent of the Seller in any capacity
and the Seller does not act as agent for the Transferor, other than as Servicer
pursuant to the Servicing Agreement, but instead presents itself to the public
as a corporation separate from the Transferor.
Section 3.23 Lease Repurchase
In the event that any of the representations or warranties made by the
Seller in Section 3.04 or Section 3.05 with respect to any of the Leases proves
at any time to have been inaccurate in any material respect as of the Closing
Date or the related Transfer Date, as applicable, and the event or condition
causing such inaccuracy shall not have been cured or corrected within 30 days of
the earlier of the date on which (a) the Seller is given notice thereof by the
Issuer, the Transferor, or the Trustee, or (b) on the date on which the Seller
otherwise first has notice thereof, the Seller shall, unless it has otherwise
substituted a Substitute Lease for such Lease, purchase such Lease not later
than the third Business Day after the Calculation Date next following the
expiration of such 30 day period described herein in an amount equal to the
Lease Repayment Amount for such Lease, and in addition, the Seller shall, at the
same time, reimburse to the Servicer any Servicer Advances made with respect to
such Lease.
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ARTICLE IV. THE SELLER
Section 4.01 Merger or Consolidation of the Seller.
The 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 the
Seller's duties under this Seller Contribution and Sale Agreement.
The 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 the Seller, shall execute and deliver to the Transferor
or the Servicer and the Trustee, in form and substance satisfactory to each of
them, (a) an instrument expressly assuming all of the obligations of the 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 the Seller hereunder.
Section 4.02 Control of Transferor.
So long as any of the Notes or the other obligations secured by the
Indenture remain outstanding, the Seller will not (i) sell, pledge or otherwise
transfer any of its common stock in the Transferor held by the Seller or (ii)
vote such common stock interests in favor of any amendment to or alteration of
the articles of incorporation of the Transferor.
Section 4.03 Books and Records.
The Seller will clearly mark its books and records to reflect the sales and
contributions of Leases and Equipment pursuant to this Agreement.
Section 4.04 Communications.
The Seller will reply to all inquiries by third parties with respect to the
transactions contemplated by this Agreement by indicating that it has
contributed the Leases and its right, title and interest in the related
Equipment and that the Transferor now holds title to the Leases and such
interest in the related Equipment.
ARTICLE V. SUBSTITUTION AND ADDITION OF LEASES
Section 5.01 Substitution and Addition.
(a) Subject to the satisfaction of the requirements set forth in Section
5.01(c) hereof, the 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 a Lease (for purposes of this Article V
referred to as a "Predecessor Lease") and the Equipment subject thereto if:
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(i) the Predecessor Lease became (A) a Defaulted Lease, (B) a Lease
subject to a Warranty Event or (C) a Lease which is the subject of a
Casualty Loss, during the immediately preceding Collection Period; and
(ii) if Section 5.01(a)(i)(A) or (C) is applicable, the aggregate
Discounted Lease Balance of the Leases that are, or have been, Predecessor
Leases shall not in the aggregate exceed 10% of the Discounted Lease
Balance of the Leases on the Cut-Off Date.
(b) Subject to the satisfaction of the requirements set forth in Section
5.01(c) hereof, in the event of an Early Lease Termination which has been
prepaid in full, the Transferor will have the option to reinvest the proceeds of
such Early Termination Lease in one or more Additional Leases. The purchase
price of such Additional Lease or Leases will be an amount paid to the
Transferor equal to the proceeds of such Early Termination Lease.
(c) Each transfer of Substitute Leases and addition of Additional Leases
will be subject to the satisfaction of the following conditions precedent:
(i) the final payment on such Substitute Lease or Additional Lease
must be on or prior to the date of the final payment of the Predecessor
Lease or Early Termination Lease;
(ii) after giving effect to such additions and substitutions, the
aggregate amount of Lease Payments through the term of the Leases
(including the Substitute Leases and the Additional Leases) and the
Discounted Lease Balance of the Leases will not be materially less than the
aggregate scheduled Lease Payments of the Leases and the Discounted Lease
Balance of the Leases, respectively prior to such substitution or addition
or adjustment; and
(iii) after giving effect to such adjustments, additions, and
substitutions pursuant to Article IV, the weighted average remaining term
of the Leases must not be greater than the weighted average remaining term
of the Leases prior to such adjustment, addition, and substitution.
(d) Each addition and substitution pursuant to this Section 5.01 shall
include the right to receive all amounts due or to become due under each
Substitute Lease being substituted or Additional Leases being purchased and any
security deposits paid by the related Lessee to the Seller in connection
therewith (other than any prepayments of rent required pursuant to the terms
thereof at or before the commencement of such Lease and any payments due before
the Transfer Date as to which such substitution or addition is made). At the
time of each such substitution and addition, the Seller shall transfer to the
Trustee all Lease Payments actually received by the Seller which became due on
or after the related Transfer Date.
Section 5.02 Procedure.
(a) By 11:00 A.M. on the third Business Day following each Transfer Date,
the Seller shall give written notice to the Servicer of any substitution
pursuant to Section 5.01 of Substitute Leases for Predecessor Leases or addition
of Additional Leases for Early Termination Leases which have been prepaid in
full during the preceding Collection Period. By 11:00 A.M.
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on the fourth Business Day following each Payment Date, the Seller shall deliver
to the Servicer and the Trustee and, to the extent not included in the Monthly
Servicer Report, the Trustee shall promptly deliver to each Rating Agency (i) a
supplement to Schedule 1 hereto setting forth the information shown thereon for
each such Substitute Lease and Additional Lease, (ii) an Officer's Certificate
(A) certifying that each such Substitute Lease and Additional Lease is an
"Eligible Lease", (B) specifying each Predecessor Lease for which a substitution
has been made and each Early Termination Lease which is being replaced by an
Additional Lease and the amount of each periodic Lease Payment under each such
Predecessor Lease and the amount of each periodic Lease Payment under each
Additional Lease and Substitute Lease being transferred thereby and (C) that all
conditions precedent to such addition or substitution have been satisfied and
(iii) such additional information concerning such Additional Leases, Substitute
Leases, Early Termination Leases or Predecessor Leases as may be needed for the
Servicer to prepare its monthly reports pursuant to the Servicing Agreement and
to otherwise carry out its duties as servicer under the Servicing Agreement.
(b) Subject to the provisions of Section 5.03, the delivery of any
Officer's Certificate and supplement to Schedule 1 pursuant to Section 5.02(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Collection Period (i) the Seller assigned to the
Transferor, as a sale and a capital contribution in accordance with Section 2.01
hereof to the extent the assignment is made under Section 5.01(a)(i)(A) or (C)
hereof all of the Seller's right, title and interest in and to the Substitute
Leases and Additional Leases identified in such supplement and the related
rights described in Section 5.01 hereof, (ii) the Seller assigned to the
Transferor, as a sale and a capital contribution in accordance with Section 2.01
hereof to the extent the assignment is made under Section 5.01(a)(i)(A) or (C),
all of the Seller's right, title and interest in and to the Equipment subject to
such Substitute Leases and Additional Leases (to the extent of the Seller's
interest in such Equipment, including the Seller's security interest in any
Equipment which is not owned by the Seller), and (iii) the Transferor assigned
and transferred to the Seller, without representation or warranty, all of the
Transferor's right, title and interest in and to the Predecessor Leases and
Early Termination Leases identified in such Officer's Certificate and the
Equipment subject thereto (to the extent of the Transferor's interest in such
Equipment, including the Transferor's security interest in any Equipment which
is not owned by the Transferor). The Seller shall promptly cause to be delivered
to the Trustee (or a custodian on its behalf) the original executed counterpart
of each Substitute Lease and Additional Lease assigned to the Transferor
pursuant to Section 5.01 hereof and the Transferor shall promptly request the
Trustee to deliver to the Seller the original executed counterpart of each
Predecessor Lease and each Early Termination Lease for which substitution or an
addition has been made pursuant to Section 7.01 hereof.
Section 5.03 Seller's Subsequent Obligations.
Upon any substitution of Leases in accordance with the provisions of this
Article V, the Seller's obligations hereunder with respect to the Predecessor
Lease shall cease but the 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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<PAGE>
ARTICLE VI. ASSIGNMENT
Section 6.01 Assignment to Trustee.
It is understood that this Seller Contribution and Sale Agreement and all
rights of the Transferor hereunder will be assigned by the Transferor to the
Issuer pursuant to the Transferor Contribution and Sale Agreement, and thence by
the Issuer to the Trustee pursuant to the Indenture, for the benefit of the
Trustee, the holders from time to time of the Notes as provided in the
Indenture, and may be subsequently assigned by the Trustee to any successor
Trustee or as otherwise provided in the Indenture. The 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, the Issuer, the Trustee, the holders from time to time of the
Notes, and any successor to or assignee of any thereof.
Section 6.02 Assignment by Seller.
None of the respective rights or obligations of the Seller hereunder may be
assigned without the prior written consent of the Transferor and the Trustee
(acting upon the instructions of the Holders of 66-2/3% of the then aggregate
unpaid Outstanding Principal Amount of the Notes).
ARTICLE VII. NATURE OF OBLIGATIONS AND SECURITY THEREFOR
Section 7.01 Obligations Absolute.
The obligations of the Seller hereunder, and the rights of the Trustee, as
assignee of the Transferor, in and to all amounts payable by the Seller
hereunder, shall be absolute and unconditional and shall not be subject to any
abatement, reduction, setoff, defense, counterclaim or recoupment whatsoever,
including, without limitation, 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 the Seller may have against, the
Transferor, the Issuer, the Trustee, and any holder of the Notes or any other
Person for any reason whatsoever; nor, except as otherwise expressly provided
herein, shall this Seller Contribution and Sale Agreement terminate, or the
respective obligations of the Transferor or the 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 the Transferor, the Issuer, the Seller and
the 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 the Transferor to perform any of its obligations herein contained, or
by reason of any other indebtedness or liability, howsoever and whenever
arising, of the Transferor, the Trustee, the Issuer, or any Holder of the Notes
to the Seller or any other Person or by reason of any insolvency, bankruptcy, or
similar proceedings by or against the Seller, the Issuer, the Transferor, the
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 the Seller
hereunder and all amounts payable by the 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 Seller Contribution and
Sale
16
<PAGE>
Agreement. The Seller shall provide the Rating Agencies with notice of any
assignment of any of its obligations hereunder.
Section 7.02 Further Assurances; Financing Statements.
The 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 the
Transferor or the 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 the Transferor or the Trustee to
exercise and enforce its rights and remedies under this Agreement with respect
to any Leases and the Lease Payments. Without limiting the generality of the
foregoing, the 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 the Transferor or the Trustee may request to
protect and preserve the assignments and security interests granted by this
Agreement with respect to the Leases.
ARTICLE VIII. MISCELLANEOUS
Section 8.01 Continuing Obligations.
This Seller Contribution and Sale Agreement shall continue in full force
and effect until each of the Notes and any other amounts due to any 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 8.02 GOVERNING LAW.
THIS SELLER CONTRIBUTION AND SALE 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 SELLER CONTRIBUTION AND SALE
AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE BALANCE OF THIS SELLER
CONTRIBUTION AND SALE AGREEMENT.
Section 8.03 Successors and Assigns.
This Seller Contribution and Sale Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Transferor, the Seller, the
Issuer and the Trustee and shall inure to the benefit of the successors and
assigns of the Holders, from time to time, of the Notes.
Section 8.04 Modification.
The terms of this Seller Contribution and Sale Agreement shall not be
waived, modified or amended without (a) the written consent of the party against
whom such waiver, modification or amendment is claimed and, in any case, the
Trustee (acting upon the instructions of the Holders of 66-2/3% of the then
aggregate unpaid Outstanding Principal Amount of the
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Notes); and (b) confirmation from the Rating Agencies that such waiver,
modification or amendment will not cause the then existing rating of the Notes
to be decreased.
Section 8.05 No Petition or Proceedings.
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, the Seller hereby agrees
that it will not, directly or indirectly, institute, or cause to be instituted,
against the Transferor any petition or otherwise invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Transferor or the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Transferor or
the Issuer or any substantial part of its respective property, or ordering the
winding up or liquidation of the affairs of the Transferor or the Issuer.
Section 8.06 Notices.
All notices and other communications given in connection with this Seller
Contribution and Sale 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 the Seller, the Servicer,
the Issuer and the Transferor, to 530 Fifth Avenue, New York, New York 10036
Attention: Treasurer, with a copy to the General Counsel (telecopy:
212-805-1181), and in the case of the Trustee and the Holders of the Notes, to
such addresses as are provided pursuant to Sections 1.05 and 1.06 of the
Indenture or to such other address as either party may specify to the other from
time to time in accordance with this Section 8.06.
Section 8.07 Counterparts.
This Seller Contribution and Sale Agreement may be executed in any number
of counterparts, each counterpart constituting an original, but all together
constituting only one Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Seller
Contribution and Sale Agreement as of the date and year first written above.
CHARTER FINANCIAL, INC., as
Seller
By: _________________________
Name:
Title:
CHARTER FUNDING CORPORATION V
By: _________________________
Name:
Title:
The undersigned hereby acknowledges
receipt of a copy of the foregoing
Seller Contribution and Sale Agreement
and agrees to, and to be bound by, each
of the provisions thereof applicable to
the undersigned.
LASALLE BANK NATIONAL ASSOCIATION,
as Trustee
By: _________________________
Name:
Title:
[Signature Page to the Seller Contribution and Sale Agreement]
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<PAGE>
SCHEDULE 1
SCHEDULE OF LEASES
DB Draft 8/5/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHARTER FUNDING CORPORATION V,
TRANSFEROR
AND
CHARTER EQUIPMENT LEASE 1999-1 LLC,
ISSUER
-------------------------
TRANSFEROR CONTRIBUTION AND SALE AGREEMENT
Dated as of August 1, 1999
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS .........................................................................................................1
ARTICLE I DEFINITIONS ............................................................................................2
ARTICLE II SALE AND CAPITAL CONTRIBUTION .........................................................................2
Section 2.01 Sale and Capital Contribution of Leases and Equipment, Lease Receivables.......................2
Section 2.02 Treatment as a Sale and Contribution; Grant of Security Interest...............................3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR.............................................4
Section 3.01 Corporate Organization and Authority...........................................................4
Section 3.02 Business and Property..........................................................................4
Section 3.03 Financial Statements...........................................................................4
Section 3.04 Equipment and Leases...........................................................................4
Section 3.05 Payments.......................................................................................8
Section 3.06 Full Disclosure................................................................................8
Section 3.07 Pending Litigation.............................................................................8
Section 3.08 Title to Properties............................................................................8
Section 3.09 Transactions Legal and Authorized..............................................................8
Section 3.10 Governmental Consent...........................................................................9
Section 3.11 Taxes..........................................................................................9
Section 3.12 Compliance with Law............................................................................9
Section 3.13 Ability to Perform............................................................................10
Section 3.14 Ordinary Course; No Insolvency................................................................10
Section 3.15 Assets and Liabilities........................................................................10
Section 3.16 Fair Consideration............................................................................10
Section 3.17 Ability to Pay Debts..........................................................................11
Section 3.18 Bulk Transfer Provisions......................................................................11
Section 3.19 Transfer Taxes................................................................................11
Section 3.20 Principal Executive Office....................................................................11
Section 3.21 Sale and Contribution Treatment...............................................................11
Section 3.22 Nonconsolidation..............................................................................11
Section 3.23 Lease Repurchase..............................................................................12
ARTICLE IV THE TRANSFEROR .......................................................................................12
Section 4.01 Merger or Consolidation of the Transferor.....................................................12
Section 4.02 Control of Issuer.............................................................................13
Section 4.03 Books and Records.............................................................................13
Section 4.04 Communications................................................................................13
</TABLE>
i
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<TABLE>
<S> <C>
ARTICLE V SUBSTITUTION AND ADDITION OF LEASES...................................................................13
Section 5.01 Substitution and Addition.....................................................................13
Section 5.02 Procedure.....................................................................................14
Section 5.03 Transferor's Subsequent Obligations...........................................................15
ARTICLE VI ASSIGNMENT ...........................................................................................15
Section 6.01 Assignment to Trustee.........................................................................15
Section 6.02 Assignment by Transferor......................................................................16
ARTICLE VII NATURE OF OBLIGATIONS AND SECURITY THEREFOR .........................................................16
Section 7.01 Obligations Absolute..........................................................................16
Section 7.02 Further Assurances; Financing Statements......................................................16
ARTICLE VIII MISCELLANEOUS ......................................................................................17
Section 8.01 Continuing Obligations........................................................................17
Section 8.02 GOVERNING LAW.................................................................................17
Section 8.03 Successors and Assigns........................................................................17
Section 8.04 Modification..................................................................................17
Section 8.05 No Petition or Proceedings....................................................................17
Section 8.06 Notices.......................................................................................18
Section 8.07 Counterparts..................................................................................18
</TABLE>
Schedule 1 - Schedule of Leases
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<PAGE>
TRANSFEROR CONTRIBUTION AND SALE AGREEMENT
This TRANSFEROR CONTRIBUTION AND SALE AGREEMENT is made and dated as of
August 1, 1999, by and between CHARTER EQUIPMENT LEASE 1999-1 LLC, a Delaware
limited liability company, as issuer hereunder (the "Issuer") and CHARTER
FUNDING CORPORATION V, a New York corporation, as transferor of the Leases (the
"Transferor").
R E C I T A L S
WHEREAS, pursuant to the Seller Contribution and Sale Agreement, Charter
Financial, Inc. (the "Seller") is selling and making certain capital
contributions to Charter Funding Corporation V (the "Transferor") with respect
to the Leases, the related Equipment and other assets described therein (the
"Transferred Assets").
WHEREAS, pursuant to this Transferor Contribution and Sale Agreement, the
Transferor is selling and making certain capital contribution to Charter
Equipment Lease 1999-1 LLC (the "Issuer"), with respect to the Transferred
Assets.
WHEREAS, pursuant to the Indenture, the Issuer is pledging the Transferred
Assets thereunder for the benefit of the Holders of the Notes (as detailed
below) and is issuing one class of [ ]% Class A-1 Lease-Backed Notes, [ ] in the
aggregate principal amount of $[ ] (the "Class A-1 Notes"), one class of [ ]%
Class A-2 Lease-Backed Notes, [ ] in the aggregate principal amount of $[ ] (the
"Class A-2 Notes"), one class of [ ]% Class A-3 Lease-Backed Notes, [ ] in the
aggregate principal amount of $[ ] (the "Class A-3 Notes"), one class of [ ]%
Class A-4 Lease-Backed Notes, [ ] in the aggregate principal amount of $[ ] (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"), one class of [ ]% Class B
Leased-Backed Notes, [ ] (the "Class B Notes"), in the aggregate principal
amount of $[ ], one class of [ ]% Class C Lease-Backed Notes, [ ], in the
aggregate principal amount of $[ ] (the "Class C Notes"), one class of [ ]%
Class D Leased-Backed Notes, [ ] in the aggregate principal amount of $[ ] (the
"Class D Notes"); together with the Class A Notes, the Class B Notes, the Class
C Notes, and the Class D Notes, are referred to collectively as the "Notes").
WHEREAS, pursuant to the Indenture, the Issuer is granting, inter alia, to
the Trustee, for the benefit of the Holders from time to time of the Notes, a
security interest in all right, title and interest of the Issuer in, to and
under the Leases, the interests in the Equipment and the other Transferred
Assets and the Servicing Agreement.
NOW, THEREFORE, the parties hereto agree, in consideration of the mutual
agreements set forth herein and other valuable consideration provided, as
follows:
<PAGE>
ARTICLE I DEFINITIONS
As used in this Transferor Contribution and Sale Agreement, the following
terms have the respective meanings set forth below or set forth in the Section
hereof or in any other agreement indicated:
Lease - 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 hereto, as the same may
be amended or modified from time to time in accordance with the provisions
hereof and thereof and of the Servicing Agreement.
Predecessor Lease - as defined in Section 5.01 hereof.
Schedule of Leases - the schedule of Leases, annexed hereto as Schedule 1
as may be amended from time to time.
Servicing Agreement - the Servicing Agreement dated as of August 1, 1999
among the Issuer, LaSalle Bank National Association, as Trustee, and Charter
Financial, Inc. as the same may be amended or modified from time to time in
accordance with the provisions hereof and thereof.
Substitute Lease - as defined in Section 5.01 hereof.
Transfer Taxes - as defined in Section 3.19 hereof.
To the extent capitalized terms are used herein which are not otherwise
defined, such terms shall have meanings defined in the Servicing Agreement.
ARTICLE II SALE AND CAPITAL CONTRIBUTION
Section 2.01 Sale and Capital Contribution of Leases and Equipment, Lease
Receivables.
By their execution and delivery of this Transferor Contribution and Sale
Agreement, the Transferor hereby sells, contributes and assigns to the Issuer,
and the Issuer hereby acquires from the Transferor without recourse (except to
the extent of the Transferor's purchase obligations as set forth herein), all of
the Transferor's right, title and interest in and to each of the Leases and the
Lease Receivables (including the right to receive all payments due or to become
due thereunder since the Cut-Off Date, or the related Transfer Date with respect
to Additional Leases or Substitute Leases), as shown on the Schedule of Leases
from time to time. The Transferor and the Issuer each acknowledge and confirm
that contemporaneously with the sale and the contribution of the Leases as
hereinabove provided, the Transferor, as a holder of beneficial interests in the
Issuer, is selling, contributing and transferring to the Issuer, and in
connection with each transfer and assignment of Additional Leases and Substitute
Leases the Transferor will sell, contribute and transfer to the Issuer, without
recourse, all right, title and interest of the Transferor in and to each item of
Equipment subject to each Lease, Additional Lease and Substitute Lease. After
such sale, contribution and transfer by the Transferor to the Issuer, all right,
title and interest of the Transferor in and to each item of Equipment subject to
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<PAGE>
each Lease shall be vested in the Issuer. In each instance, the transfer of the
Leases, the Lease Receivables and the Equipment shall be regarded as a sale,
however to the extent that the sale price for the Lease, the Lease Receivables
and the Equipment is less than the fair market value thereof, the difference
shall be deemed to be a capital contribution by the Transferor to the Issuer.
Section 2.02 Treatment as a Sale and Contribution; Grant of Security
Interest.
It is the intention of the parties hereto that each transfer of Leases,
Additional Leases, Substitute Leases, Lease Payments and all other amounts due
or becoming due with respect thereto and Equipment (or interests therein) being
made hereunder shall constitute a sale and a capital contribution, as described
in Section 2.01 hereof, and not a loan. The Transferor shall not take any action
inconsistent with the treatment of such transfers as sales and capital
contributions, as described in Section 2.01 hereof, or with the Issuer's
ownership of the Leases, the Lease Receivables and all other amounts due or
becoming due with respect thereto and the interests in the Equipment. The
Transferor shall indicate in its records that ownership of each of the Leases,
the Lease Receivables and the interests in the Equipment is held by the Issuer,
and each shall respond to any inquiries from third parties by indicating that
its ownership in the Leases, Additional Leases, Substitute Leases, the Lease
Receivables and all other amounts due or becoming due with respect thereto and
the interests in the Equipment is held by the Issuer. In the event, however,
that a court of competent jurisdiction were to hold that any transaction
evidenced hereby constitutes a loan and not a capital contribution, it is the
intention of the parties hereto that this Agreement shall constitute a security
agreement under applicable law and that the Issuer shall be deemed to have been
granted a first priority security interest in (a) the Leases and all Lease
Payments, Casualty Payments, Termination Payments, and other amounts now due or
becoming due with respect thereto since 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 and any payments due before the Cut-Off Date) and all
Additional Leases and Substitute Leases and all Lease Payments, Casualty
Payments, Termination Payments and other amounts due or becoming due with
respect thereto since the effective date of their respective addition or
substitution (other than any prepayments of rent required by the terms of any
Lease at or before the commencement of the Lease and any payments due before the
effective date of such addition or substitution), (b) all rights of the Issuer
to or under any guarantees of or collateral (including all rights of the Issuer
in any security deposits) for the Lessee's obligations under any Lease, (c) all
interests of the Issuer in the Equipment at any time subject to any Lease
including any security interest of the Transferor in the Equipment and (d) all
proceeds of the conversion, whether voluntary or involuntary, of any of the
foregoing into cash or other property.
3
<PAGE>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR
The Transferor hereby represents and warrants to the accuracy and
correctness of the statements set forth in Section 3.01 through Section 3.22.
Section 3.01 Corporate Organization and Authority.
The Transferor:
(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 business or condition (financial or
otherwise) of the Transferor or impair the enforceability of any Lease) and to
enter into and perform its obligations under this Transferor Contribution and
Sale Agreement, and the transactions contemplated hereby, including the
Transferor'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 Transferred Assets or the business or
condition (financial or otherwise) of the Transferor or impair the
enforceability of any Lease).
Section 3.02 Business and Property.
The Prospectus and the Private Placement Memoranda, accurately describe in
all material respects the general nature of the business of the Transferor.
Section 3.03 Financial Statements.
Except as disclosed in the Prospectus and the Private Placement Memoranda,
there has been no change in the business, condition or prospects (financial or
otherwise) of the Transferor except changes in the ordinary course of business,
none of which individually or in the aggregate has been materially adverse.
Neither the Transferor nor any of its subsidiaries has any material liabilities
or obligations not incurred in the ordinary course of business other than those
for which adequate reserves are reflected in such financial statements and
certain contingent obligations of the Transferor relating to other asset
securitization transactions involving the Transferor.
Section 3.04 Equipment and Leases.
(a) Prior to the date of each transfer of any Leases and Equipment in
accordance with Sections 2.01 and 2.02, respectively, the Transferor purchased
each item of Equipment from Charter Financial, Inc. pursuant to the Seller
Contribution and Sale Agreement.
4
<PAGE>
The Transferor has paid in full, to Charter Financial, Inc., as the case may be,
the purchase price and any related charges in connection with the acquisition of
the Equipment. The transfer to the Issuer of the Leases and all of the
Transferor'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 the
Transferor is a party or by which it is bound.
(b) Upon completion of the transfer described in Article II hereof, the
Issuer will (i) be the legal owner of the Leases (including the right to receive
all payments due or to become due thereunder), (ii) have a valid security
interest in each item of Equipment subject to any Lease other than a Rent Stream
Obligation. At such time, the Leases (including the right to receive all
payments due or to become due thereunder) and the Transferor's interest in the
Equipment will be free and clear of all Liens other than Permitted Encumbrances.
(c) With respect to any Lease, other than an Additional Lease or a
Substitute Lease, as of the Cut-Off Date, or with respect to any Additional
Lease or any Substitute Lease, as of the related Transfer Date, the Transferor
represents and warrants that each Lease shall comply with the following:
(i) the Lease is a valid and binding obligation of the Lessee
enforceable against such Lessee in accordance with its terms (except as may
be limited by bankruptcy laws, other laws affecting creditor's rights in
similar transactions generally, and judicial powers of equity);
(ii) the Lease constitutes a non-cancellable, "hell or high water"
obligation of the Lessee and requires the Lessee to make all Lease Payments
thereon regardless of the condition of the Equipment to which the Lease
relates;
(iii) the Lease is non-cancellable by the Lessee and does not contain
early termination options (except for a Lease which contains early
termination or prepayment clauses, which requires the Lessee to pay the
Prepayment Amount for such Lease upon such cancellation or prepayment);
(iv) all payments payable under the Lease are absolute, unconditional
obligations of the Lessee without right to offset for any reason;
(v) the Lease requires the Lessee or a third party to maintain the
Equipment in good working order, to bear all the costs of operating the
Equipment, including taxes and insurance relating thereto;
(vi) the Lease does not materially violate any U.S. or state laws;
(vii) the Lease provides for periodic payments;
(viii) in the event of a Casualty Loss, with respect to the Lease, the
Lessee, at the Lessee's expense, is required to replace the Equipment with
like equipment in good repair, acceptable to the Servicer or pay at a
minimum the outstanding principal or net book value of the Leases and any
applicable make whole premium, if any;
5
<PAGE>
(ix) the Lease was originated by the Seller, or was acquired by the
Seller in a "true sale" in the ordinary course of its business and in a
manner which satisfies the underwriting practices set forth in the Credit
and Collection Policy as in effect from time to time;
(x) the Lease has been sold to the Transferor free and clear of any
Liens other than Permitted Encumbrances;
(xi) the Lease is assignable without prior written consent of the
Lessee;
(xii) the Lease is denominated and payable only in U.S. dollars, the
Lessor is located in the United States and one or more Obligors who are
fully liable under the Lease are located in the United States;
(xiii) the Lease is not a "consumer lease" within the meaning of
Article 2A of the UCC in any jurisdiction where such Article 2A has been
adopted and governs the construction thereof;
(xiv) the Lease, to the extent such Lease was reacquired by the Seller
from an affiliate prior to its conveyance in this transaction, was acquired
by the Seller in a "true sale";
(xv) no adverse selection was used in selecting the Lease for transfer
to the Transferor or the Issuer;
(xvi) the Lessee has represented to the Seller or Vendor that it has
accepted the Equipment;
(xvii) the Lessee is not a subject of an insolvency or bankruptcy
proceeding at the time of the transfer;
(xviii) the Lease is not a Defaulted Lease;
(xix) the maximum remaining term of the Lease does not exceed 84
months; and
(xx) the Lease is not more than 60 days past due at time of transfer
to the Transferor or the Issuer;
(xxi) (A) with respect to any Lease other than a Rent Stream
Obligation, such Lease is a Finance Lease, and (B) with respect to any
Lease other than a Rent Stream Obligation or a Synthetic Lease, such Lease
provides that by the end of the lease term, the Lessee may elect to
purchase the related Equipment upon the exercise of a nominal purchase
option;
(xxii) at least one Lease Payment has been paid by the Obligor on such
Lease;
6
<PAGE>
(xxiii) at the time that the Seller conveyed its right, title and
interest in the Lease and the related Equipment, the Seller had no
knowledge that any item of such Equipment had suffered any loss or damage
which has not been repaired;
(xxiv) at the time that the Seller conveyed its right, title and
interest in the Lease and the related Equipment, such Lease shall not have
been amended, altered or modified in any respect, except in writing and all
such writings shall be contained in the Lease File in which the Lease
itself is contained;
(xxv) if a Synthetic Lease, such Lease was originated by the Seller
and not acquired by the Seller from a third party;
(xxvi) at the time that the Seller conveyed its right title and
interest in the Lease and the related Equipment, (A) except to the extent
that payments have been previously received on such Lease, the Obligor will
not have been released, in whole or in part, from any of its obligations in
respect of such Lease, (B) except as shown in the Lease File, no Equipment
related to such Lease will have been released, in whole or in part, from
such Lease, and (C) except as shown in the Lease File, neither the
operation of the Lease nor the exercise of any rights thereunder, nor the
execution of any instrument, nor the occurrence of any facts or
circumstances, has rendered or will render such Lease unenforceable, in
whole or in part, or subject such Lease or any related Equipment to any
right of rescission, setoff, counterclaim or defense (including, without
limitation, the defense of usury);
(xxvii) with respect to a Lease which had been acquired by Charter
Financial, Inc. from a third party originator, other than an affiliate of
Charter Financial, Inc., UCC filings have been filed to reflect the
assignment of the security interest from the third party originator to
Charter Financial, Inc.; and
(xxviii) with respect to a Lease which is a Financial Lease, Charter
Financial, Inc. has made all necessary UCC filings in all states where the
related Equipment is located, naming the Lessee as debtor and Charter
Financial, Inc. as secured party, to perfect the security interest of
Charter Financial, Inc. in such Equipment.
(d) the Transferor represents and warrants that as of the Cut-Off-Date:
(i) no more than 2.5% of the Leases by Discounted Lease Balance have
Equipment which is subject to certificate of title regulations in any
jurisdiction;
(ii) the information set forth in the Schedule of Leases is true and
correct.
(iii) no less than 98% of the Leases by Discounted Lease Balance have
Lease Payments which are scheduled to be paid in monthly intervals; and
(iv) the Leases which are Rent Stream Obligations which were issued by
any individual third party issuer (including, without limitation, an
affiliate of Charter
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Financial, Inc.) do not represent more than 1.5% of the Aggregate
Discounted Lease Balance.
Section 3.05 Payments.
The portfolio detail delivered or to be delivered to the 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 3.06 Full Disclosure.
The Prospectus and the Private Placement Memoranda (including, without
limitation, 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 the Transferor or any Affiliate of the Transferor or, to the
knowledge of the Transferor, any Lease, Lessee or item of Equipment, which the
Transferor has not or will not disclose in the Prospectus or the Private
Placement Memoranda which materially affects adversely nor, so far as the
Transferor can now reasonably foresee, will materially affect adversely the
ability of the Transferor to perform the transactions contemplated by this
Transferor Contribution and Sale Agreement.
Section 3.07 Pending Litigation.
There are no proceedings or investigations pending, or to the knowledge
(after due inquiry) of the Transferor threatened, against or affecting the
Transferor or any subsidiary in or before any court, governmental authority or
agency or arbitration board or tribunal, including, but not limited to, any such
proceeding or investigation with respect to any environmental or other liability
resulting from the ownership or use of any of the Equipment, which, individually
or in the aggregate, involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Transferor and its subsidiaries, or the ability of the
Transferor to perform its obligations under this Transferor Contribution and
Sale Agreement. The Transferor is not in default with respect to any order of
any court, governmental authority or agency or arbitration board or tribunal.
Section 3.08 Title to Properties.
Immediately following the transfer by the Transferor to the Issuer of the
Leases and the Transferor's interest in the Equipment, the Leases (including the
right to receive all payments due or to become due thereunder) and the interest
in the Equipment will be free and clear of all Liens, other than Permitted
Encumbrances.
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Section 3.09 Transactions Legal and Authorized.
The transfer by the Transferor of all of its right, title and interest in
and to each item of Equipment and each Lease (including the right to receive all
payments due or to become due thereunder) and compliance by the Transferor with
all of the provisions of this Transferor Contribution and Sale Agreement:
(a) have been duly authorized by all necessary corporate action on the part
of the Transferor, and do not require any stockholder approval, or approval or
consent of any trustee or holders of any indebtedness or obligations of the
Transferor except such as have been duly obtained;
(b) are within the corporate powers of the Transferor; 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 the Transferor under the provisions of, any agreement,
charter, instrument, by-law or other instrument to which the Transferor 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 the Transferor or its
properties, or any order to which the Transferor 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 the Transferor in connection with the execution and delivery of this
Transferor Contribution and Sale Agreement or the contribution of the Leases and
Equipment.
Section 3.11 Taxes.
(a) All tax returns required to be filed by the Transferor or any
subsidiary in any jurisdiction have in fact been filed, or a valid extension
obtained, and all taxes, assessments, fees and other governmental charges upon
the Transferor or any subsidiary, or upon any of their respective properties,
income or franchises, shown to be due and payable on such returns have been
paid. To the best of the Transferor's knowledge all such tax returns were true
and correct and neither the Transferor nor any subsidiary knows of any proposed
additional tax assessment against it in any material amount nor of any basis
therefor.
(b) The provisions for taxes on the books of the Transferor and each of its
subsidiaries are in accordance with generally accepted accounting principles.
Section 3.12 Compliance with Law.
The Transferor:
(a) is not in violation of any laws, ordinances, governmental rules or
regulations to which it is subject;
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(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 might
materially adversely affect the business or condition (financial or otherwise)
of the Transferor and its subsidiaries.
Section 3.13 Ability to Perform.
At the date hereof, the Transferor does not believe, nor does it have any
reasonable cause to believe, that it cannot perform each and every covenant
contained in this Transferor Contribution and Sale Agreement.
Section 3.14 Ordinary Course; No Insolvency.
The transactions contemplated by the Notes, the Indenture and this
Transferor Contribution and Sale Agreement are being consummated by the
Transferor in furtherance of the Transferor's ordinary business purposes and
constitute a practical and reasonable course of action by the Transferor
designed to improve the financial position of the Transferor, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. The Transferor will not, either as a result
of the transaction contemplated by this Transferor Contribution and Sale
Agreement, or immediately before or after such transaction, be insolvent or have
an unreasonably small capital for the conduct of its business and the payment of
anticipated obligations.
Section 3.15 Assets and Liabilities.
(a) Both immediately before and after any transfer of Leases (including the
right to receive all payments due or to become due thereunder) and the transfer
of the interests in the Equipment contemplated by this Transferor Contribution
and Sale Agreement, the present fair salable value of the Transferor's assets
was or will be in excess of the amount that will be required to pay the
Transferor'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 (including the
right to receive all payments due or to become due thereunder) and the transfer
of the interests in the Equipment contemplated by this Transferor Contribution
and Sale Agreement, the sum of the Transferor's assets was or will be greater
than the sum of the Transferor's debts, valuing the Transferor's assets at a
fair salable value.
Section 3.16 Fair Consideration.
The consideration received by the Transferor, in exchange for the Leases
(including the right to receive all payments due or to become due thereunder)
and the transfer of its interests in the Equipment, is fair consideration having
value equivalent to or in excess of the value of the assets being transferred by
the Transferor.
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Section 3.17 Ability to Pay Debts.
Neither as a result of the transaction contemplated by this Transferor
Contribution and Sale Agreement nor otherwise does the Transferor believe that
it will incur debts beyond its ability to pay or which would be prohibited by
its charter documents or by-laws. The Transferor's assets and cash flow enable
it to meet its present obligations in the ordinary course of business as they
become due.
Section 3.18 Bulk Transfer Provisions.
The transfer, assignment and conveyance of the Leases and its interests in
the Equipment by the Transferor pursuant to this Transferor Contribution and
Sale Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
Section 3.19 Transfer Taxes.
The transfer, assignment and conveyance of the Leases (including all
payments due or to become due thereunder) and its interests in the Equipment by
the Transferor pursuant to this Transferor Contribution and Sale Agreement is
not subject to and will not result in any tax, fee or governmental charge
payable by the Transferor to any federal, state or local government ("Transfer
Taxes"). In the event that the Issuer receives actual notice of any Transfer
Taxes arising out of the transfer, assignment and conveyance of the Leases
and/or its interests in the Equipment, on written demand by the Issuer, or upon
the Transferor otherwise being given notice thereof, the Transferor shall pay,
and otherwise indemnify and hold the Issuer, the Trustee and the holders of the
Notes harmless, on an after-tax basis, from and against any and all such
Transfer Taxes (it being understood that the holders of the Notes and the
Trustee shall have no obligation to pay such Transfer Taxes).
Section 3.20 Principal Executive Office.
The principal executive office of the Transferor is located at 530 Fifth
Avenue, New York, New York 10036.
Section 3.21 Sale and Contribution Treatment.
The Transferor will treat the transfer to the Issuer of the Leases and the
Lease Receivables as a sale and capital contribution as described in Section
2.01 hereof and absolute assignment for tax reporting and accounting purposes.
Section 3.22 Nonconsolidation.
The Transferor is and at all times since its incorporation has been
operated in such a manner that it would not be substantively consolidated with
the Issuer, such that the separate existence of the Transferor and the Issuer
would be disregarded in the event of a bankruptcy or insolvency of the
Transferor or the Issuer, and in such regard:
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(a) the Transferor maintains separate corporate records and books of
account from the Issuer and otherwise observes corporate formalities and has
separate business office space from the Issuer;
(b) the financial statements and books and records of the Transferor
prepared after the Issuance Date will reflect the separate existence of the
Issuer;
(c) the Transferor maintains its assets separately from the assets of the
Issuer (including through the maintenance of a separate bank account), the
Transferor's funds and assets, and records relating thereto, have not been and
are not commingled with those of the Issuer;
(d) all business correspondence of the Transferor and other communications
are conducted in the Transferor's own name and on its own stationery; and
(e) the Issuer does not act as an agent of the Transferor in any capacity
and the Transferor does not act as agent for the Issuer, but instead presents
itself to the public as a corporation separate from the Issuer.
Section 3.23 Lease Repurchase
In the event that any of the representations or warranties made by the
Transferor in Section 3.04 or Section 3.05 with respect to any of the Leases
proves at any time to have been inaccurate in any material respect as of the
Closing Date or the related Transfer Date, as applicable, and the event or
condition causing such inaccuracy shall not have been cured or corrected within
30 days of the earlier of the date on which (a) the Transferor is given notice
thereof by the Issuer or the Trustee, or (b) on the date on which the Transferor
otherwise first has notice thereof, the Transferor shall, unless it has
otherwise substituted a Substitute Lease for such Lease, purchase such Lease not
later than the third Business Day after the Calculation Date next following the
expiration of such 30 day period described herein in an amount equal to the
Lease Repayment Amount for such Lease, and in addition, the Transferor shall, at
the same time, reimburse to the Servicer any Servicer Advances made with respect
to such Lease.
ARTICLE IV THE TRANSFEROR
Section 4.01 Merger or Consolidation of the Transferor.
The Transferor 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 the
Transferor's duties under this Transferor Contribution and Sale Agreement.
The Transferor 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
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United States or any jurisdiction thereof and (ii) the surviving entity, if not
the Transferor, shall execute and deliver to the Issuer or the Servicer and the
Trustee, in form and substance satisfactory to each of them, (a) an instrument
expressly assuming all of the obligations of the Transferor 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 the Transferor hereunder.
Section 4.02 Control of Issuer.
So long as any of the Notes or the other obligations secured by the
Indenture remain outstanding, the Transferor will not (i) sell, pledge or
otherwise transfer any of its membership interest in the Issuer held by the
Transferor or (ii) vote such beneficial interests in favor of any amendment to
or alteration of the certificate of formation of the Issuer.
Section 4.03 Books and Records.
The Transferor will clearly mark its books and records to reflect the sales
and contributions of Leases and Equipment pursuant to this Agreement.
Section 4.04 Communications.
The Transferor will reply to all inquiries by third parties with respect to
the transactions contemplated by this Agreement by indicating that it has
contributed the Leases and its right, title and interest in the related
Equipment and that the Issuer now holds title to the Leases and such interest in
the related Equipment.
ARTICLE V SUBSTITUTION AND ADDITION OF LEASES
Section 5.01 Substitution and Addition.
(a) Subject to the satisfaction of the requirements set forth in Section
5.01(c) hereof, the Transferor 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 a Lease (for purposes of this Article V
referred to as a "Predecessor Lease") and the Equipment subject thereto if:
(i) the Predecessor Lease became (A) a Defaulted Lease, (B) a Lease
subject to a Warranty Event or (C) a Lease which is the subject of a
Casualty Loss, during the immediately preceding Collection Period; and
(ii) if Section 5.01(a)(i)(A) or (C) is applicable, the aggregate
Discounted Lease Balance of the Leases that are, or have been, Predecessor
Leases shall not in the aggregate exceed 10% of the Discounted Lease
Balance of the Leases on the Cut-Off Date.
(b) Subject to the satisfaction of the requirements set forth in Section
5.01(c) hereof, in the event of an Early Lease Termination which has been
prepaid in full, the Issuer will have the option to reinvest the proceeds of
such Early Termination Lease in one or more
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Additional Leases. The purchase price of such Additional Lease or Leases will be
an amount paid to the Transferor in equal to the proceeds of such Early
Termination Lease.
(c) Each transfer of Substitute Leases and addition of Additional Leases
will be subject to the satisfaction of the following conditions precedent:
(i) the final payment on such Substitute Lease or Additional Lease
must be on or prior to the date of the final payment of the Predecessor
Lease or Early Termination Lease.
(ii) after giving effect to such additions and substitutions, the
aggregate amount of Lease Payments through the term of the Leases
(including the Substitute Leases and the Additional Leases) and the
Discounted Lease Balance of the Leases will not be materially less than the
aggregate scheduled Lease Payments of the Leases and the Discounted Lease
Balance of the Leases, respectively prior to such substitution or addition
or adjustment; and
(iii) after giving effect to such adjustments, additions, and
substitutions pursuant to Article IV, the weighted average remaining term
of the Leases must not be greater than the weighted average remaining term
of the Leases prior to such adjustment, addition, and substitution.
(d) Each addition and substitution pursuant to this Section 5.01 shall
include the right to receive all amounts due or to become due under each
Substitute Lease being substituted or Additional Leases being purchased and any
security deposits paid by the related Lessee to the Transferor in connection
therewith (other than any prepayments of rent required pursuant to the terms
thereof at or before the commencement of such Lease and any payments due before
the Transfer Date as to which such substitution or addition is made). At the
time of each such substitution and addition, the Transferor shall transfer to
the Trustee all Lease Payments actually received by the Transferor which became
due on or after the related Transfer Date.
Section 5.02 Procedure.
(a) By 11:00 A.M. on the third Business Day following each Transfer Date,
the Transferor shall give written notice to the Servicer of any substitution
pursuant to Section 5.01 of Substitute Leases for Predecessor Leases or addition
of Additional Leases for Early Termination Leases which have been prepaid in
full during the preceding Collection Period. By 11:00 A.M. on the fourth
Business Day following each Payment Date, the Transferor shall deliver to the
Servicer and the Trustee and, to the extent not included in the Monthly Servicer
Report, the Trustee shall promptly deliver to each Rating Agency (i) a
supplement to Schedule 1 hereto setting forth the information shown thereon for
each such Substitute Lease and Additional Lease, (ii) an Officer's Certificate
(A) certifying that each such Substitute Lease and Additional Lease is an
"Eligible Lease", (B) specifying each Predecessor Lease for which a substitution
has been made and each Early Termination Lease which is being replaced by an
Additional Lease and the amount of each periodic Lease Payment under each such
Predecessor Lease and the amount of each periodic Lease Payment under each
Additional Lease and Substitute Lease being transferred thereby and (C) that all
conditions precedent to such addition or substitution have
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been satisfied and (iii) such additional information concerning such Additional
Leases, Substitute Leases, Early Termination Leases or Predecessor Leases as may
be needed for the Servicer to prepare its monthly reports pursuant to the
Servicing Agreement and to otherwise carry out its duties as servicer under the
Servicing Agreement.
(b) Subject to the provisions of Section 5.03, the delivery of any
Officer's Certificate and supplement to Schedule 1 pursuant to Section 5.02(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Collection Period (i) the Transferor assigned to the
Issuer, as a sale and a capital contribution in accordance with Section 2.01
hereof to the extent the assignment is made under Section 5.01(a)(i)(A) or (C)
hereof all of the Transferor's right, title and interest in and to the
Substitute Leases and Additional Leases identified in such supplement and the
related rights described in Section 5.01 hereof, (ii) the Transferor assigned to
the Issuer, as a sale and a capital contribution in accordance with Section 2.01
hereof to the extent the assignment is made under Section 5.01(a)(i)(A) or (C),
all of the Transferor's right, title and interest in and to the Equipment
subject to such Substitute Leases and Additional Leases (to the extent of the
Transferor's interest in such Equipment, including the Transferor's security
interest in any Equipment which is not owned by the Transferor), and (iii) the
Issuer assigned and transferred to the Transferor, without representation or
warranty, all of the Issuer's right, title and interest in and to the
Predecessor Leases and Early Termination Leases identified in such Officer's
Certificate and the Equipment subject thereto (to the extent of the Issuer's
interest in such Equipment, including the Issuer's security interest in any
Equipment which is not owned by the Issuer). The Transferor shall promptly cause
to be delivered to the Trustee (or a custodian on its behalf) the original
executed counterpart of each Substitute Lease and Additional Lease assigned to
the Issuer pursuant to Section 5.01 hereof and the Issuer shall promptly request
the Trustee to deliver to the Transferor the original executed counterpart of
each Predecessor Lease and each Early Termination Lease for which substitution
or an addition has been made pursuant to Section 7.01 hereof.
Section 5.03 Transferor's Subsequent Obligations.
Upon any substitution of Leases in accordance with the provisions of this
Article V, the Transferor's obligations hereunder with respect to the
Predecessor Lease shall cease but the Transferor 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.
ARTICLE VI ASSIGNMENT
Section 6.01 Assignment to Trustee.
It is understood that this Transferor Contribution and Sale Agreement and
all rights of the Issuer hereunder will be assigned by the Issuer to the Trustee
pursuant to the Indenture, for the benefit of the Trustee, the holders from time
to time of the Notes as provided in the Indenture, and may be subsequently
assigned by the Trustee to any successor Trustee or as otherwise provided in the
Indenture. The Transferor 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, the Trustee, the
holders from time to time of the Notes, and any successor to or assignee of any
thereof.
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Section 6.02 Assignment by Transferor.
None of the respective rights or obligations of the Transferor hereunder
may be assigned without the prior written consent of the Issuer and the Trustee
(acting upon the instructions of the Holders of 66-2/3% of the then aggregate
unpaid Outstanding Principal Amount of the Notes).
ARTICLE VII NATURE OF OBLIGATIONS AND SECURITY THEREFOR
Section 7.01 Obligations Absolute.
The obligations of the Transferor hereunder, and the rights of the Trustee,
as assignee of the Issuer, in and to all amounts payable by the Transferor
hereunder, shall be absolute and unconditional and shall not be subject to any
abatement, reduction, setoff, defense, counterclaim or recoupment whatsoever,
including, without limitation, 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 the Transferor may have against, the
Issuer, the Trustee, and any holder of the Notes or any other Person for any
reason whatsoever; nor, except as otherwise expressly provided herein, shall
this Transferor Contribution and Sale Agreement terminate, or the respective
obligations of the Issuer or the Transferor 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 the Issuer, the Transferor and the 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 the Issuer to
perform any of its obligations herein contained, or by reason of any other
indebtedness or liability, howsoever and whenever arising, of the Issuer, the
Trustee, or any holder of the Notes to the Transferor or any other Person or by
reason of any insolvency, bankruptcy, or similar proceedings by or against the
Transferor, the Issuer, the 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 the Transferor hereunder and all amounts payable by the
Transferor 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 Transferor Contribution and Sale Agreement. The Seller shall
provide the Rating Agencies with notice of any assignment of any of its
obligations hereunder.
Section 7.02 Further Assurances; Financing Statements.
The Transferor 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 the Issuer or the 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 the Issuer or the
Trusteeto exercise and enforce its rights and remedies under this Agreement with
respect to any Leases and the Lease Payments. Without limiting the generality of
the foregoing, the Transferor 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 the Issuer or the Trustee
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may request to protect and preserve the assignments and security interests
granted by this Agreement with respect to the Leases.
ARTICLE VIII MISCELLANEOUS
Section 8.01 Continuing Obligations.
This Transferor Contribution and Sale Agreement shall continue in full
force and effect until each of the Notes and any other amounts due to any 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 8.02 GOVERNING LAW.
THIS TRANSFEROR CONTRIBUTION AND SALE 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 TRANSFEROR
CONTRIBUTION AND SALE AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE
BALANCE OF THIS TRANSFEROR CONTRIBUTION AND SALE AGREEMENT.
Section 8.03 Successors and Assigns.
This Transferor Contribution and Sale Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Issuer, the Transferor
and the Trustee and shall inure to the benefit of the successors and assigns of
the Holders, from time to time, of the Notes.
Section 8.04 Modification.
The terms of this Transferor Contribution and Sale Agreement shall not be
waived, modified or amended without (a) the written consent of the party against
whom such waiver, modification or amendment is claimed and, in any case, the
Trustee (acting upon the instructions of the Holders of 66-2/3% of the then
aggregate unpaid Outstanding Principal Amount of the Notes), and (b)
confirmation from the Rating Agencies that such waiver, modification or
amendment will not cause the then existing rating of the Notes to be decreased.
Section 8.05 No Petition or Proceedings.
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, the Transferor hereby
agrees that it will not, directly or indirectly, institute, or cause to be
instituted, against the Issuer any petition or otherwise invoke the process of
any Governmental Authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its respective property, or ordering the winding up or liquidation of the
affairs of the Issuer.
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Section 8.06 Notices.
All notices and other communications given in connection with this
Transferor Contribution and Sale 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 the Seller, the Servicer,
the Issuer and the Transferor, to 530 Fifth Avenue, New York, New York 10036
Attention: Treasurer, with a copy to the General Counsel (telecopy:
212-805-1181), and in the case of the Trustee and the Holders of the Notes, to
such addresses as are provided pursuant to Sections 1.05 and 1.06 of the
Indenture or to such other address as either party may specify to the other from
time to time in accordance with this Section 8.06.
Section 8.07 Counterparts.
This Transferor Contribution and Sale Agreement may be executed in any
number of counterparts, each counterpart constituting an original, but all
together constituting only one Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Transferor
Contribution and Sale Agreement as of the date and year first written above.
CHARTER FUNDING CORPORATION V, as
Transferor
By:
------------------------------
Name:
Title:
CHARTER EQUIPMENT LEASE 1999-1 LLC
By: CHARTER FUNDING CORPORATION V
By:
------------------------------
Name:
Title:
The undersigned hereby acknowledges receipt of a copy of the foregoing
Transferor Contribution and Sale Agreement and agrees to, and to be bound by,
each of the provisions thereof applicable to the undersigned.
LASALLE BANK NATIONAL ASSOCIATION,
as Trustee
By:
------------------------------
Name:
Title:
[Signature Page to the Transferor Contribution and Sale Agreement]
<PAGE>
SCHEDULE 1
SCHEDULE OF LEASES
================================================================================
CHARTER FINANCIAL, INC.,
SERVICER,
CHARTER EQUIPMENT LEASE 1999-1 LLC,
ISSUER,
AND
LASALLE BANK NATIONAL ASSOCIATION
TRUSTEE
-------------------------
SERVICING AGREEMENT
Dated as of August 1, 1999
-------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
R E C I T A L S 1
ARTICLE 1. DEFINITIONS........................................................2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE SERVICER.....................3
Section 2.01 Corporate Organization and Authority.......................3
Section 2.02 Business and Property......................................4
Section 2.03 Financial Statements.......................................4
Section 2.04 Insurance..................................................4
Section 2.05 Pending Litigation.........................................4
Section 2.06 Transactions Legal and Authorized..........................5
Section 2.07 Governmental Consent.......................................5
Section 2.08 Taxes......................................................5
Section 2.09 Compliance with Law........................................6
Section 2.10 Ability to Perform.........................................6
Section 2.11 Ordinary Course; No Insolvency.............................6
Section 2.12 Principal Executive Office.................................6
Section 2.13 Servicing Provisions Customary.............................6
ARTICLE 3. ADMINISTRATION OF LEASES...........................................7
Section 3.01 Servicer to Act............................................7
Section 3.02 Lease Amendments and Modifications.........................8
Section 3.03 Defaulted Leases...........................................9
Section 3.04 Costs of Servicing; Servicing Fee.........................10
Section 3.05 Other Transactions........................................11
Section 3.06 Clean-Up Call.............................................11
ARTICLE 4. SERVICER ADVANCES AND SELLER'S SUPPORT............................11
Section 4.01 Late Lease Payments.......................................11
Section 4.02 Early Termination Leases..................................11
Section 4.03 Indemnification...........................................12
Section 4.04 Repurchases...............................................12
Section 4.05 Payment Advices...........................................13
ARTICLE 5. INFORMATION TO BE PROVIDED........................................13
Section 5.01 Monthly Status Reports; Servicing Reports.................13
Section 5.02 Annual Independent Public Accountant's Report.............14
ARTICLE 6. THE SERVICER......................................................15
Section 6.01 Merger or Consolidation of the Servicer...................15
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Section 6.02 Limitation on Liability of the Servicer and Others........15
Section 6.03 Servicer Not to Resign or Be Removed......................15
Section 6.04 Financial and Business Information........................16
Section 6.05 Officer's Certificates....................................17
Section 6.06 Inspection................................................17
Section 6.07 Servicer to Act as Custodian..............................18
ARTICLE 7. DEFAULT 19
Section 7.01 Servicer Events of Default................................19
Section 7.02 Termination...............................................20
Section 7.03 Trustee to Act; Appointment of Successor..................20
Section 7.04 Servicer to Cooperate.....................................21
Section 7.05 Notification to Noteholders...............................21
Section 7.06 Remedies Not Exclusive....................................22
Section 7.07 Database File.............................................22
Section 7.08 Indemnification of Trustee................................22
Section 7.09 Responsibilities of the Trustee Acting as Servicer........22
ARTICLE 8. SUBSTITUTION AND ADDITION OF LEASES...............................23
Section 8.01 Substitution and Addition.................................23
Section 8.02 Procedure.................................................24
Section 8.03 Servicer's Subsequent Obligations.........................25
ARTICLE 9. ASSIGNMENT........................................................25
Section 9.01 Assignment to Trustee.....................................25
Section 9.02 Assignment by Servicer....................................25
ARTICLE 10. NATURE OF OBLIGATIONS AND SECURITY THEREFOR......................26
Section 10.01 Obligations Absolute.....................................26
Section 10.02 Further Assurances; Financing Statements.................26
ARTICLE 11. MISCELLANEOUS....................................................26
Section 11.01 Continuing Obligations...................................26
Section 11.02 GOVERNING LAW............................................26
Section 11.03 Successors and Assigns...................................27
Section 11.04 Modification.............................................27
Section 11.05 No Petition or Proceedings...............................27
Section 11.06 Notices..................................................27
Section 11.07 Counterparts.............................................27
Schedule 1 - Schedule of Leases
Exhibit A - Form of Receivables Servicing Report
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SERVICING AGREEMENT
This SERVICING AGREEMENT is made and dated as of August 1, 1999, by and
among CHARTER FINANCIAL, INC., a New York corporation, as servicer (the
"Servicer") hereunder, CHARTER EQUIPMENT LEASE 1999 - 1 LLC, as issuer (the
"Issuer"), and LASALLE BANK NATIONAL ASSOCIATION, as Trustee (the "Trustee").
R E C I T A L S
WHEREAS, pursuant to the Seller Contribution and Sale Agreement, Charter
Financial, Inc. (the "Seller") is selling and making certain capital
contributions to Charter Funding Corporation V (the "Transferor") with respect
to the Leases, the related Equipment and other assets described therein (the
"Transferred Assets").
WHEREAS, pursuant to the Transferor Contribution and Sale Agreement, the
Transferor is selling and making certain capital contribution to Charter
Equipment Lease 1999-1 LLC (the "Issuer"), with respect to the Transferred
Assets.
WHEREAS, pursuant to the Indenture, the Issuer is pledging the Transferred
Assets thereunder for the benefit of the Holders of the Notes (as detailed
below) and is issuing one class of [ ]% Class A-1 Lease-Backed Notes, [ ] in the
aggregate principal amount of $[ ] (the "Class A-1 Notes"), one class of [ ]%
Class A-2 Lease-Backed Notes, [ ] in the aggregate principal amount of $[ ] (the
"Class A-2 Notes"), one class of [ ]% Class A-3 Lease-Backed Notes, [ ] in the
aggregate principal amount of $[ ] (the "Class A-3 Notes"), one class of [ ]%
Class A-4 Lease-Backed Notes, [ ] in the aggregate principal amount of $[ ] (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"), one class of [ ]% Class B
Leased-Backed Notes, [ ] (the "Class B Notes"), in the aggregate principal
amount of $[ ], one class of [ ]% Class C Lease-Backed Notes, [ ], in the
aggregate principal amount of $[ ] (the "Class C Notes"), one class of [ ]%
Class D Leased-Backed Notes, [ ] in the aggregate principal amount of $[ ] (the
"Class D Notes"); together with the Class A Notes, the Class B Notes, the Class
C Notes, and the Class D Notes, are referred to collectively as the "Notes").
WHEREAS, the Servicer and the Trustee desire to enter into this Serving
Agreement in order that the Servicer may service the Transferred Assets in
accordance with the terms of this Servicing Agreement.
WHEREAS, pursuant to the Indenture, the Issuer is granting, inter alia, to
the Trustee, for the benefit of the Holders from time to time of the Notes, a
security interest in all right, title and interest of the Issuer in, to and
under the Leases, the interests in the Equipment and the other Transferred
Assets and this Servicing Agreement.
NOW, THEREFORE, the parties hereto agree, in consideration of the mutual
agreements set forth herein and other valuable consideration provided, as
follows:
<PAGE>
ARTICLE 1. DEFINITIONS
As used in this Servicing Agreement, the following terms have the
respective meanings set forth below or set forth in the Section hereof or in any
other agreement indicated:
Additional Lease - 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) Granted by the Issuer to be a part of the Granted
Assets in exchange for all or a portion of the proceeds of an Early Termination
Lease that has been prepaid in full pursuant to Section 8.01(b) hereof.
Casualty Loss: with respect to any Lease, any 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.
Clean-Up Call - as defined in Section 3.06 hereof.
Eligible Lease - as defined in Section 4.02 hereof.
Filing Requirements - Financing Statements necessary to perfect (a) the
ownership interest of the Issuer in the Leases, which name the Issuer as secured
party/buyer and the Transferor as the debtor/seller, and (b) the perfected
security interest of the Trustee in the Leases and the Equipment which name the
Issuer as debtor and the Trustee as the secured party..
Financing Statement - a statement filed pursuant to the UCC which evidences
a security interest in an asset in order to perfect such security interest.
Indemnified Party - as defined in Section 4.03 hereof.
Indenture - the Indenture dated as of August 1, 1999 among the Issuer, the
Servicer and the Trustee, as the same may be supplemented, modified or amended
from time to time in accordance with the terms thereof.
Issuer - Charter Equipment Lease 1999-1 LLC and any successor thereto.
Lien - means a security interest, lien, charge, pledge or encumbrance of
any kind other than tax liens, mechanics liens, and any liens that attach to a
Lease by operation of law.
Predecessor Lease - as defined in Section 8.01 hereof.
Private Placement Memorandum - the final Private Placement Memorandum used
in connection with the private offering of the Class C Notes and the Class D
Notes.
Prospectus - the form of final prospectus to be used in connection with the
public offering of the Class A Notes and the Class B Notes, as filed with the
Securities and Exchange Commission.
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Registration Statement - the registration statement (File No. 333-64045)
filed with the Securities and Exchange Commission for the registration of the
Class A Notes and the Class B Notes.
Servicer - the corporation so identified in the first paragraph of this
Servicing Agreement and any successor thereto in accordance with the provisions
hereof.
Servicer Event of Default - as defined in Section 7.01 hereof.
Servicing Fee - as defined in Section 3.04(a) hereof.
Servicing Report - as defined in Section 5.01(b) hereof.
Substitute Lease - as defined in Section 8.01(a) hereof.
Transferor - Charter Funding Corporation V and any successor thereto.
To the extent capitalized terms are used herein which are not otherwise
defined, such terms shall have meanings defined in the Indenture.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE SERVICER
The Servicer hereby represents and warrants to the Trustee as to the
accuracy and correctness of the following statements set forth in Article 2:
Section 2.01 Corporate Organization and Authority.
The Servicer:
(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 business or
condition (financial or otherwise) of the Servicer or impair the
enforceability of any Lease) and to enter into and perform its
obligations under this Servicing Agreement, and the transactions
contemplated hereby, including performance of the duties of the
Servicer and the Servicer'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
Granted Assets or the business or
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<PAGE>
condition (financial or otherwise) of the Servicer or impair the
enforceability of any Lease).
Section 2.02 Business and Property.
The Prospectus and the Private Placement Memorandum, accurately describe in
all material respects the general nature of the business of the Servicer.
Section 2.03 Financial Statements.
(a) The consolidated balance sheet of the Servicer and its consolidated
subsidiaries for the fiscal periods ended December 31, 1998 and December 31,
1997 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 the Servicer and its
consolidated subsidiaries as of March 31, 1999 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
the Servicer 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 the preceding Section 2.03(a), since
March 31, 1999 there has been no change in the business, condition or prospects
(financial or otherwise) of the Servicer except changes in the ordinary course
of business, none of which individually or in the aggregate has been materially
adverse. Neither the Servicer 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 Section 2.03(a)
or for which adequate reserves are reflected in such financial statements and
certain contingent obligations of the Servicer relating to other asset
securitization transactions involving the Servicer.
Section 2.04 Insurance.
In addition to the insurance maintained by the Lessees with respect to the
Equipment, the Servicer (or an Affiliate of the Servicer) maintains (i) a
general liability insurance policy in the aggregate amount of $2,000,000 and
(ii) an excess liability insurance policy in umbrella form in the aggregate
amount of $4,000,000. Each of such policies is in full force and effect and
covers all equipment owned by the Servicer and the Issuer. All premiums in
respect of such policies have been paid. The Issuer is named as a loss payee and
additional insured, as its interests may appear, on such liability policies
maintained by the Servicer.
Section 2.05 Pending Litigation.
There are no proceedings or investigations pending, or to the knowledge
(after due inquiry) of the Servicer threatened, against or affecting the
Servicer or any subsidiary in or before any court, governmental authority or
agency or arbitration board or tribunal, including,
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but not limited to, any such proceeding or investigation with respect to any
environmental or other liability resulting from the ownership or use of any of
the Equipment, which, individually or in the aggregate, involve the possibility
of materially and adversely affecting the properties, business, prospects,
profits or condition (financial or otherwise) of the Servicer and its
subsidiaries, or the ability of the Servicer or the Servicer to perform its
obligations under this Servicing Agreement. The Servicer is not in default with
respect to any order of any court, governmental authority or agency or
arbitration board or tribunal.
Section 2.06 Transactions Legal and Authorized.
The compliance by the Servicer with all of the provisions of this Servicing
Agreement:
(a) have been duly authorized by all necessary corporate action on the part
of the Servicer, and do not require any stockholder approval, or approval or
consent of any trustee or holders of any indebtedness or obligations of the
Servicer except such as have been duly obtained;
(b) are within the corporate powers of the Servicer; and
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 the Servicer under the provisions of, any agreement,
charter, instrument, by-law or other instrument to which the Servicer 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 the Servicer or its
properties, or any order to which the Servicer or its properties is subject, of
or by any government or governmental agency or authority.
Section 2.07 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 the Servicer in connection with the execution and delivery of this
Servicing Agreement or the performance of its obligations as Servicer.
Section 2.08 Taxes.
(a) All tax returns required to be filed by the Servicer or any subsidiary
in any jurisdiction have in fact been filed, and all taxes, assessments, fees
and other governmental charges upon the Servicer or any subsidiary, or upon any
of their respective properties, income or franchises, shown to be due and
payable on such returns have been paid. To the best of the Servicer's knowledge
all such tax returns were true and correct and neither the Servicer nor any
subsidiary knows of any proposed additional tax assessment against it in any
material amount nor of any basis therefor.
(b) The provisions for taxes on the books of the Servicer and each of its
subsidiaries are in accordance with generally accepted accounting principles.
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Section 2.09 Compliance with Law.
The Servicer:
(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 might materially adversely affect the
business or condition (financial or otherwise) of the Servicer
and its subsidiaries.
Section 2.10 Ability to Perform.
At the date hereof, the Servicer does not believe, nor does it have any
reasonable cause to believe, that it cannot perform each and every covenant
contained in this Servicing Agreement or its ability to perform as Servicer.
Section 2.11 Ordinary Course; No Insolvency.
The transactions contemplated by the Indenture and this Servicing Agreement
are being consummated by the Servicer in furtherance of the Servicer's ordinary
business purposes and constitute a practical and reasonable course of action by
the Servicer designed to improve the financial position of the Servicer, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. The Servicer will not, either as a result of
the transaction contemplated by this Servicing Agreement, or immediately before
or after such transaction, be insolvent or have an unreasonably small capital
for the conduct of its business and the payment of anticipated obligations.
Section 2.12 Principal Executive Office.
The principal executive office of each of the Servicer and the Servicer is
located at 530 Fifth Avenue, New York, New York 10036.
Section 2.13 Servicing Provisions Customary.
The servicing arrangements hereunder, including, without limitation, the
terms and conditions pursuant to which the Servicer will act as Servicer and the
Servicing Fee to be paid to the Servicer, are consistent with the arrangements
and customary practices of the Servicer when providing comparable services to
non-affiliated entities and of other servicers in the equipment leasing
industry.
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ARTICLE 3. ADMINISTRATION OF LEASES
Section 3.01 Servicer to Act.
(a) Notwithstanding the transfers and assignments of the Leases (including
the right to receive all payments due or to become due thereunder) and the
related interests in the Equipment contemplated hereby, the Servicer, for the
benefit of the Issuer, will service and administer each Lease in accordance with
the terms thereof and of this Servicing Agreement. The Servicer shall take, or
cause to be taken, all such 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 limitation as to
its obligations under the preceding clauses (i) and (ii), no less a standard of
care than that which it applies to leases it services for its own account. The
Servicer shall provide the Lessees with appropriate invoices or payment coupons
and such other notices as may be required so that all Lease Payments, Casualty
Payments and Termination Payments in respect of each Lease are remitted by the
Lessees to the address specified by the Servicer. The Servicer shall deposit
such payments to the Distribution Account within two Business Days following the
receipt thereof. Any other amount received by the Servicer from time to time
from the Issuer or any Lessee which is or is intended to be subject to the Lien
of the Indenture shall be held in trust by the Servicer, as agent for the
Trustee and within two Business Days deposited into the Distribution Account for
application in accordance with the provisions of the Indenture.
(b) The Servicer shall do, and shall have full power and authority to do,
subject only to the specific requirements and prohibitions of this Servicing
Agreement, any and all things in connection with the servicing and
administration of the Leases and the interests in the Equipment which are
consistent with the manner in which it services leases and equipment
constituting part of its own portfolio and consistent with the customary
practices of servicers in the equipment leasing industry, but in performing its
duties hereunder, the Servicer will act on behalf and for the benefit of the
Issuer, the Trustee and the Holders of the Notes, subject at all times to the
provisions of the Indenture, without regard to any relationship which the
Servicer or any Affiliate of the Servicer may otherwise have with a Lessee. The
Servicer shall at all times act in accordance with the provisions of each Lease,
and shall observe and comply with all requirements of law applicable to it.
Except as permitted by the terms of any Lease following a default thereunder,
the Servicer shall not take any action which would result in the interference
with the Lessee's right to quiet enjoyment of the Equipment subject to the Lease
during the term thereof. The Servicer shall exercise in accordance with the
servicing standard described in this Section 3.01 with respect to each item of
Equipment all rights and remedies it, the Issuer or the Trustee shall have
against any vendor of the Equipment, subject to the provisions of any Lease, and
shall promptly pay all amounts realized from such actions into the Distribution
Account, in accordance with the terms of the Indenture.
(c) Without limiting the generality of the foregoing, the Servicer agrees
to (i) provide coupon books for or invoice each Lessee monthly (except
quarterly, semi-annually or annually in the case of Leases which provide for
quarterly, semi-annual or annual Lease Payments, respectively) for all Lease
Payments required to be paid by such Lessee in such manner and to the same
extent as the Servicer does with respect to leases held for its own
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account, (ii) maintain with respect to each Lease and each item of Equipment,
and with respect to each payment by each Lessee and compliance by each Lessee
with the provisions of each Lease, complete and accurate records in the same
form and to the same extent as the Servicer does with respect to leases and
equipment held for its own account (which records shall be at least as complete
and accurate as those maintained by the Servicer as of the date of this
Servicing Agreement), and (iii) from time to time execute, deliver and file (or
cause the same to be done), and the Servicer is hereby authorized and empowered
to execute, deliver, and file on behalf of the Issuer and the Trustee, any and
all tax returns with respect to sales, use, personal property and other taxes
(other than corporate income tax returns) and any and all reports or licensing
applications required to be filed in any jurisdiction with respect to any Lease
or any item of Equipment and any and all required Financing Statements and
assignments of Financing Statements and such additional Financing Statements and
continuation statements with respect thereto as may from time to time be
necessary because of Lease substitutions, equipment replacements in accordance
with the provisions of any Lease or otherwise so that the security interest
contemplated by the Indenture in favor of the Trustee in each of the Leases, at
all times will be perfected by such filings with the appropriate Uniform
Commercial Code filing offices. The Servicer agrees to complete and file
Financing Statements in accordance with the Filing Requirement.
(d) The Servicer will cause to be maintained with respect to the Leases and
the Equipment casualty insurance sufficient to cover the replacement cost of the
Equipment. Each such casualty policy shall name the Servicer or the Trustee as
loss payee and additional insured; provided that the Servicer shall cause all
such policies to name the Trustee and the Issuer as loss payees and additional
insureds if (A) the Servicer is no longer the Servicer, (B) an Event of Default
shall have occurred and be continuing or (C) a Servicer Event of Default shall
have occurred and be continuing.
(e) On or prior to the Closing Date, the Servicer will file the Financing
Statements and assignments of Financing Statements in accordance with the Filing
Requirements and thereafter will file such additional Financing Statements and
continuation statements and assignments with respect to the Leases as may be
necessary because of equipment replacements in accordance with the provisions of
any Lease, purchases of Additional Leases in accordance with Article 8 and Lease
substitutions pursuant to Article 8 hereof or otherwise so that (i) the
interests conveyed by the Seller Contribution and Sale Agreement in favor of the
Transferor in each of the Leases and Equipment, (ii) the interests conveyed by
the Transferor Contribution and Sale Agreement in favor of the Issuer, and (iii)
the security interest granted by the Indenture in favor of the Trustee in each
of the Leases and the Equipment will be perfected by such filings with the
appropriate Uniform Commercial Code filing offices (to the extent this may be
achieved by central filing).
Section 3.02 Lease Amendments and Modifications.
In performing its obligations hereunder, the Servicer may, acting in the
name of the Issuer and without the necessity of obtaining the prior consent of
the Issuer or the Trustee, enter into and grant modifications, waivers and
amendments to the terms of any Lease except for modifications, waivers or
amendments that (a) are inconsistent with the servicing standards set forth in
Section 3.01 above, (b) would reduce the amount or extend the time for payment
of any
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Lease Payment, Casualty Payment or Termination Payment to be made under a Lease
(other than as permitted in the following paragraph or 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
Equipment subject thereto, an amount which equals or exceeds the Lease
Repurchase Amount for such Lease as of such date) or the Lessee's absolute and
unconditional obligation to make payment of the same, (c) 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 its present or future value or (d) otherwise
would materially adversely affect the interests of any of the Issuer, the
Trustee or the Holders of the Notes.
Notwithstanding the foregoing paragraph, following the transfer of any
Lease to the Issuer in accordance with the Transferor Contribution and Sale
Agreement, the Servicer may make adjustments to such Lease which modify one or
more terms of such Lease, such as payment amount or payment date. Such
administrative adjustments may result in a re-booking of such Lease and the
assignment of a new Lease number, but will not be considered to be a
substitution or prepayment of such Lease. The Servicer may permit such
adjustments so long as the following conditions precedent have been satisfied:
(i) after giving effect to such adjustment, the final payment on such
Lease must be on or prior to January 1, 2006.
(ii) after giving effect to such adjustments the aggregate amount of
Lease Payments through the term of the Leases will not be materially less
than the aggregate scheduled Lease Payments of the Leases prior to such
adjustment.
(iii) after giving effect to such adjustments, the Discounted Lease
Balance of the Leases must not be less than the Discounted Lease Balance of
the Leases prior to such adjustment.
(iv) after giving effect to such adjustments, the weighted average
remaining term of the Leases must not be greater than the weighted average
remaining term of the Leases prior to such adjustment.
Section 3.03 Defaulted Leases.
(a) Upon receipt of notice from the Issuer, the Trustee or any other
Person, or if the Servicer otherwise learns that any Lease is a Defaulted Lease,
the Servicer will take such action as is appropriate, consistent with the
Servicer's administration of leases in its own portfolio and consistent with the
customary practices of servicers in the equipment leasing industry, including
such action as may be reasonably necessary to attempt to cause the Lessee
thereunder to cure such non-performance (if the same may be cured) or to
terminate or attempt to terminate such Lease and to recover, or attempt to
recover, all damages resulting from such default.
(b) The Servicer will use commercially reasonable efforts to sell or lease
any Equipment upon the expiration of a Lease or the early termination of an
Early Termination Lease or that is subject to a Defaulted Lease in a timely
manner and upon the most favorable terms and
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conditions available at the time. In the event of an early lease termination of
an Early Termination Lease, any Additional Lease must have a Discounted Lease
Balance equal to or greater than that of the Early Termination Lease, monthly
payments at least equal to those of the Early Termination Lease through the
remaining term of such Early Termination Lease, and a remaining term less than
or equal to that of the Early Termination Lease.
(c) In the event that the Servicer is required to sell or lease any item of
Equipment pursuant to the provisions of this Section 3.03 at a time when the
Servicer has other similar items of equipment available to it, the Servicer will
not favor any such other item in its remarketing efforts.
(d) All amounts realized by the Servicer in the performance of its duties
hereunder with respect to any Lease or Equipment remaining subject to the Lien
of the Indenture (net of the Servicer's actual out-of-pocket expenses reasonably
incurred in such realization) shall be held in trust by the Servicer, as agent
for the Trustee and deposited into the Distribution Account within two Business
Days of receipt for application in accordance with the provisions of the
Indenture; provided that, to the extent that (i) the Servicer has made any
advances pursuant to Section 4.01 hereof with respect to any Lease which
thereafter became a Defaulted Lease, and (ii) the Servicer has not otherwise
been fully reimbursed for such advances or payments, the Servicer shall
reimburse itself for such advances or payments from any amounts recovered with
respect to such Defaulted Lease before depositing any such amounts pursuant to
this Section 3.03(d).
Section 3.04 Costs of Servicing; Servicing Fee.
(a) All costs of servicing each Lease in the manner required by this
Article 3 shall be borne by the Servicer, but the Servicer shall be entitled to
retain, out of any amounts actually recovered by the Servicer in the performance
of its obligations under Section 3.03 hereof with respect to any Lease or the
interests in the Equipment subject thereto, the Servicer's actual out-of-pocket
expenses reasonably incurred in the course of such performance with respect to
such Lease or the interests in the Equipment. (For all purposes of this Article
3 the Servicer's "out-of-pocket expenses" means only those expenses incurred to
third parties (e.g., reasonable fees of outside counsel in a collection suit)
and not salaries, operating costs, overtime wages and other such "overhead"
costs or expenses of the Servicer.) In addition, the Servicer shall be entitled
to receive from the Issuer on each Payment Date following the Closing Date a
servicing fee with respect to the Notes (the "Servicing Fee") in the amounts
described in paragraph (b) below.
(b) The amount of the Servicing Fee which the Servicer shall be entitled to
receive on each Payment Date following the original issuance of the Notes shall
be determined by multiplying (i) the Aggregate Discounted Lease Balance of
Leases as of the prior Payment Date times (ii) one-twelfth of 0.50%.
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Section 3.05 Other Transactions.
Nothing in this Servicing Agreement shall preclude the Servicer from
entering into other leases or other financial transactions with any Lessee or
selling or discounting any such lease with any Person.
Section 3.06 Clean-Up Call.
The Servicer shall be permitted, in its sole discretion, to purchase all of
the remaining Leases and Lease Receivables which comprise the Granted Assets as
of the end of any Collection Period on which the Aggregate Discounted Lease
Balance is less than 10% of the Aggregate Discounted Lease Balance as of the
Closing Date (a "Clean-Up Call") through the deposit of an amount equal to the
sum of the Discounted Lease Balance of all remaining Leases into the
Distribution Account on the Business Day prior to the Payment Date following the
end of such Collection Period. Such payment shall be treated as Collections on
the Leases.
ARTICLE 4. SERVICER ADVANCES AND SELLER'S SUPPORT
Section 4.01 Late Lease Payments.
On the day prior to each Payment Date, the Servicer may, but will not be
required to, advance and remit to the Trustee for deposit in the Distribution
Account, in such manner as will ensure that the Trustee will have immediately
available funds on account thereof by 11:00 A.M. New York City time on the
Business Day prior to such Payment Date, an amount (a "Servicer Advance") equal
to any Lease Payment due during the prior Collection Period but unpaid or due
prior to the related Calculation Date with respect to any Lease. In
consideration of each Servicer Advance the Servicer will be entitled to retain
any late payment fees recovered from the Lessee with respect to any Lease
Payment covered by a Servicer Advance. In addition, the Servicer will be
reimbursed for Servicer Advances from funds in the Distribution Account in
accordance with the Indenture on any following Payment Date.
Section 4.02 Early Termination Leases.
Following the Calculation Date as of which any Lease first becomes an Early
Termination Lease the Seller may, but shall have no obligation to, either (a)
substitute one or more Eligible Leases and the Equipment subject thereto for
such Lease and the Equipment subject thereto pursuant to Article 8 hereof (if
the Seller is then entitled to substitute Leases and Equipment in accordance
with the provisions of Section 8.01 hereof) on or before the Business Day prior
to the next succeeding Payment Date, (b) repurchase from the Issuer such Lease
and the related Equipment by remitting to the Trustee an amount equal to the
Lease Repurchase Amount in such manner as will ensure that the Trustee will have
immediately available funds therefor by 11:00 A.M. New York City time on the
Business Day prior to the next succeeding Payment Date or (c) offer for sale to
the Issuer one or more Additional Leases in consideration of the proceeds
thereof in accordance with Article 8 hereof. Unless the Seller takes one of the
actions set forth in the prior sentence, the Servicer will not permit a
voluntary termination of a Lease prior to its stated maturity unless it receives
a payment in connection with such termination equal to at least the Prepayment
Amount. Any Early Termination Lease and the Equipment subject thereto which is
repurchased, or for which Additional Leases have been
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purchased or Substitute Leases transferred, pursuant to this Section 4.02 shall
nevertheless remain subject to the Lien of the Indenture until such time as an
Additional Lease or Additional Leases have been purchased or Substitute Lease or
Substitute Leases have been transferred in accordance with the provisions of
Article 8 hereof or the Lease Repurchase Amount has been paid. A Lease will be
considered to be an "Eligible Lease" if on the date such Lease is substituted
for or added in replacement of an Early Termination Lease, such Lease satisfies
the representations and warranties set forth in Section 3.04(c) of the Seller
Sale and Contribution Agreement and the requirements of Article 8 hereof.
Section 4.03 Indemnification.
The Servicer agrees to indemnify and hold harmless the Issuer, the Trustee
and each Holder of the Notes (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 willful misconduct or negligence of the Servicer regarding the servicing of
any Lease or the related Equipment, 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 by the
Servicer; provided that the foregoing indemnity shall in no way be deemed to
impose on the Servicer any obligation, other than to the extent specifically set
forth in this Article 4, to make any payment with respect to principal or
interest on the Notes or to reimburse the Issuer for any payments on account of
the Notes. This Section 4.03 shall bind any successor Servicer hereunder.
Section 4.04 Repurchases.
(a) In the event that 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 the Servicer (other than any
such action or inaction of the Servicer, in connection with the enforcement of
any Lease in a manner consistent with the provisions of this Servicing
Agreement) or any claim by any Lessee against the Servicer and, in any such
case, 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 Servicer is given notice thereof by the
Issuer or the Trustee or the date on which the Servicer otherwise first has
notice thereof, the Servicer will repurchase such Lease and the Equipment
subject thereto by paying to the Trustee, not later than the third Business Day
after the Calculation Date next following the expiration of such 30-day period
with respect to the events referenced in Section 4.04(a), an amount equal to the
Lease Repurchase Amount. The Servicer shall not be responsible under this
Section for the action or inaction of any successor Servicer.
(b) The Servicer's obligations under this Section 4.04 are the full
recourse obligations of the Servicer and shall in no way be limited or
discharged by the application of any funds constituting part of the Granted
Assets other than payments and amounts received with respect to the Lease in
question.
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Section 4.05 Payment Advices.
Each payment to the Trustee pursuant to any of the provisions of this
Servicing Agreement shall be accompanied by written advice containing sufficient
information to identify the Lease and/or Equipment to which such payment
relates, the Section of this Servicing Agreement pursuant to which such payment
is made, and the proper application pursuant to the provisions of the Indenture
of the amounts being paid.
ARTICLE 5. INFORMATION TO BE PROVIDED
Section 5.01 Monthly Status Reports; Servicing Reports.
(a) Within five Business Days following each Payment Date, the Servicer
will send to the Trustee (copies of which the Trustee shall send to each Rating
Agency and to each holder of the Notes as provided in the Indenture) a written
report, signed by one of the Servicer's financial officers, (i) identifying each
Lease with respect to which any Lease Payment was 30 or more days overdue as of
the end of the immediately preceding Collection Period, the Discounted Lease
Balance of such Lease as of such Payment Date, the amount advanced by the
Servicer with respect to such Lease pursuant to Section 4.01 hereof since the
Servicer's previous monthly report (or, in the case of the first such report,
since the Cut-Off Date), (ii) identifying each Lease with respect to which any
Lease Payment was 60 or more days overdue as of the end of the immediately
preceding Collection Period, the Discounted Lease Balance of such Lease as of
such Payment Date, the amount advanced by the Servicer with respect to such
Lease pursuant to Section 4.01 hereof since the Servicer's previous monthly
report (or, in the case of the first such report, since the Closing Date), (iii)
identifying each Lease with respect to which any Lease Payment was more than 120
days overdue as of the end of the immediately preceding Collection Period, the
Discounted Lease Balance of such Lease as of such Payment Date, the amount
advanced by the Servicer with respect to such Lease pursuant to Section 4.01
hereof since the Servicer's previous monthly report (or, in the case of the
first such report, since the Closing Date), (iv) identifying each Lease which
became a Defaulted Lease as of the preceding Calculation Date and specifying the
Discounted Lease Balance of such Lease as of such Calculation Date (or, in the
case of the first such report, subsequent to the Cut-Off Date) and the aggregate
Discounted Lease Balance of all such Defaulted Leases, and (v) indicating the
aggregate amount recovered by the Servicer subsequent to the preceding Payment
Date (or, in the case of the first Payment Date, subsequent to the Cut-Off Date)
and on or prior to such Payment Date with respect to Servicer Advances
previously made by the Servicer. Each such report shall also describe generally
what action or actions the Servicer is then taking or proposes to take to
recover from the appropriate Lessees any amounts previously paid by the Servicer
to the Trustee pursuant to Section 4.01 hereof.
(b) On or before the third Business Day preceding the Payment Date, the
Servicer shall deliver to the Trustee and to each Rating Agency an Officer's
Certificate signed by an officer of the Servicer accompanying a servicing report
(a "Servicing Report") stating the date and in the form of Exhibit A hereto.
Such report shall be provided in an electronic format reasonably acceptable to
the Trustee.
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(c) The Servicing Report shall include, among other items, the total amount
of all Lease Payments, Casualty Payments, Termination Payments, Lease Repurchase
Amount, recoveries related to Servicer Advances, and Other Lease Payments
received by the Servicer and deposited in the Distribution Account. Such report
shall indicate the amount of all Lease Payments received by the Servicer and
deposited in the Distribution Account, as applicable, which are for any
Collection Period other than the Collection Period for such Payment Date and
shall identify each Lease with respect to which a Casualty Payment, Termination
Payment or Lease Repurchase Amount was made during such time period. Such report
shall also indicate (i) the aggregate amount of Servicing Advances to be paid by
the Servicer on the related Payment Date pursuant to Section 4.01 hereof, and
(ii) the aggregate amount expected to be reimbursed to the Servicer on the
related Payment Date for Servicer Advances made by the Servicer pursuant to
Section 4.01 hereof. The Servicer hereby represents and warrants that such
calculations will be correct and accurate, and the Servicer shall be fully
responsible for, and shall reimburse and indemnify each Indemnified Party for,
any loss resulting from such Indemnified Party's reliance on any such
calculations which are not correct.
(d) If the Servicer requests the withdrawal of any funds from the
Distribution Account which constitute any part of the Granted Assets other than
on a Payment Date, the Servicer shall submit to the Trustee with such report a
certificate (i) setting forth the amounts to be withdrawn (on an item-by-item
basis), (ii) stating that none of such amounts, other than those pertaining to
the Servicing Fee or other servicer compensation, are all or part of any Lease
Payment, Servicer Advances, recoveries related to Defaulted Leases, Lease
Repurchase Amount, Casualty Payment or Termination Payment, and (iii)
identifying the Lease or Leases to which such amounts relate.
Section 5.02 Annual Independent Public Accountant's Report.
The Servicer shall cause a firm of independent public accountants (who may
also render other services to the Servicer) to deliver to the Trustee, with a
copy to each Rating Agency, within 135 days following the end of each fiscal
year of the Servicer, beginning with the Servicer's fiscal year ending December
31, 1999, a written statement to the effect that such firm has (a) obtained from
the Servicer a copy of the monthly status report pursuant to Section 5.01 for a
single month during the previous calendar year; (b) compared the information
contained in such monthly status report and in the monthly summaries prepared by
the Servicer in support of such monthly status report to the computer printouts
and accounts prepared by the Servicer and supporting such reports; and (c)
selected, at random, at least 20 Leases included in the Granted Assets and
compared the activity in the files maintained by the Servicer for such Leases to
the activity as reported for those Leases to the monthly summaries prepared by
the Servicer and supporting the monthly status report, and that, on the basis of
such examination and comparison, such firm is of the opinion that the Servicer
has prepared such monthly status report and summaries in agreement with the
computer printouts, accounts and individual Lease files, except in each case for
(x) such exceptions as such firm shall believe to be immaterial and (y) such
other exceptions as shall be set forth in such statement.
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ARTICLE 6. THE SERVICER
Section 6.01 Merger or Consolidation of the Servicer.
The Servicer 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 the
Servicer's duties under this Servicing Agreement.
The Servicer 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 the Servicer, shall execute and deliver to the Issuer,
the Servicer and the Trustee, in form and substance satisfactory to each of
them, (a) an instrument expressly assuming all of the obligations of the
Servicer 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 the Servicer hereunder. Upon the
occurrence of any such merger or consolidation, the Servicer shall give notice
promptly to the Rating Agencies.
Section 6.02 Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors, officers, employees or
agents of the Servicer shall incur any liability to the Issuer, the Trustee or
the Holders of the Notes for any action taken or not taken in good faith
pursuant to the terms of this Servicing Agreement with respect to any Lease or
the Equipment subject thereto; provided, however, that this provision shall not
protect the Servicer against any breach of warranties, representations or
covenants made by it herein or in any certificate delivered in conjunction with
the purchase of the Notes or for any liability which would otherwise be imposed
for any action or inaction resulting from willful misconduct or bad faith or for
negligence in the performance or nonperformance of its duties hereunder.
Section 6.03 Servicer Not to Resign or Be Removed.
The Servicer shall not resign from the servicing obligations and duties
hereby imposed on it except upon determination that such duties hereunder are no
longer permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced by an opinion of independent
counsel to the Servicer, in form and substance satisfactory to the holders of
the Notes, to such effect delivered to the Trustee.
Except as provided in Section 7.02 hereof, the Servicer shall not be
removed or be replaced as Servicer with respect to any Lease or any of the
Equipment.
No resignation or removal of the Servicer shall in any event become
effective until the Trustee or a successor servicer shall have assumed the
Servicer's servicing responsibilities and obligations in accordance with Section
7.02 hereof.
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Section 6.04 Financial and Business Information.
The Servicer will deliver to the Issuer and the Trustee, and the Trustee
upon receipt thereof shall deliver to each Rating Agency and upon request, to
any Holder of outstanding Notes evidencing not less than 25% of the Outstanding
Principal Amount of the Notes (and, upon the request of any holder of
outstanding Notes, to any prospective transferee of any Notes) and, in the case
of a notice of a Servicer Event of Default as provided in subsection (c) below:
(a) Quarterly Statements - within 45 days after the end of each of the
first three quarterly fiscal periods in each fiscal year of the Servicer, a copy
of:
(1) a consolidated balance sheet of the Servicer (or its parent) and
its consolidated subsidiaries at the end of such quarter, and
(2) consolidated statements of income, retained earnings and cash flow
of the Servicer (or its parent) and its consolidated subsidiaries for that
quarter and for the portion of the fiscal year ending with such quarter,
accompanied by a certificate signed by a principal financial officer of the
Servicer stating that such financial statements present fairly the financial
condition of the Servicer and its consolidated subsidiaries and have been
prepared in accordance with generally accepted accounting principles
consistently applied;
(b) Annual Statements - within 135 days after the end of each fiscal year
of the Servicer, a copy of:
(1) a consolidated balance sheet of the Servicer (or its parent) and
its consolidated subsidiaries, at the end of that year, and
(2) consolidated statements of income, retained earnings and cash flow
of the Servicer (or its parent) and its consolidated subsidiaries for that
year, setting forth in each case in comparative form the figures for the
previous fiscal year,
all in reasonable detail and accompanied by an opinion of a firm of independent
certified public accountants of recognized national standing stating that such
financial statements present fairly the financial condition of the Servicer and
its consolidated subsidiaries and have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur and footnote), and that
the examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(c) Notice of Servicer Event of Default - immediately upon becoming aware
of the existence of any condition or event which constitutes a Servicer Event of
Default, a written notice, by certified mail return receipt requested, hand
delivery or overnight courier, describing its nature and period of existence and
what action the Servicer is taking or proposes to take with respect thereto;
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(d) SEC and Other Reports - if so required to be filed and promptly upon
their becoming available, one copy of each report (including the Servicer's
annual report to shareholders and reports on Form 8-K, 10-K, and 10-Q), proxy
statement, registration statement, prospectus and notice filed with or delivered
to any securities exchange, the Securities and Exchange Commission or any
successor agencies; and
(e) Report on Proceedings - promptly upon the Servicer's becoming aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding
which materially and adversely affect the properties, business, prospects,
profits or conditions (financial or otherwise) of the Servicer, a written notice
specifying the nature of such investigation or proceeding and what action the
Servicer is taking or proposes to take with respect thereto and evaluating its
merits; and
(f) Requested Information - with respect to the Class C Notes and the Class
D Notes, with reasonable promptness, any other data and information which may be
reasonably requested from time to time, including, without limitation, any
information required to be made available at any time to any prospective
transferee of any Notes in order to satisfy the requirements of Rule 144A under
the Securities Act of 1933, as amended.
Section 6.05 Officer's Certificates.
With each set of financial statements delivered pursuant to Section 6.04,
the Servicer will deliver an Officer's Certificate stating (i) that the officer
signing such Officer's Certificate have reviewed the relevant terms of this
Servicing Agreement and have made, or caused to be made under such officer's
supervision, a review of the activities of the Servicer during the period
covered by the statements then being furnished, (ii) that the review has not
disclosed the existence of any Servicer Event of Default or, if a Servicer Event
of Default exists, describing its nature and what action the Servicer has taken
and is taking with respect thereto, and (iii) that on the basis of such review
the officers signing such certificate are of the opinion that during such period
the Servicer has serviced the Leases in compliance with the procedures hereof
except as described in such certificate.
Section 6.06 Inspection.
The Servicer will permit, on reasonable prior notice, the representatives
of the Issuer and the Trustee and the Holder of any Notes evidencing not less
than 25% of the Outstanding Principal Amount of any Class of Notes to examine
all of the books of account, records, reports and other papers of the Servicer,
to make copies and extracts therefrom, and to discuss the Servicer's affairs,
finances and accounts with its officers, employees and independent public
accountants (and by this provision the Servicer authorizes said accountants to
discuss the finances and affairs of the Servicer) 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 the Servicer or the Servicer's
performance of its duties and obligations hereunder.
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Any expense incident to the exercise by the Issuer, the Trustee, or any holder
of the Notes during the continuance of any Servicer Event of Default, or any
event or condition which with the giving of notice or the lapse of time or both
would become a Servicer Event of Default, of any right under this Section 6.06
shall be borne by the Servicer.
Section 6.07 Servicer to Act as Custodian.
(a) The Servicer shall hold and acknowledges that it is holding the Leases
and all other Granted Assets that it may from time to time receive hereunder as
custodian for the Trustee; provided that the Trustee shall not be liable for the
action, inaction of omission of the Servicer.
(b) The Servicer shall perform its duties under this Section 6.07 in
accordance with the standard set forth in Section 3.01 as such standard applies
to servicers acting as custodial agents. The Servicer shall promptly report to
the Trustee any failure by it to hold the complete Leases as herein provided and
shall promptly take appropriate action to remedy any such failure but only to
the extent (i) any such failure is caused by the acts or omissions of the
Servicer and (ii) such remedial action is otherwise within its capabilities or
control. As custodian, the Servicer shall have and perform the following powers
and duties:
(A) hold the Leases on behalf of the Trustee for the benefit of the
Noteholders, maintain accurate records pertaining to each Lease to enable
it to comply with the terms and conditions of this Servicing Agreement, and
maintain a current inventory thereof;
(B) implement policies and procedures in accordance with the
Servicer's normal business practices with respect to the handling and
custody of the Leases so that the integrity and physical possession of the
Leases will be maintained; and
(C) attend to all details in connection with maintaining custody of
the Leases on behalf of the Trustee on behalf of the Noteholders.
(c) In acting as custodian of the Leases, the Servicer agrees further that
it does not and will not have or assert any beneficial ownership interest in
such Leases. The Servicer on behalf of the Noteholders shall mark conspicuously
each original contractual document with a Lessee, and its master data processing
records evidencing each Lease with a legend, acceptable to the Trustee,
evidencing that all right, title and interest in the Leases has been granted to
the Trustee as provided in the Transaction Document.
(d) The Servicer agrees to maintain the Leases at either its office in New
York, New York or at such other offices of the Servicer as shall from time to
time be identified by prior written notice to the Trustee. Subject to the
foregoing, the Servicer may temporarily move individual Leases or any portion
thereof without notice as necessary to conduct collection and other servicing
activities.
(e) The Servicer will indicate in its records that it is servicing and
administering each Lease in its capacity as Servicer hereunder, and to the
extent it is in possession of any original Lease agreement, will hold such
Lease, subject to the provisions of the Indenture as custodian for the Trustee.
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ARTICLE 7. DEFAULT
Section 7.01 Servicer Events of Default.
The following events and conditions shall constitute Servicer Events of
Default hereunder:
(i) failure on the part of the Servicer to deposit to the Distribution
Account or other applicable account in accordance with the terms of the
Indenture within two Business Days following the receipt thereof any monies
received by the Servicer and required to be deposited hereunder, which
failure continues unremedied;
(ii) so long as the Servicer is the Servicer hereunder, failure on the
part of the Servicer to pay to the Trustee on the date when due in
accordance with the terms hereof, any payment required to be made by the
Seller pursuant to Article 4 hereof;
(iii) failure on the part of the Servicer to observe or perform in any
material respect any other of their respective covenants or agreements in
this 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 the Seller or the 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 the Servicer by the Trustee;
(iv) if any representation or warranty made by the Servicer in this
Servicing Agreement or in any certificate or other writing delivered
pursuant hereto shall prove to be incorrect in any material respect as of
the time when the same shall have been made; provided, however, that the
breach of any representation or warranty made by the Servicer in this
Servicing Agreement will be deemed to be "material" only if it affects the
Noteholders, the enforceability of the Indenture or of the Notes; and
provided, further, that a material breach of any representation or warranty
made by the Servicer in this Servicing Agreement with respect to any of the
Leases or the Equipment subject thereto will not constitute a Servicer
Event of Default if the Servicer repurchases such Lease and Equipment in
accordance with this Servicing Agreement;
(v) the entry by a court having jurisdiction of (A) a decree or order
for relief in respect of the Servicer in an involuntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (B) a decree or order adjudging the
Servicer bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment, or composition of or in
respect of the Servicer under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or other similar official of the Servicer or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the
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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
(vi) the commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Servicer 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 the Servicer or of any substantial
part of its property, or the making by it of an assignment for the benefit
of creditors, or the failure by the Servicer to pay its debts generally as
they become due, or the taking of corporate action by the Servicer in
furtherance of any such action.
Section 7.02 Termination.
So long as a Servicer Event of Default shall be continuing, the Trustee
shall, upon the instructions of the Holders of 66-2/3% in Outstanding Principal
Amount of the Notes, by notice in writing to the Servicer terminate all of the
rights and obligations of the Servicer (but not the Seller's obligations which
shall survive any such termination) under this Servicing Agreement. On the
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Servicing Agreement to take any action with respect to any
Lease or Equipment shall cease and the same shall pass to and be vested in the
Trustee pursuant to and under this Article and the Indenture; and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and assignment of any
Lease and the related Equipment, or otherwise.
Section 7.03 Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 7.02 hereof, the Trustee, subject to the terms of Section
5.02 of the Indenture, shall be the successor in all respects to the Servicer in
its capacity as servicer of the Leases under this Servicing Agreement and, to
such extent, shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof and shall be entitled to receive from the Issuer the Servicing Fee
provided for in Section 3.04 hereof; provided that the Trustee shall in no way
be responsible or liable for any action or actions of the Servicer before the
time the Servicer receives such a notice of termination.
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(b) Notwithstanding the above, the Trustee may, if it shall be unwilling to
so act, or shall, if it is unable to so act, give notice of such fact to each
Holder of the Notes and (i) appoint an established institution satisfactory to
the Holders of 66-2/3% in Outstanding Principal Amount of the Notes as the
successor to the Servicer hereunder to assume all of the rights and obligations
of the Servicer hereunder, including, without limitation, the Servicer's right
hereunder to receive the Servicing Fee or, (ii) if no such institution
satisfactory to the Holders of 66-2/3% in Outstanding Principal Amount of the
Notes is so appointed within 60 days following the giving of such notice,
appoint a bank or other established institution, which has experience in
servicing lease contracts and equipment similar to the Leases and Equipment and
as to which each of S&P and DCR has indicated in writing that the appointment of
such Person, as the successor to the Servicer hereunder will not result in the
reduction or withdrawal of such Rating Agency's then-current rating of the Notes
or, (iii) if no such institution is so appointed, petition a court of competent
jurisdiction to appoint an institution meeting such criteria as the Servicer
hereunder. Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee shall cause such successor to the
Servicer to enter into a servicing agreement substantially in the form of this
Servicing Agreement except that the Trustee may make arrangements for the
compensation of such successor out of payments on Leases as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that provided for a successor to the Servicer in Section 3.04 hereof.
The Trustee shall provide the Rating Agencies with prior written notice of the
appointment of any successor to the Servicer.
Section 7.04 Servicer to Cooperate.
The Servicer hereby agrees to cooperate with the Trustee or any successor
to the Servicer appointed in accordance with Section 7.03 hereof, as applicable,
in effecting the termination and transfer of the responsibilities and rights of
the Servicer hereunder to the Trustee or any successor to the Servicer,
including, without limitation, the execution and delivery of assignments of
Financing Statements, and the transfer to the Trustee or the successor to the
Servicer for administration by it of all cash amounts which shall at the time be
held by the Servicer or thereafter received with respect to the Leases. The
Servicer hereby agrees to transfer to any successor to the Servicer its
electronic records and all other records, correspondence and documents relating
to the Leases and Equipment in the manner and at such times as the successor to
the Servicer shall reasonably request. The Servicer hereby designates the
Trustee and any successor to the Servicer its agent and attorney-in-fact to
execute transfers of Financing Statements (including any and all Financing
Statements naming an individual Lessee as debtor and the Servicer as secured
party) and any other filings or instruments which may be necessary or advisable
to effect such transfer of the Servicer's responsibilities and rights hereunder.
Section 7.05 Notification to Noteholders.
Upon any such termination or appointment of a successor to the Servicer,
the Issuer shall cause the Trustee to give prompt written notice thereof to each
Rating Agency and to each Holder of the Notes in the manner provided in the
Indenture.
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Section 7.06 Remedies Not Exclusive.
Nothing in the preceding provisions of this Article 7 shall be interpreted
as limiting or restricting any rights or remedies which the Issuer, the Trustee
or any other Person would otherwise have at law or in equity on account of the
breach or violation of any provision of this Servicing Agreement by the
Servicer, including, without limitation, the right to recover full and complete
damages on account thereof to the extent not inconsistent with Section 6.02
hereof.
Section 7.07 Database File.
The Servicer, will provide the Trustee with a magnetic tape containing the
database file for each Lease (i) as of the Cut-Off Date, (ii) as of any Transfer
Dates, (iii) as of the last day of the preceding Collection Period on each
Calculation Date prior to a Servicer Event of Default and (iv) on and as of the
Business Day before the actual commencement of servicing functions by the
Trustee following the occurrence of a Servicer Event of Default.
Section 7.08 Indemnification of Trustee.
The original Servicer shall defend, indemnify and hold the Trustee acting
as a successor Servicer and any officers, directors, employees or agents of the
Trustee harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments and any other costs, fees,
and expenses that the Trustee may sustain in connection with the claims asserted
at any time by third parties against the Trustee acting in the capacity as
Servicer which result from (i) any willful or grossly negligent act taken or
omission by the original Servicer or (ii) a breach of any representations of the
original Servicer in Article 2 hereof. The indemnification provided by this
Section 7.08 shall survive the termination of this Servicing Agreement.
Section 7.09 Responsibilities of the Trustee Acting as Servicer.
(a) The Trustee will not be responsible for delays attributable to the
original Servicer's failure to deliver information, defects in the information
supplied by the original Servicer, or other circumstances beyond the control of
the Trustee.
(b) The Trustee will make arrangements with the original Servicer for the
prompt and safe transfer of, and the original Servicer shall provide to the
Trustee, all necessary servicing files and records, including (as deemed
necessary by the Trustee at such time): (i) Lease documentation, (ii) servicing
systems tapes, (iii) Lease payment history, (iv) collections history and (v) the
trial balances, as of the close of business on the day immediately preceding
conversion to the Trustee, reflecting all applicable Lease information. The
current Servicer shall be obligated to pay the costs associated with the
transfer of the servicing files and records to the Trustee.
(c) The Trustee shall have no responsibility and shall not be in default
hereunder nor incur any liability for any failure, error, malfunction or any
delay in carrying out any of its duties under this Servicing Agreement if any
such failure or delay results from the Trustee acting in accordance with
information prepared or supplied by a Person other than the
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<PAGE>
Trustee or the failure of any such Person to prepare or provide such
information. The Trustee shall have no responsibility, shall not be in default
and shall incur no liability (i) for any act or failure to act by any third
party, including the Servicer, the Transferor or the Issuer or for any
inaccuracy or omission in a notice or communication received by the Trustee from
any third party or (ii) which is due to or results from the invalidity,
unenforceability of any Lease with applicable law or the breach or the
inaccuracy of any representation or warrant made with respect to any Lease. The
Trustee shall not be subject to Section 4.04 of this Servicing Agreement
pertaining to the repurchase of Lease and Equipment thereto.
(d) If the Trustee assumes the role of Servicer hereunder the Trustee shall
be entitled to the benefits of (and subject to the provisions of) Section 9.02
hereunder concerning delegation of duties to subservicers.
ARTICLE 8. SUBSTITUTION AND ADDITION OF LEASES
Section 8.01 Substitution and Addition.
(a) Subject to the satisfaction of the requirements set forth in Section
8.01(c) hereof, the Transferor 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 a Lease (for purposes of this Article 8
referred to as a "Predecessor Lease") and the Equipment subject thereto if:
(i) the Predecessor Lease became (A) a Defaulted Lease, (B) a Lease
which is subject to a Warranty Event or (C) a Lease which is the subject of
a Casualty Loss, during the immediately preceding Collection Period; and
(ii) if Section 8.01(a)(i)(A) or (C) is applicable, the aggregate
Discounted Lease Balance of the Leases that are, or have been, Predecessor
Leases shall not in the aggregate exceed 10% of the Discounted Lease
Balance of the Leases on the Cut-Off Date.
(b) Subject to the satisfaction of the requirements set forth in Section
4.02 and Section 8.01(c) hereof, in the event of an Early Lease Termination
which has been prepaid in full, the Issuer will have the option to reinvest the
proceeds of such Early Termination Lease in one or more Additional Leases. The
purchase price of such Additional Lease or Leases will be paid to the Transferor
in an amount equal to the proceeds of such Early Termination Lease.
(c) Each transfer of Substitute Leases and addition of Additional Leases
will be subject to the satisfaction of the following conditions precedent:
(i) the final payment on such Substitute Lease or Additional Lease
must be on or prior to the date of the final payment of the Predecessor
Lease or Early Termination Lease;
(ii) after giving effect to such additions and substitutions and any
adjustments pursuant to Section 3.02 hereof the aggregate amount of Lease
Payments through the term of the Leases (including the Substitute Leases
and the
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<PAGE>
Additional Leases) and the Discounted Lease Balance of the Leases will not
be materially less than the aggregate scheduled Lease Payments of the
Leases and the Discounted Lease Balance of the Leases, respectively prior
to such substitution or addition or adjustment;
(iii) after giving effect to such adjustments, additions and
substitutions, the Discounted Lease Balance of the Leases must not be less
than the Discounted Lease Balance of the Leases prior to such adjustment,
substitution or addition; and
(iv) after giving effect to such adjustments, additions, and
substitutions pursuant to Article 8, the weighted average remaining term of
the Leases must not be greater than the weighted average remaining term of
the Leases prior to such adjustment, addition, and substitution.
(d) Each addition and substitution pursuant to this Section 8.01 shall
include the right to receive all amounts due or to become due under each
Substitute Lease being substituted or Additional Leases being purchased and any
security deposits paid by the related Lessee to the Servicer in connection
therewith (other than any prepayments of rent required pursuant to the terms
thereof at or before the commencement of such Lease and any payments due before
the Transfer Date as to which such substitution or addition is made). At the
time of each such substitution and addition, the Servicer shall transfer to the
Trustee all Lease Payments actually received by the Servicer which became due on
or after the related Transfer Date.
Section 8.02 Procedure.
(a) By 11:00 A.M. on the third Business Day following each Transfer Date,
the Servicer shall give written notice to the Trustee of any substitution
pursuant to Section 8.01 of Substitute Leases for Predecessor Leases or addition
of Additional Leases for Early Termination Leases which have been prepaid in
full during the preceding Collection Period. By 11:00 A.M. on the fourth
Business Day following each Payment Date, the Servicer shall deliver to the
Trustee and, to the extent not included in the Monthly Servicer Report, the
Trustee shall promptly deliver to each Rating Agency (i) a supplement to
Schedule 1 hereto setting forth the information shown thereon for each such
Substitute Lease and Additional Lease, (ii) an Officer's Certificate (A)
certifying that each such Substitute Lease and Additional Lease is an "Eligible
Lease", (B) specifying each Predecessor Lease for which a substitution has been
made and each Early Termination Lease which is being replaced by an Additional
Lease and the amount of each periodic Lease Payment under each such Predecessor
Lease and the amount of each periodic Lease Payment under each Additional Lease
and Substitute Lease being transferred thereby and (C) that all conditions
precedent to such addition or substitution have been satisfied and (iii) such
additional information concerning such Additional Leases, Substitute Leases,
Early Termination Leases or Predecessor Leases as may be needed for the Servicer
to prepare its monthly reports pursuant to Section 5.01 hereof and to otherwise
carry out its duties as servicer hereunder.
(b) Subject to the provisions of Section 8.03 hereof, the delivery of any
Officer's Certificate and supplement to Schedule 1 pursuant to Section 8.02(a)
hereof shall be conclusive evidence that during the immediately preceding
Collection Period (i) the Transferor
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assigned to the Issuer, as a sale and a capital contribution in accordance with
Section 2.01 of the Transferor Contribution and Sale Agreement to the extent
made under Section 8.01(a)(i)(A) or (C) hereof, all of the Transferor's right,
title and interest in and to the Substitute Leases identified in such supplement
and the related rights described in Section 8.01 hereof, (ii) the Transferor
transferred to the Issuer, as a sale and a contribution to capital in accordance
with Section 2.01 of the Transferor Contribution and Sale Agreement to the
extent made under Section 8.01(a)(i)(A) or (C) hereof, all of the Transferor's
right, title and interest in and to the Equipment subject to such Substitute
Leases (to the extent of the Transferor's interest in such Equipment, including
the Transferor's security interest in any Equipment which is not owned by the
Transferor), and (iii) the Issuer assigned and transferred to the Transferor,
without representation or warranty, all of the Issuer'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 the Issuer's
interest in such Equipment, including the Issuer's security interest in any
Equipment which is not owned by the Issuer). The Servicer shall promptly deliver
to the Trustee (or a custodian on its behalf) the original executed counterpart
of each Substitute Lease and each Additional Lease assigned to the Issuer
pursuant to Section 8.01 hereof and the Issuer shall promptly request the
Trustee to deliver to the Servicer the original executed counterpart of each
Predecessor Lease and each Early Termination Lease for which a substitution or
an addition has been made pursuant to Section 8.01 hereof.
Section 8.03 Servicer's Subsequent Obligations.
Upon any substitution of Leases in accordance with the provisions of this
Article 8, the Servicer's obligations hereunder with respect to the Predecessor
Lease shall cease but the Servicer 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.
ARTICLE 9. ASSIGNMENT
Section 9.01 Assignment to Trustee.
It is understood that this Servicing Agreement and all rights of the Issuer
hereunder will be assigned by the Issuer to the Trustee pursuant to the
Indenture, for the benefit of the Trustee, the holders from time to time of the
Notes as provided in the Indenture, and may be subsequently assigned by the
Trustee to any successor Trustee or as otherwise provided in the Indenture. The
Servicer 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, the Trustee, the holders from time to
time of the Notes, and any successor to or assignee of any thereof.
Section 9.02 Assignment by Servicer.
None of the respective rights or obligations of the Servicer hereunder may
be assigned without the prior written consent of the Issuer and the Trustee
(acting upon the instructions of the Holders of 66-2/3% of the then aggregate
unpaid Outstanding Principal Amount of the Notes); provided, that nothing herein
shall preclude the Servicer from performing its duties hereunder through the use
of subservicers or agents to the extent that such use is
25
<PAGE>
consistent with the Servicer's business practices in dealing with leases and
equipment for its own account, so long as the Servicer remains responsible for
the actions of any subservicer.
ARTICLE 10. NATURE OF OBLIGATIONS AND SECURITY THEREFOR
Section 10.01 Obligations Absolute.
The obligations of the Servicer hereunder, and the rights of the Trustee,
as assignee of the Issuer, in and to all amounts payable hereunder, shall be
absolute and unconditional and shall not be subject to any abatement, reduction,
setoff, defense, counterclaim or recoupment whatsoever, including, without
limitation, 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 the Servicer may have against the Issuer, the Trustee, and
any Holder of the Notes or any other Person for any reason whatsoever; it being
the intention of the parties hereto that all obligations of the Servicer
hereunder and all amounts payable by the Servicer 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 Servicing Agreement.
Section 10.02 Further Assurances; Financing Statements.
The Servicer 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 the Issuer
or the 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 the Issuer or the Trustee to exercise and
enforce its rights and remedies under this Agreement with respect to any Leases
and the Lease Payments. Without limiting the generality of the foregoing, the
Servicer 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 the Issuer or the Trustee may request to protect and preserve
the assignments and security interests granted by any Transaction Document with
respect to the Leases.
ARTICLE 11. MISCELLANEOUS
Section 11.01 Continuing Obligations.
This Servicing Agreement shall continue in full force and effect until each
of the Notes and any other amounts due to any 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 11.02 GOVERNING LAW.
THIS SERVICING 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, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. IF ANY
PROVISION OF THIS
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SERVICING AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE BALANCE OF THIS
SERVICING AGREEMENT.
Section 11.03 Successors and Assigns.
This Servicing Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Issuer, the Servicer and the Trustee and shall
inure to the benefit of the successors and assigns of the Holders, from time to
time, of the Notes.
Section 11.04 Modification.
The terms of this Servicing Agreement shall not be waived, modified or
amended without (a) the written consent of the party against whom such waiver,
modification or amendment is claimed and, in any case, the Trustee (acting upon
the instructions of the Holders of 66-2/3% of the then aggregate unpaid
Outstanding Principal Amount of the Notes), and (b) confirmation from the Rating
Agencies that such waiver, modification or amendment will not cause the then
existing rating of the Notes to be decreased.
Section 11.05 No Petition or Proceedings.
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, the Servicer hereby agrees
that it will not, directly or indirectly, institute, or cause to be instituted,
against the Issuer any petition or otherwise invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its respective property, or ordering the winding up or liquidation of the
affairs of the Issuer.
Section 11.06 Notices.
All notices and other communications given in connection with this
Servicing 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 the Servicer, the Seller, the Issuer
and the Transferor, to 530 Fifth Avenue, New York, New York 10036, Attention:
Treasurer with a copy to the General Counsel (telecopy: 212-805-1181) and in the
case of the Trustee and the Holders of the Notes, to such addresses as are
provided pursuant to Sections 1.05 and 1.06 of the Indenture or to such other
address as either party may specify to the other from time to time in accordance
with this Section 11.06.
Section 11.07 Counterparts.
This Servicing Agreement may be executed in any number of counterparts,
each counterpart constituting an original, but all together constituting only
one Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Servicing
Agreement as of the date and year first written above.
CHARTER FINANCIAL, INC., as Servicer
By:
-----------------------------------
Name:
Title:
CHARTER EQUIPMENT LEAST 1999 - 1 LLC.,
By: CHARTER FUNDING CORPORATION V
By:
-----------------------------------
Name:
Title:
LASALLE BANK NATIONAL ASSOCIATION,
as Trustee
By:
-----------------------------------
Name:
Title:
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SCHEDULE 1
SCHEDULE OF LEASES
<PAGE>
EXHIBIT A
Form of Receivables Servicing Report
[to come]
CHARTER EQUIPMENT LEASE 1999-1 LLC
$3,956,427 Class C [__]% Lease-Backed Notes, Series 1999-1
$1,318,809 Class D [__]% Lease-Backed Notes, Series 1999-1
CHARTER FINANCIAL, INC.
(Seller and Servicer)
PLACEMENT AGENCY AGREEMENT
August [__], 1999
First Union Capital Markets Corp.
301 South College Street, TW-9
Charlotte, North Carolina 28288-0610
Dear Sirs:
Pursuant to an Indenture to be dated as of August [__], 1999 (the
"Indenture") among Charter Equipment Lease 1999-1 LLC (the "Issuer"), Charter
Financial, Inc. ("Charter"), as servicer, and LaSalle Bank National Association,
as indenture trustee (the "Indenture Trustee"), the Issuer will issue
$50,642,266 aggregate principal amount of its Class A-1 [_____]% Lease-Backed
Notes, Series 1999-1 (the "Class A-1 Notes"), $40,355,556 aggregate principal
amount of its Class A-2 [_____]% Lease-Backed Notes, Series 1999-1 (the "Class
A-2 Notes"), $18,990,850 aggregate principal amount of its Class A-3 [_____]%
Lease-Backed Notes, Series 1999-1 (the "Class A-3 Notes"), $48,708,013 aggregate
principal amount of its Class A-4 [_______]% Lease-Backed Notes, Series 1999-1
(the "Class A-4 Notes"), $7,473,251 aggregate principal amount of its Class B
[_______]% Lease-Backed Notes, Series 1999-1 (the "Class B Notes", and together
with the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes,
the "Public Notes"), $3,956,427 aggregate principal amount of its Class C
[_____]% Lease-Backed Notes, Series 1999-1 and $1,318,809 aggregate principal
amount of its Class D [_____]% Lease-Backed Notes, Series 1999-1 (the "Class D
Notes", and together with the Class C Notes, the "Private Notes").
The order of seniority of the Public Notes and the Private Notes (together,
the "Notes"), from most senior to least senior, is Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes, Class C Notes and Class
D Notes. The Public Notes are not being placed or sold hereunder. The assets of
the Issuer (the "Issuer Assets") will include, among other things, the
Transferred Assets, together with all monies and investments on deposit, from
time to time, in the Collection Account and Reserve Account. The Notes will be
secured by the Granted Assets pursuant to the Indenture. Capitalized terms used
and not otherwise defined herein shall have the meanings given them in the
Indenture.
<PAGE>
The Issuer and Charter request that First Union Capital Markets Corp.
("First Union"), subject to the terms and conditions set forth in this
Agreement, act as exclusive placement agent (the "Placement Agent") in the
private placement of the Private Notes. In acting as the exclusive placement
agent for such private placement, First Union agrees to complete the placement
of such Private Notes, subject to performance by the Issuer and Charter of all
of their respective obligations hereunder and the completeness and accuracy of
the representations and warranties of the Issuer and Charter, on such terms as
shall have theretofore been approved by the Issuer and Charter, on a best
efforts basis and not as a principal in the sale and placement of the Private
Notes under this Agreement. The appointment of First Union as placement agent
hereunder is not terminable by the Issuer or Charter except upon termination of
the private placement contemplated hereby or otherwise in accordance with the
terms hereof.
Section 1. Offering and Sale of the Securities.
The sale of the Private Notes is to be accomplished in transactions (the
"private placement") that are intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to Section 4(2) thereof. The Private Notes are to be offered and sold
by means of a confidential offering memorandum prepared for the Private Notes
(as supplemented and amended from time to time, being referred to as a
"Memorandum") prepared by the Issuer and Charter. The Issuer hereby authorizes
the Placement Agent to furnish the applicable Memorandum to prospective
purchasers of the Private Notes in accordance with Section 3 hereof. Each
purchaser of a Class C Note (other than a QIB (as defined below)), and each
purchaser of a Class D Note, from the Issuer shall execute an investor
representation letter substantially in the form of Exhibit A hereto (each, an
"Investment Representation Letter").
It is understood and agreed that nothing in this Agreement shall prevent
the Placement Agent from entering into any agency agreements, underwriting
agreements or other similar agreements governing the offer and sale of
securities with any issuer or issuers of securities, and nothing contained
herein shall be construed in any way as precluding or restricting the Placement
Agent's right to sell or offer for sale any securities issued by any Person,
including securities similar to, or competing with, the Private Notes.
Section 2. Compensation and Costs.
The parties hereto acknowledge and agree that the Placement Agent shall
receive such fees and expenses as set forth in the Underwriting Agreement dated
the date hereof among the Issuer, Charter and First Union. In addition, Charter
and the Issuer hereby agree that in consideration of the Placement Agent's
efforts in the placement of the Private Notes with the purchasers, the Issuer
shall pay to the Placement Agent a fee (the "Placement Fee") equal to (i) [___]
basis points on the principal amount of Class C Notes placed by the Placement
Agent, which fee, assuming the placement of all Class C Notes as anticipated,
will be equal to $[_________] and (ii) [___] basis points on the principal
amount of Class D Notes placed by the Placement Agent, which fee, assuming the
placement of all Class D Notes as anticipated, will be equal to $[_________],
which Placement Fee shall be payable in full by the Issuer from the
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<PAGE>
proceeds of the sale of such Private Notes, by wire transfer in immediately
available funds, plus the fees and disbursements of counsel for the Placement
Agent, payable by check within 30 days of the receipt of an invoice from
counsel.
[In addition, Charter shall pay First Union a structuring fee on the
Closing Date in the amount of $[_________] (the "Structuring Fee").]
In addition, the Issuer and Charter, jointly and severally, agree to pay
all other costs and expenses incident to the performance by the Issuer and
Charter of their respective obligations hereunder and under the documents to be
executed and delivered in connection with the offer, issuance, sale and delivery
of the Private Notes (the "Documents"), including, without limitation, (i) the
fees and expenses of the Indenture Trustee and its counsel; (ii) the fees and
expenses of the accountants for the Issuer and Charter, including the fees for
the "comfort letters" required by the Placement Agent or any rating agency in
connection with the offer, issuance, sale and delivery of the Private Notes;
(iii) the fees for any securities identification service for any CUSIP or
similar identification number required by the purchasers or requested by the
Placement Agent; and (iv) any federal, state or local taxes, or other similar
payments to any federal, state or local governmental authority in connection
with the offer, issuance, sale and delivery of the Private Notes. It is
understood that except to the extent provided in Section 7(d), First Union will
pay the fees and disbursements of its own counsel.
The Placement Agent shall have the right, after consultation with the
Issuer, to reject in whole or in part any offer to purchase the Private Notes or
to allot to any purchaser of Notes less than the amount of the Private Notes
offered to be purchased by such purchaser, and the Placement Agent's decision in
respect thereof shall be binding on the Issuer and the Indenture Trustee. The
Placement Agent shall not have any liability to Charter, the Issuer or the
Indenture Trustee in the event that any purchaser, whose offer to purchase the
Private Notes has been solicited by the Placement Agent and accepted by the
Issuer or the Indenture Trustee, does not, for any reason, consummate the
purchase of the Private Notes.
The Placement Agent may, but is not obligated to, at any time agree to
purchase, as principal, all or a portion of the Notes as set forth in, and
subject to the terms of, a purchase agreement (a "Purchase Agreement") entered
into by the Placement Agent with the Issuer containing terms satisfactory to all
parties. If requested by a purchaser, the Issuer shall enter into a Purchase
Agreement with such purchaser. The Placement Agent shall not, in fulfilling its
obligations hereunder, act as underwriter for the Private Notes, and the
Placement Agent is not in any way obligated, directly or indirectly, to advance
its own funds to purchase any of the Private Notes.
At 9:00 a.m. on the Closing Date (or such later time and date as may be
mutually agreed upon by the parties hereto), the Issuer will deliver (or cause
the Indenture Trustee to deliver), in definitive form, duly executed and
authenticated, the Private Notes placed by the Placement Agent to (or at the
direction of) the Placement Agent for the benefit of the purchasers of such
Private Notes against delivery by the Placement Agent of receipts therefor, and
the Placement Agent will deliver payment for such Private Notes on behalf of
such purchasers in
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<PAGE>
immediately available funds to the Issuer in an amount equal to the aggregate
issue price of the Private Notes less the fees payable to the Placement Agent
pursuant to this Section 2; provided, however, that the Placement Agent reserves
the right to withhold any payment for which it has not received funds from the
purchaser. The Placement Agent shall immediately return to the Indenture Trustee
any Private Notes delivered to it by the Indenture Trustee for which it has
withheld payment as provided in the proviso to the preceding sentence.
If a purchaser fails to make payment to the Placement Agent for a Private
Note for which the Placement Agent has not withheld funds as set forth above,
the Placement Agent will promptly, but in no event later than five business days
after the Closing Date, notify the Indenture Trustee and the Issuer thereof by
telephone (confirmed in writing) or by facsimile transmission or other
acceptable written means. The Placement Agent will immediately return the
Private Note to the Indenture Trustee. Immediately upon receipt of such Private
Note by the Indenture Trustee, the Issuer will return to the Placement Agent an
amount equal to the amount previously paid to the Issuer in respect of such
Private Note. The Issuer will reimburse the Placement Agent on an equitable
basis for its loss of the use of funds during the period when they were credited
to the account of the Issuer.
Section 3. Private Placement.
(a) Each of the Issuer, Charter and the Placement Agent hereby agrees that:
(i) each of the Issuer, Charter and the Placement Agent will
reasonably believe at the time of the sale of the Private Notes that each
purchaser of the Private Notes is (A) a "qualified institutional buyer"
(each, a "QIB") or (B) an institutional "accredited investor" (each, an
"Institutional Accredited Investor") as such term is defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act
("Regulation D"));
(ii) the Issuer and Charter will furnish and make available to each
purchaser of the Private Notes the information and opportunities, if any,
required by Rule 502(b)(v) of Regulation D;
(iii) neither Charter, the Issuer nor any Person acting on either of
their behalf (other than the Placement Agent or any Person acting on its
behalf) nor the Placement Agent or any Person acting on its behalf will
offer or sell the Private Notes by any form of general solicitation or
general advertising, including the methods described in Rule 502(c) of
Regulation D;
(iv) each of the Issuer, Charter and the Placement Agent will exercise
reasonable care to assure that the purchasers of the Private Notes are not
underwriters within the meaning of Section 2(11) of the Securities Act;
(v) the Issuer shall take the actions specified in Rule 502(d) of
Regulation D and the Placement Agent will provide a copy of the applicable
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<PAGE>
Memorandum to each prospective purchaser and will take the actions
specified in Rule 502(d)(1) of Regulation D;
(vi) the Issuer will file in a timely manner with the Securities and
Exchange Commission (the "SEC") the notice with respect to the sale on the
Closing Date of the Private Notes required by Rule 503 of Regulation D and
will furnish to the Placement Agent promptly a signed copy of such notice;
and
(vii) the Issuer will sell the Private Notes pursuant thereto to, such
Persons as are designated by the Placement Agent; provided, however, that
the Issuer shall have the right to refuse to sell Private Notes to any
proposed purchaser that it reasonably believes would cause the sale of the
Private Notes to fail to be entitled to the exemption from registration
afforded under Section 4(2) of the Securities Act, who refuses to sign an
Investment Representation Letter or who is not an offeree of the Private
Notes approved by the Issuer pursuant to Section 3(e) hereof.
(b) Neither the Issuer nor Charter will, directly or indirectly (except
through the Placement Agent), sell or offer, or attempt or offer to dispose of,
or solicit any offer to buy, or otherwise approach or negotiate in respect of,
any of the Private Notes and neither the Issuer nor Charter has heretofore done
any of the foregoing. As used herein, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Securities Act.
(c) The Issuer and the Placement Agent intend that the offering of the
Private Notes will be to Institutional Accredited Investors and QIBs only. The
Issuer, at the request of the Placement Agent, will qualify the Private Notes
for offering and sale under the state securities or blue sky laws of such
jurisdictions as the Placement Agent may reasonably request; provided that in
connection therewith the Issuer shall not be required to qualify as a foreign
corporation, to file a general consent to service of process in any jurisdiction
or to subject itself to taxation. The Issuer will comply in all material
respects with such applicable state securities or blue sky laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as long
as may be necessary to complete the distribution.
(d) The Issuer will ensure that the Servicing Agreement will contain
provisions granting to any holder of the Private Notes and any prospective
purchaser thereof the right to obtain from the Issuer the information concerning
the Private Notes, distributions on the Private Notes and servicing of the
Private Notes as is contemplated by Rule 144A promulgated under the Securities
Act ("Rule 144A").
(e) The Placement Agent hereby agrees that:
(i) it will offer the Private Notes for sale only to QIBs or
Institutional Accredited Investors who have been approved by the Issuer;
(ii) it will not offer either of the Class C Notes or the Class D
Notes for sale to more than 50 QIBs or Institutional Accredited Investors;
and
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(iii) it will not furnish or make available to offerees of the Private
Notes or any of their representatives any information or documents with
respect to the Private Notes, other than the Memorandum, without the prior
written consent of the Issuer or Charter.
Section 4. Representations and Warranties of the Issuer and Charter.
Each of the Issuer and Charter represents and warrants to, and agrees with,
the Placement Agent that:
(a) The Memorandum does not and will not, as of its issue date and as of
the Closing Date, include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements not misleading;
provided, however, that this representation shall not apply to the Placement
Agent's Information (as defined in Section 6) contained therein.
(b) The representations and warranties of the Issuer and Charter in the
Servicing Agreement will be true and correct as of the Closing Date.
(c) The execution, delivery and performance of this Agreement, the issuance
and sale of the Private Notes and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which Charter or any of its subsidiaries is a party or by which Charter or any
of its subsidiaries is bound or to which any of the property or assets of
Charter or any of its subsidiaries is subject, nor will such actions result in
any violation of the provisions of Charter or by-laws of Charter or any of its
subsidiaries or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over Charter or any of its
subsidiaries or any of their properties or assets; and except for the filing of
any financing statements required to perfect the Issuer's interest in the Lease
Receivable, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for
the execution, delivery and performance of this Agreement, the issuance and sale
of the Private Notes and the consummation of the transactions contemplated
hereby.
(d) There are no legal or governmental proceedings pending to which Charter
or any of its subsidiaries is a party or of which any property or assets of
Charter or any of its subsidiaries is the subject which, individually or in the
aggregate, if determined adversely to Charter or any of its subsidiaries, are
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), results of operations, business or prospects of Charter and its
subsidiaries taken as a whole; and to the best of Charter's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(e) Neither Charter nor any of its subsidiaries (i) is in violation of its
charter or by-laws, (ii) is in default in any material respect, and no event has
occurred which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or condition
contained in any material indenture, mortgage, deed of trust,
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<PAGE>
loan agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its property or assets is subject or (iii)
is in violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be subject,
except any violation or default that could not have a material adverse effect on
the condition (financial or otherwise), results of operations, business or
prospects of Charter and its subsidiaries taken as a whole.
(f) This Agreement has been duly authorized, executed and delivered by the
Issuer and Charter.
(g) The Issuer is not required to be registered under the Investment
Company Act of 1940, as amended.
(h) On the Closing Date, each Class of Private Notes shall have been given
a rating by each of the Rating Agencies that is equal to or better than the
rating required for such Class of Private Notes as set forth in the Memorandum.
(i) Any information that may, pursuant to Rule 144A ("Rule 144A
Information"), be delivered from time to time by the Issuer or Charter to any
holder or any prospective purchaser or transferee of any Note to enable the
resale or other transfer thereof to be made pursuant to Rule 144A, and any
amendments or supplements to any Rule 144A Information, as of their respective
dates, will not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.
Section 5. Certain Agreements of the Issuer and Charter.
In connection with the private placement contemplated hereby, each of the
Issuer and Charter agrees as follows:
(a) Prior to August [___], 1999, the Issuer or Charter, as applicable, will
advise the Placement Agent promptly of (i) the occurrence of any event or the
existence of any condition as a result of which it is necessary to amend or
supplement the Memorandum in order that the Memorandum will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading in light of the
circumstances existing at the time the Memorandum is delivered to prospective
purchasers, (ii) the receipt by the Issuer or Charter of any communication from
the SEC or any state securities authority concerning the offering or sale of the
Private Notes, (iii) the commencement of any lawsuit or proceeding to which the
Issuer or Charter, as applicable, is a party relating to the offering or sale of
the Private Notes, and (iv) the suspension of the qualification of the Private
Notes for offering or sale in any jurisdiction, or the initiation or threatening
of any proceeding for any such purpose.
(b) On the Closing Date, the Issuer and Charter will each deliver to the
Placement Agent, in each case in form and substance reasonably satisfactory to
the Placement Agent and its counsel, (i) a letter certifying to the Placement
Agent that (A) the representations
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<PAGE>
and warranties of such party contained herein and in any of the Documents are
true and correct in all material respects as of the date of such letter, except
to the extent any such representation or warranty was expressly made as of any
other date, in which case such representation and warranty was true and correct
in all material respects as of such other date, (B) such party has complied in
all material respects with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the initial Closing
Date, and (C) since [June 30, 1999], there has been no material adverse change
in the financial position or results of operations of Charter or the Issuer, as
applicable, or the Issuer or any development including a prospective change in
the financial position or results of operations of Charter or the Issuer, as
applicable, except as set forth in or contemplated by the Memorandum, and (ii)
copies of the Documents, including, without limitation, all certificates and
other documents (other than the Private Notes) delivered by the Issuer or
Charter to each prospective purchaser on such Closing Date. In addition, both
the Issuer and Charter will cause their respective counsel to address to the
Placement Agent any opinion furnished to any Person on the Closing Date in
connection with the issuance or sale of the Private Notes (or, alternatively, to
furnish the Placement Agent with a letter stating that the Placement Agent may
rely on such opinion as though it were addressed to the Placement Agent).
(c) Prior to August [___], 1999, (i) the Issuer and Charter will make
available to each offeree such information (in addition to that contained in the
Memorandum) concerning the Private Notes, the Issuer Assets, the Issuer and
Charter, and any other relevant matters, as they or any of their affiliates
possess or can acquire without unreasonable effort or expense, as determined in
good faith by them (any such additional written information together with the
Memorandum being referred to herein as the "Offering Documents"), (ii) the
Issuer and Charter will provide each offeree the opportunity to ask questions
of, and receive answers from, them concerning the terms and conditions of the
offering and to obtain any additional information, to the extent they or any of
their affiliates possess such information or can acquire it without unreasonable
effort or expense (as determined in good faith by them), necessary to verify the
accuracy of the information furnished to the offeree and (iii) neither the
Issuer nor Charter will publish or disseminate any material as part of the
offering of the Private Notes except as contemplated herein or as consented in
writing to by the Placement Agent.
(d) Prior to the Closing Date, the Issuer and Charter will provide the
Placement Agent with a letter from [Accounting Firm] verifying the accuracy of
such financial and statistical data contained in the Memorandum as the Placement
Agent shall deem advisable. In addition, if any amendment or supplement to the
Memorandum made after the date hereof and on or prior to the Closing Date
contains financial or statistical data, on the Closing Date, the Issuer and
Charter shall provide a letter dated the Closing Date providing additional
comfort on such new data on substantially the same basis as provided in the
initial letter.
(e) Each Note shall contain the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR
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<PAGE>
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CHARTER EQUIPMENT
LEASE 1999-1 LLC (THE "ISSUER") OR ANY AFFILIATE OF THE ISSUER WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO
THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN ACCREDITED INVESTOR WITHIN THE MEANING
OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF [$250,000][$500,000], FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO THE ISSUER. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT
WILL NOT SELL, TRADE, ASSIGN OR OTHERWISE DISPOSE OF THIS SECURITY (OR ANY
INTEREST HEREIN) OR CAUSE THIS SECURITY (OR ANY INTEREST HEREIN) TO BE
MARKETED ON OR THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(B)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
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AMENDED (THE "CODE"), INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER
MARKET OR AN INTERDEALER QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM
BUY OR SELL QUOTATIONS OR (II) A "SECONDARY MARKET" WITHIN THE MEANING OF
SECTION 7704(B)(2) OF THE CODE, INCLUDING A MARKET WHEREIN THE CLASS [C][D]
NOTES ARE REGULARLY QUOTED BY ANY PERSON MAKING A MARKET IN SUCH INTERESTS
AND A MARKET WHEREIN ANY PERSON REGULARLY MAKES AVAILABLE BID OR OFFER
QUOTES WITH RESPECT TO THE CLASS [C][D] NOTES AND STANDS READY TO EFFECT
BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF
OTHERS.
The Issuer will not cause or permit the legend to be removed from the face
of any Note except in accordance with the procedures set forth in the Indenture.
The purpose of this requirement is to ensure that the Private Notes are
resold or otherwise transferred only to Institutional Accredited Investors or to
QIBs and not in a manner that might call into question the non-public offering
character of the offer and sale of the Private Notes.
Section 6. Indemnification and Contribution.
(a) Regardless of whether any Private Notes are sold, Charter and the
Issuer shall, jointly and severally, indemnify and hold harmless the Placement
Agent and each Person, if any, who controls the Placement Agent within the
meaning of the Securities Act (collectively referred to for the purposes of this
Section 6 as the Placement Agent) against any loss, claim, damage or liability
(including the cost of any investigation, legal and other expenses incurred in
connection with and amounts paid in settlement of any action, suit, proceeding
or claim asserted), joint or several, or any action in respect thereof, to which
the Placement Agent may become subject, under the Securities Act, the Securities
Exchange Act of 1934 (the "Exchange Act") or other federal or state law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Memorandum or in
any other Offering Documents, and the Indenture, or any amendment thereof or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse the Placement Agent for any legal or
other expenses reasonably incurred by the Placement Agent directly in connection
with investigating or preparing to defend or defending against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that neither Charter
nor the Issuer shall be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from the Memorandum or in any other Offering Documents, or any amendment thereof
or supplement thereto in reliance upon and in conformity with the Placement
Agent's Information (as defined below).
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(b) The Placement Agent shall indemnify and hold harmless the Issuer, each
of its directors and each Person, if any, who controls the Issuer within the
meaning of the Securities Act (collectively referred to for the purposes of this
Section 6 as the Issuer), against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Issuer may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Memorandum or in any other Offering Documents, or any amendment thereof or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with the written information furnished to the
Issuer by the Placement Agent specifically for use therein (the "Placement
Agent's Information"), and shall reimburse the Issuer for any legal or other
expenses reasonably incurred by the Issuer in connection with investigating or
preparing to defend or defending against or appearing as a third party witness
in connection with any such loss, claim, damage or liability (or any action in
respect thereof) as such expenses are incurred.
(c) Promptly after receipt by a person under this Section 6 of notice of
any claim or the commencement of any action in respect of which indemnity may be
sought pursuant to this Section 6, such person (hereinafter called the
"indemnified party") shall, if a claim in respect thereof is to be made against
a person under this Section 6, notify such person (herein called the
"indemnifying party") in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have under this Section 6
except to the extent it has been materially prejudiced by such failure; and,
provided, further, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 6. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 6 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that the Placement Agent
shall have the right to employ counsel to represent the Placement Agent (and its
controlling Persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought under this Section 6) if, in the
reasonable judgment of the Placement Agent, it is advisable for the Placement
Agent and controlling Persons to be jointly represented by separate counsel, and
in that event the fees and expenses of such separate counsel shall be paid by
the Issuer and Charter. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts
to cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld),
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but if settled with its written consent or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
The obligations of Charter, the Issuer and the Placement Agent in this
Section 6 are in addition to any other liability which Charter, the Issuer or
the Placement Agent, as the case may be, may otherwise have.
(d) If the indemnification provided for in this Section 6 is unavailable or
insufficient to hold harmless an indemnified party under Section 6(a) or 6(b),
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or any action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by Charter and the Issuer on the one hand and the Placement
Agent on the other from the placement of the Private Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of Charter and the
Issuer on the one hand and the Placement Agent on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or any action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by Charter and the Issuer on the
one hand and the Placement Agent on the other with respect to such placement
shall be deemed to be in the same proportion as the total net proceeds from the
sale of the Private Notes sold hereunder (before deducting expenses) received by
the Issuer bear to the total commissions received by the Placement Agent with
respect to the Private Notes placed hereunder. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by Charter or the Issuer on the
one hand or the Placement Agent on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission.
(e) Charter, the Issuer and the Placement Agent agree that it would not be
just and equitable if contributions pursuant to this Section 6 were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability referred to in Section 6 shall be deemed to include, for
purposes of this Section 6, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
claim or any action. Notwithstanding the provisions of this Section 6, the
Placement Agent shall not be required to contribute any amount in excess of the
amount of its commission received hereunder with respect to the placement of the
Private Notes less the amount of any damages which the Placement Agent has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
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(f) Charter, the Issuer and the Placement Agent each expressly waive, and
agree not to assert, any defense to their respective indemnification and
contribution obligations under this Section 6 which they might otherwise assert
based upon any claim that such obligations are unenforceable under federal or
state securities laws or by reasons of public policy.
Section 7. Miscellaneous.
(a) When the private placement contemplated hereby is completed, the
Placement Agent may, at its option and expense, but with the prior approval of
the Issuer, place an announcement in such newspapers and periodicals as it may
choose stating that the Placement Agent has acted as a placement agent in such
private placement.
(b) All communications hereunder shall be in writing and shall be mailed or
delivered to
(i) if to the Placement Agent, shall be delivered or sent by mail or
facsimile transmission and confirmed to First Union Capital Markets Corp.,
One First Union Center TW-9, Charlotte, North Carolina 28288-0610,
Attention: Mr. Michael Clippinger, Telecopy Number: (704) 374-3254;
(ii) if to the Issuer, shall be delivered or sent by mail or facsimile
transmission and confirmed to Charter Equipment Lease 1999-1 LLC,
[__________________], Attention: President, Telecopy Number:
[______________]; and
(iii) if to Charter, shall be delivered or sent by mail or facsimile
transmission and confirmed to Charter Financial, Inc.,
[__________________], Attention: [_________________], Telecopy Number:
[______________].
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof.
(c) The Placement Agent's engagement hereunder shall terminate on the
Closing Date, it being understood that the provisions of Section 2, Section
3(c), Section 6 and Section 7(a) hereof shall survive any such termination.
(d) If the Issuer shall fail to deliver any of the Private Notes as
contemplated by this Agreement or if, on or prior to the Closing Date, either of
the Issuer or Charter fails to fulfill all of its respective obligations
contained in Section 5 hereof required to be fulfilled on or prior to the
Closing Date, Charter and the Issuer, jointly and severally, will promptly pay
the Placement Agent the Structuring Fee referenced in Section 2 hereof and, in
addition, reimburse the Placement Agent for all out-of-pocket expenses,
including reasonable fees and disbursements of the Placement Agent's counsel,
reasonably incurred by the Placement Agent in connection with this Agreement and
the transactions contemplated herein, and the Issuer shall then be under no
further liability to the Placement Agent except as provided in Section 2 and
Section 6 hereof.
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(e) In soliciting offers to purchase the Private Notes from the Issuer
pursuant to this Agreement and in assuming its other obligations hereunder, the
Placement Agent is acting solely as agent for the Issuer and not as principal.
The Placement Agent will make reasonable efforts to assist the Issuer in
obtaining performance by each purchaser whose offer to purchase the Private
Notes from the Issuer has been solicited by the Placement Agent and accepted by
the Issuer, but the Placement Agent shall have no liability to the Issuer in the
event any such purchase is not consummated for any reason. If the Issuer shall
default on its obligations to deliver Private Notes to any purchaser whose offer
it has accepted, Charter and the Issuer (i) shall hold the Placement Agent
harmless against any loss, claim or damage arising from or as a result of such
default by the Issuer, and (ii) in particular, shall pay to the Placement Agent
any commission to which it would be entitled in connection with such sale.
(f) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to its conflicts of laws
provisions.
(g) The respective agreements, representations, warranties, indemnities and
other statements of Charter and the Issuer set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Placement Agent, Charter, the Issuer or any of the
officers, directors or controlling Persons referred to as an indemnified party
above, and will survive delivery of and payment for the Private Notes. The
provisions of this Agreement relating to indemnification and in paragraph (d) of
this Section 7 shall survive the termination or cancellation of this Agreement.
(h) This Agreement supersedes all prior or contemporaneous agreements and
understandings relating to the subject matter hereof. Neither this Agreement nor
any term hereof may be changed, waived, discharged or terminated except by a
writing signed by the party against whom enforcement of such change, waiver,
discharge or termination is sought. This Agreement may be signed in any number
of counterparts, each of which shall be deemed an original, and all of such
counterparts, taken together, shall constitute one and the same instrument.
(i) To the fullest extent permitted by applicable law, each of the Issuer
and Charter irrevocably submits to the jurisdiction of any Federal or State
court in the City, County and State of New York, United States of America, in
any suit or proceeding based on or arising under this Agreement, and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in any such court. Each of the Issuer and Charter hereby irrevocably and fully
waives the defense of an inconvenient forum to the maintenance of such suit or
proceeding. Each of the Issuer and Charter hereby irrevocably designates and
appoints CT Corporation (the "Process Agent"), as its authorized agent upon whom
process may be served in any such suit or proceeding, it being understood that
the designation and appointment of CT Corporation as such authorized agent shall
become effective immediately without any further action on the part of the
Issuer or Charter. Each of the Issuer and Charter represents to the Placement
Agent that it has notified the Process Agent of such designation and appointment
and that the Process Agent has accepted the same in writing. Each of the Issuer
and Charter hereby irrevocably authorizes and directs the Process Agent to
accept such service. Each of the Issuer and Charter further agrees
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that service of process upon the Process Agent and written notice of said
service to the Issuer or Charter, as the case may be, mailed by first class mail
or delivered to the Process Agent at its principal office, shall be deemed in
every respect effective service of process upon the Issuer or Charter, as the
case may be, in any such suit or proceeding. Nothing herein shall affect the
right of the Placement Agent or any Person controlling the Placement Agent to
serve process in any other manner permitted by law. Each of the Issuer and
Charter agrees that a final action in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other lawful manner.
(j) The obligation of the parties to make payments hereunder is in U.S.
dollars (U.S. dollars and such other currencies referred to above being called
the "Obligation Currency") and such obligation shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency or any other
realization in such other currency, whether as proceeds of set-off, security,
guarantee, distributions, or otherwise, except to the extent to which such
tender, recovery or realization shall result in the effective receipt by the
party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable hereunder, and the party liable to make such
payment agrees to indemnify the party which is to receive such payment (as an
additional, separate and independent cause of action) for the amount (if any) by
which such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation to
indemnify shall not be affected by judgment being obtained for any other sums
due under this Agreement.
-15-
<PAGE>
If you are in agreement with the foregoing, please sign the counterpart
hereof and return it to the Issuer, whereupon this letter and your acceptance
shall become a binding agreement among the Issuer and Charter.
Very truly yours,
CHARTER EQUIPMENT LEASE 1999-1 LLC
By: ____________________________
Name:
Title:
CHARTER FINANCIAL, INC.
By: ____________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the date hereof.
FIRST UNION CAPITAL MARKETS CORP.
By: ____________________________
Name:
Title:
<PAGE>
Exhibit A
Investment Representation Letter
Charter Equipment Lease 1999-1 LLC
530 Fifth Avenue
New York, New York 10036
Attention:
Ladies and Gentlemen:
In connection with our proposed purchase of $____________ aggregate
principal amount of ___% Class [C] [D] Lease-Backed Notes, Series 1999-1, Due
[_______] (the "Notes"), issued pursuant to the Indenture, dated as of August
[__], 1999 (the "Indenture"), between Charter Equipment Lease 1999-1 LLC (the
"Issuer"), Charter Financial, Inc., as servicer, and LaSalle Bank National
Association, as Trustee, we represent and agree as follows:
[[For Institutional Accredited Investors only] 1. We are an institutional
"accredited investor" (an entity meeting the requirements of Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act of 1933, as amended
(the "Securities Act")) and have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment. We are acquiring
the Notes purchased by us for our own account or for one or more accounts (each
of which is an "institutional accredited investor") as to each of which we
exercise sole investment discretion.]
[[For Qualified Institutional Buyers only] 1. The Purchaser is a "qualified
institutional buyer" within the meaning of Rule 144A ("Rule 144A") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). The
Purchaser is aware that the transfer is being made in reliance on Rule 144A, and
the Purchaser has had the opportunity to obtain the information required to be
provided pursuant to paragraph (d)(4)(i) or Rule 144A.]
2. The Purchaser's intention is to acquire the Notes (a) for investment for
the Purchaser's own account or (b) for resale to (i) "qualified institutional
buyers" in transactions under Rule 144A, or (ii) to institutional "accredited
investors" meeting the requirements of Rule 501(a)(1), (2), (3) or (7) of
Regulation D promulgated under the Securities Act, pursuant to any other
exemption from the registration requirements of the Securities Act, subject in
the case of this clause (ii) to (a) the receipt by the Note Registrar of a
letter substantially in the form hereof, and (b) the receipt by the Note
Registrar of such other evidence acceptable to the Note Registrar that such
reoffer, resale, pledge or transfer is in compliance with the Securities Act and
other applicable laws. It understands that the Notes have not been registered
under the Securities Act, by reason of a specified exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the Purchaser's investment
<PAGE>
intent (or intent to resell to only certain investors in certain exempted
transactions) as expressed herein.
3. The Purchaser acknowledges that the Notes (and any Note issued on
transfer or exchange thereof) have not been registered or qualified under the
Securities Act or the securities laws of any State or any other jurisdiction,
and that the Notes cannot be resold unless they are registered or qualified
thereunder or unless an exemption from such registration or qualification is
available.
4. The Purchaser has received and reviewed the Private Placement Memorandum
dated August [__], 1999, relating to the Notes (the "Private Placement
Memorandum") and the agreements and other materials referred to therein and has
had the opportunity to ask questions and receive answers concerning the terms
and conditions of the transactions contemplated by the Private Placement
Memorandum.
5. The Purchaser will not sell or otherwise transfer (any such act, a
"Transfer") any portion of the Note, except in compliance with the Indenture.
6. Check one of the following:*
___ The Purchaser is a "U.S. Person" and it has attached hereto an Internal
Revenue Service ("IRS") Form W-9 (or successor form).
___ The Purchaser is not a "U.S. Person" and under applicable law in effect on
the date hereof, no taxes will be required to be withheld by the Note
Registrar (or its agent) with respect to distributions to be made on the
Note(s). The Purchaser has attached hereto either (i) a duly executed IRS
Form W-8 (or successor form), which identifies such Purchaser as the
beneficial owner of the Note(s) and states that such Purchaser is not a
U.S. Person or (ii) two duly executed copies of IRS Form 4224 (or successor
form), which identify such Purchaser as the beneficial owner of the Note(s)
and state that interest on the Note is, or is expected to be, effectively
connected with a U.S. trade or business. The Purchaser agrees to provide to
the Note Registrar updated IRS Forms W-8 or IRS Forms 4224, as the case may
be, any applicable successor IRS forms, or such other certificates as the
Note Registrar may reasonably request, on or before the date that any such
IRS form or certification expires or becomes obsolete, or promptly after
the occurrence of any event requiring a change in the most recent IRS form
of certification furnished by it to the Note Registrar.
For this purpose, "U.S. Person" means a citizen or resident of the United
States, a corporation, or partnership (unless, in the case of a partnership,
Treasury regulations are adopted that provide otherwise) created or organized in
or under the laws of the United States, any state thereof or the District of
Columbia, including an entity treated as a corporation or partnership for
federal income tax purposes, an estate whose income is subject to United States
federal income tax
- --------
*Each Purchaser must include one of the two alternative certifications.
-2-
<PAGE>
regardless of its source, or a trust if a court within the United States is able
to exercise primary supervision over the administration of such trust, and one
or more such U.S. Persons have the authority to control all substantial
decisions of such trust (or, to the extent provided in applicable Treasury
regulations, certain trusts in existence on August 20, 1996 which are eligible
to elect to be treated as U.S. Persons).
7. The Purchaser represents and warrants that either:(i) it is not
purchasing the Notes with the assets of an employee benefit plan subject to
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or a plan subject to Section 4975 of the Internal Revenue Code of
1986, as amended, or (ii) part of the assets to be used to purchase the Notes
constitutes assets of any such plan and one or more exemptions from the
prohibited transaction rules of ERISA, including but not limited to Prohibited
Transaction Class Exemptions ("PTCE") 84-14, PTCE 90-1, PTCE 95-60, PTCE 91-38,
and PTCE 96-23 applies such that use of such assets to acquire and hold the
Notes does not and will not constitute a non-exempt prohibited transaction for
purposes of ERISA.
8. The Purchaser will treat the Notes as indebtedness for tax and U.S. GAAP
purposes
[Paragraphs 9 through 15 apply for Purchasers of Class D Notes only]
9. The Purchaser has neither acquired nor will it Transfer any Class D Note
it acquires (or any interest therein) or cause any Class D Note (or any interest
therein) to be marketed on or through an "established securities market" within
the meaning of Section 7704(b)(1) of the Internal Revenue Code of 1986, as
amended (the "Code") and any Treasury regulation thereunder, including, without
limitation, an over-the-counter-market or an interdealer quotation system that
regularly disseminates firm buy or sell quotations. The Purchaser understands
that any transfer effected through an established securities market shall be
void.
10. The Purchaser is a U.S. Person and the sole legal and beneficial owner
of the Class D Note.
11. The Purchaser is not and will not become a partnership, Subchapter S
corporation or grantor trust for United States federal income tax purposes or,
if it is or becomes such an entity, less than 50 percent of the aggregate value
of the assets of such entity are and at all times will be attributable to
interests in the Issuer.
12. The Purchaser understands that no subsequent Transfer of a Class D Note
is permitted unless (i) such Transfer is of a Class D Note with a denomination
of at least $500,000 and (ii) the Issuer and the Servicer each consent in
writing to the proposed Transfer, which consent shall be granted unless either
the Issuer or the Servicer, acting pursuant to advice of counsel, determines
that such Transfer would create a material risk that the Issuer would be
classified for federal or any applicable state tax purposes as an association or
publicly traded partnership taxable as a corporation; provided, that an
attempted Transfer that would cause the number of Targeted Holders to exceed one
hundred shall be void. For these purposes, the term "Targeted Holder" means any
holder of a right to receive interest or principal with respect to the
-3-
<PAGE>
Class D Notes; provided, that any Person holding more than one interest each of
which would cause such Person to be a Targeted Holder shall be treated as a
single Targeted Holder.
13. The Purchaser understands that the opinion of tax counsel to the Issuer
that the Issuer is not a publicly traded partnership taxable as a corporation is
dependent in part on the accuracy of the representations in paragraphs 8, 9, 10,
11 and 12 and that in addition to its being subject to having its purchase
rescinded, it will be liable for damages.
14. The Purchaser understands that any purported Transfer of any Class D
Note in contravention of the restrictions and conditions in the paragraphs above
(including any violation of the representation in paragraph 11 by an investor
who continues to hold a Class D Note occurring any time after the Transfer in
which it acquired such Class D Note) shall be null and void and the purported
transferee shall not be recognized by the Issuer or any other person as a Class
D Noteholder for any purpose.
15. The Purchaser further understands that, on any proposed resale, pledge
or Transfer of any Class D Notes, it will be required to furnish to the
Indenture Trustee and other appropriate parties as required, such certification
and other information as the Indenture Trustee or such other party may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions and with the restrictions and conditions of the Class D Notes, and
the Indenture pursuant to which the Class D Notes were issued and it agrees that
if it determines to Transfer any Class D Note, it will cause its proposed
transferee to provide the Issuer, the Servicer and the Indenture Trustee with a
letter substantially in the form of this letter subject to the qualification set
forth in the Private Placement Memorandum related to paragraphs 1 and 3 hereof.
The Purchaser further understands that Class D Notes purchased by it will bear a
legend to the foregoing effect.
Terms used but not defined herein shall have the meanings ascribed thereto
in the Indenture.
Very truly yours,
[Purchaser]
By: ___________________________
Name:
Title:
-4-
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated July 15, 1999, in Amendment No. 3 to
the Registration Statement (Form S-1 No. 333-64045) and related Prospectus of
Charter Equipment Lease 1999-1 LLC for the registration of approximately
$166,169,936 million of lease-backed notes.
/s/ Ernst & Young LLP
Ernst & Young LLP
Memphis, Tennessee
August 10, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------
LaSalle Bank National Association
(Exact name of trustee as specified in its charter)
36-1521370
(I.R.S. Employer Identification No.)
135 South LaSalle Street, Suite 1625 Chicago, Illinois 60674
(Address, including zip code, of principal executive offices)
--------------------
Mr. Robert K. Quinn
Senior Vice President and General Counsel
LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Telephone: (312) 443-2010
(Name, address and telephone number of agent for service)
--------------------
Charter Equipment Lease 1999-1 LLC
(Exact name of obligor as specified in its charter)
New York 13-4063218
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
(Address, including zip code, of registrant's Principal Executive Offices)
--------------------
Charter Equipment Lease 1999-1 LLC, Lease-Backed Notes Series 1999-1
(Title of the indenture securities)
<PAGE>
Item 1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
1. Comptroller of the Currency, Washington D.C.
2. Federal Deposit Insurance Corporation, Washington, D.C.
3. The Board of Governors of the Federal Reserve Systems,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of
the trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the trustee.
Item 3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting
securities of the trustee:
Not applicable
<PAGE>
Item 4. Trusteeships under Other Indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, furnish the
following information:
(a) Title of the securities outstanding under each other indenture.
Not applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of Section
310(b)(1) of the Act arises as a result of the trusteeship under
such other indenture, including a statement as to how the
indenture securities will rank as compared with the securities
issued under such other indenture.
Not applicable
<PAGE>
Item 5. Interlocking Directorates and Similar Relationships with the Obligor or
Underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not applicable
Item 6. Voting Securities of the Trustee Owned by the Obligor or its Officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner and
executive officer of the obligor.
Not applicable
Item 7. Voting Securities of the Trustee Owned by Underwriters or their
Officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner, and executive officer of each such underwriter.
Not applicable
Item 8. Securities of the Obligor Owned or Held by the Trustee.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by
the trustee:
Not applicable
Item 9. Securities of the Underwriter Owned or Held by the Trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor,
furnish the following information as to each class of securities of such
underwriter any of which are so owned or held by the trustee.
Not applicable
<PAGE>
Item 10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the knowledge
of the trustee (1) owns 10 percent or more of the voting securities of the
obligor or (2) is an affiliate, other than a subsidiary, of the obligor,
furnish the following information as to the voting securities of such
person.
Not applicable
Item 11. Ownership or Holdings by the Trustee of any Securities of a Person
owning 50 Percent or more of the Voting Securities of the Obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of
the trustee, owns 50 percent or more of the voting securities of the
obligor, furnish the following information as to each class of securities
of such person any of which are so owned or held by the trustee.
Not applicable
Item 12. Indebtedness of the Obligor to the Trustee.
If the obligor is indebted to the trustee, furnish the following
information.
Not applicable
Item 13. Defaults by the Obligor.
a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
Not applicable
b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, or is trustee for
more than one outstanding series of securities under the indenture,
state whether there has been a default under any such indenture or
series, identify the indenture or series affected, and explain the
nature of any such default.
Not applicable
<PAGE>
Item 14. Affiliations with the Underwriters.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable
Item 15. Foreign Trustee.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified.
Not applicable
<PAGE>
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility
and qualification.
1. A copy of the Articles of Association of LaSalle Bank N.A.
now in effect.
2. A copy of the certificate of authority to commence business.
3. A copy of the authorization to exercise corporate trust
powers.
4. A copy of the existing By-Laws of LaSalle Bank N.A.
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
8. Not applicable.
9. Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
LaSalle Bank National Association, a corporation organized and existing under
the laws of the United States of America, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Chicago, State of Illinois, on the
9th day of August 1999.
LaSalle Bank N.A.
By: /s/Cynthia Reis
-----------------------
Cynthia Reis
Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
<PAGE>
ARTICLES OF ASSOCIATION
FIRST. The title of this association shall be LaSalle Bank National Association.
SECOND. The main office of the association shall be in Chicago, County of Cook,
State of Illinois. The general business of the association shall be conducted at
its main office and its branches.
THIRD. The board of directors of this association shall consist of not less than
five nor more than twenty-five persons, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of a majority of the shareholders at any annual or
special meeting thereof. Each director, during the full term of his or her
directorship, shall own a minimum of $1,000 aggregate par value of stock of this
association or a minimum par, market value or equity interest of $1,000 of stock
in the bank holding company controlling this association.
Any vacancy in the board of directors may be filled by action of the board of
directors; provided, however, that a majority of the full board of directors may
not increase the number of directors to a number which: (1) exceeds by more than
two the number of directors last elected by shareholders where the number was 15
or less; and (2) exceeds by more than four the number of directors last elected
by shareholders where the number was 16 or more, but in no event shall the
number of directors exceed 25.
FOURTH. There shall be an annual meeting of the shareholders to elect directors
and transact whatever other business may be brought before the meeting. It shall
be held at the main office or any other convenient place the board of directors
may designate, on the day of each year specified therefor in the bylaws, or if
that day falls on a legal holiday in the state in which the association is
located, on the next following banking day. If no election is held on that day,
it may be held on any subsequent day according to such lawful rules as may be
prescribed by the board of directors.
Nominations for election to the board of directors may be made by the board of
directors or by any stockholder of any outstanding class of capital stock of the
bank entitled to vote for election of directors.
FIFTH. The authorized amount of capital stock of this association shall be 8
million shares of common stock of the par value of ten dollars ($10.00) each;
but said capital stock may be increased or decreased from time to time,
according to the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the corporation shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of the corporation, whether now or hereafter authorized, or to
any obligations convertible into stock of the corporation, issued, or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE>
The association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors shall appoint one of its members president of this
association, who shall be chairperson of the board, unless the board appoints
another director to be the chairperson. The board of directors shall have the
power to appoint one or more vice presidents, a secretary who shall keep minutes
of the directors and shareholders meeting and be responsible for authenticating
the records of the association and such other officers and employees as may be
required to transact the business of this association. A duly appointed officer
may appoint one or more officers or assistant officers if authorized by the
board of directors in accordance with the bylaws.
The board of directors shall have the power to define the duties of the officers
and employees of the association; dismiss officers and employees; require bonds
from officers and employees and to fix the penalty thereof, regulate the manner
in which any increase of the capital of the association shah be made; manage and
administer the business and affairs of the association; make all bylaws that it
may be lawful for the board to make; and generally to perform all acts that are
legal for a board of directors to perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of Chicago, without the
approval of the shareholders, and shall have the power to establish or change
the location of any branch or branches of the association to any other location
permitted under applicable law, without the approval of the shareholders.
EIGHTH. The corporate existence of this association shall continue until
terminated according to the laws of the United States.
NINTH. The board of directors of this association, or any one or more
shareholders owning, in the aggregate, not less than fifty percent of the stock
of this association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place, and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least 10 days
prior to the date of the meeting, to each shareholder of record at his/her
address as shown upon the books of this association.
TENTH. To the full extent permitted by the General Corporation Law of the State
of Delaware or by any other applicable laws presently or hereafter in effect and
subject to the provisions of this article Tenth, the association may indemnify
any person who was or is a party or 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 association) by reason of the fact that he or she is or was a
director, officer, employee or agent of the association, or is or was serving at
the request of the association as a director, officer, employee or agent of
another company, partnership, joint venture, trust or other enterprise, against
expenses, including attorney fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by
<PAGE>
the person in connection with such action, suit or proceeding if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the association, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful; provided no director, officer, employee or agent of the
association shall be indemnified against any expenses, penalties or other
payments incurred in an administrative proceeding or action instituted by an
appropriate bank regulatory agency resulting in a final order assessing civil
money penalties or requiring affirmative action by an individual or individuals
in the form of payments to this association. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of no
contest 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 or she reasonably
believed to be in or not opposed to the best interests of the association, and
with respect to any criminal action or proceeding did not have reasonable cause
to believe that his or her conduct was unlawful.
To the full extent permitted by the General Corporation Law of the State of
Delaware or by any other applicable laws presently or hereafter in effect and
subject to the provisions of this article Tenth, the association shall 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
association to procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the association, or is
or was serving at the request of the association 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 or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
association 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 for negligence or misconduct in the performance of this duty to the
association unless and only to the extent that 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 circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper; provided no director, officer, employee or agent of the association
shall be indemnified against any expenses, penalties or other payments incurred
in an administrative proceeding or action instituted by an appropriate bank
regulatory agency resulting in a final order assessing civil money penalties or
requiring affirmative action by an individual or individuals in the form of
payments to this association, and under circumstances in which he or she would
be entitled to indemnification under this article Tenth, no director of the
association shall be personally liable to the association or its stockholders
for or with respect to any acts or omissions in the performance of his or her
duties as a director of the association.
Any indemnification under this article Tenth unless ordered by a court shall be
made by the association only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he or she has met the applicable standard
of conduct set forth in this article Tenth. Such determination shall be made:
(a) by the board of directors by a majority
<PAGE>
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding; (b) if such a quorum is not obtainable, or even if
obtainable, a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion; or (c) by the shareholders.
Expenses, including attorneys' fees, incurred in defending a civil or criminal
action, suit or proceeding, shall be paid by the association in advance of the
final disposition of such action, suit or proceeding as authorized in the manner
provided in the third subparagraph of this article Tenth herein upon receipt of
an undertaking by or on behalf of the director, officer, employee or agent to
repay such amount unless it shall ultimately be determined that he or she is
entitled to be indemnified by the association as authorized in this article
Tenth.
The indemnification provided by this article Tenth shall not be deemed exclusive
of any other rights to which any person may be entitled under any bylaw,
agreement vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall 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.
The association 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
association, or is or was serving at the request of the association 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 association would have the power to indemnify him against
such liability under the provisions of this article Tenth; provided, the power
of the association to purchase and maintain insurance as herein provided shall
not include insurance with respect to expenses, penalties or other payments of a
director, officer, employee or agent of the association incurred in an
administrative proceeding or action instituted by an appropriate bank regulatory
agency resulting in a final order assessing civil money penalties or requiring
affirmative action by such individual or individuals in the form of payments to
this association.
For purposes of this article, references to "the association" shall include, in
addition to the surviving association or corporation, any merging or
consolidating association or corporation (including any association or
corporation having merged or consolidated with a merging or consolidating
association or corporation) absorbed in a merger or consolidation which, if its
separate existence had continued, would have had the power and authority to
indemnify its directors, officers, employees and agents, so that any person who
was a director, officer, employee or agent of such merging or consolidating
association or corporation, or was serving at the request of such merging or
consolidating association or corporation as a director, officer, employee or
agent of another association, corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
article with respect to the surviving association or corporation as such person
would have with respect to such merging association or corporation if its
separate existence had continued.
<PAGE>
For purposes of this article, references to "other enterprises" shall include
employee benefit plans, references to "fines" shall include any excise taxes,
assessed on a person with respect to an employee benefit plan, and references to
"serving at the request of the association" shall include any service as a
director, officer, employee or agent of the association 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.
The invalidity or unenforceability of any provision of this article Tenth shall
not affect the validity or enforceability of the remaining provisions of this
article Tenth.
ELEVENTH. These articles of association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this association, unless the vote of the holders of a greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount.
<PAGE>
EXHIBIT 2
CERTIFICATE OF AUTHORITY
TO COMMENCE BUSINESS
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, John D. Hawke, Jr., Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering of all National Banking
Associations.
2. "LaSalle Bank, National Association," Chicago, Illinois, (Charter No. 14362)
is a National Banking Association formed under the laws of the United States and
is authorized thereunder to transact the business of banking on the date of this
Certificate.
IN TESTIMONY WHEREOF, I
have hereunto subscribed
my name and caused my
seal of office to be
affixed to these
presents at the Treasury
Department in the City
of Washington and
District of Columbia,
this 26th day of May,
1999.
[seal]
/s/ John D. Hawke, Jr.
---------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 3
AUTHORIZATION TO EXERCISE
CORPORATE TRUST POWERS
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify the records
in this office evidence "LaSalle National Bank", Chicago, Illinois, (Charter No.
14362), was granted, under the hand and seal of the Comptroller, the right to
act in all fiduciary capacities authorized under the provisions of The Act of
Congress approved September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further
certify the authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have
hereunto subscribed my name and
caused my seal of Office of the
Comptroller of the Currency to be
affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia,
this 9th day of November, 1993.
/s/ Eugene A Ludwig
------------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
BY-LAWS OF LASALLE BANK NATIONAL ASSOCIATION
<PAGE>
BYLAWS
of
LASALLE BANK NATIONAL ASSOCIATION
(a National Banking, Association which association
is herein referred to as the "bank")
ARTICLE I
MEETINGS OF THE SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders
to elect directors and transact whatever other business may properly come before
the meeting, shall be held at the main office of the association, 135 South
LaSalle Street, Chicago, Illinois, at 8:30 A.M. on the third Wednesday of April
of each year, or at such other place or time as the board of directors may
designate. Notice of the meeting shall be mailed, postage prepaid, at least 10
days prior to the date thereof, addressed to each shareholder at the address
appearing on the books of the association. If, for any cause, an election of
directors is not made on that day, the board of directors shall order the
election to be held on some subsequent day, as soon thereafter as practicable,
according to the provisions of law; and notice shall be given in the manner
herein provided for the annual meeting.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by the board of directors or by any three or more shareholders owning,
in the aggregate, not less than fifty percent of the stock of the association.
Every such special meeting, unless otherwise provided by law, shall be called by
mailing, postage prepaid, not less than 120 days prior to the date fixed for the
meeting, to each shareholder at the address appearing on the books of the
association, a notice stating the purpose of the meeting.
SECTION 1.3. JUDGES OF ELECTION. Every election of directors shall be
managed by three judges who shall be appointed by the board of directors. The
judges of election shall hold and conduct the election at which they are
appointed to serve. After the election, they shall file with the Secretary a
certificate signed by them, certifying the result thereof and the names of the
directors elected. The judges of election, at the request of the chairperson of
the meeting, shall act as tellers of any other vote by ballot taken at such
meeting, and shall certify the result thereof.
SECTION 1.4. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified
<PAGE>
therein, and any adjournments of such meeting. Proxies shall be dated and filed
with the records of the meeting.
SECTION 1.5. QUORUM. A majority of the outstanding capital stock, presented
in person or by proxy, shall constitute a quorum at any meeting of shareholders,
unless otherwise provided by law; but less than a quorum may adjourn any
meeting, from time to time, and the meeting may be held, as adjourned, without
further notice. A majority of the votes cast shall decide every question or
matter submitted to the shareholders at any meeting, unless otherwise provided
by law or by the articles of association.
ARTICLE II
DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors (board) shall have
the power to manage and administrate the business and affairs of the
association. Except as expressly limited by law, all corporate powers of the
association shall be vested in and may be exercised by the board.
SECTION 2.2. NUMBER. The board shall consist of not less than five nor more
than twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of the shareholders at any meeting thereof,
or, if such a resolution shall not be in effect, such number shall be five;
provided, however, that a majority of the full board may not increase the number
of directors by more than two if the number of directors last elected by
shareholders was fifteen or less and by not more than four where the number of
directors last elected by shareholders was sixteen or more; provided that in no
event shall the number of directors exceed twenty-five.
SECTION 2.3. ORGANIZATION MEETING. The Secretary, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election, and of the time at which they are required to
meet, at the main office of the association or at such other place as the board
may designate to organize the new board and elect and appoint officers of the
association for the succeeding year. Such meeting shall be held on the day of
the election or as soon thereafter as practicable, and, in any event, within 30
days thereof. If, at the time fixed for such meeting, there shall not be a
quorum, the directors present may adjourn the meeting, from time to time, until
a quorum is obtained.
SECTION 2.4. REGULAR MEETINGS. The regular meetings of the board shall be
held, without notice, on the third Wednesday of each month, other than August
and December, at the main office or at such other place as the board may
designate. When any regular meeting of the board falls upon a holiday, the
meeting shall be held on the next banking business day unless the board shall
designate another day.
<PAGE>
SECTION 2.5. SPECIAL MEETINGS. Special meetings of the board may be called
by the chairman of the board, the president of the association, or at the
request of three or more directors. Each member of the board shall be given
notice stating the time and place by telegram, letter, telephonic
communications, or in person, of each special meeting.
SECTION 2.6. QUORUM. A majority of the directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice.
SECTION 2.7. VACANCIES. When any vacancy occurs among the directors, the
remaining members of the board, according to the laws of the United States, may
appoint a director to fill such vacancy at any regular meeting of the board or
at a special meeting called for that purpose in conformance with Section 2.5 of
this article.
SECTION 2.8. RETIREMENT POLICY. A retirement policy adopted by the board
shall be applicable to directors who are not active officers of the association.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1. EXECUTIVE COMMITTEE. There shall be an executive committee of
the board composed of not less than three directors, at least one of whom shall
not be an active officer of the association, appointed by the board annually or
more often. This committee shall also exercise such other powers and perform
such other duties as shall be specified by resolution of the board. When the
board is not in session, the executive committee shall have and may exercise all
the powers of the board that may lawfully be delegated. The executive committee
shall keep minutes of its meetings, and such minutes shall be submitted at the
next regular meeting of the board at which a quorum is present, and any action
taken by the board with respect thereto shall be entered in the minutes of the
board.
SECTION 3.2. AUDIT COMMITTEE. There shall be an audit committee of the
board composed of not less than three directors, exclusive of any active
officers of the association, appointed by the board annually or more often. The
duty of the audit committee shall be, at least once during each calendar year,
to examine or cause suitable examinations to be made by auditors responsible
only to the board of (1) the affairs of the association and (2) the fiduciary
activities of the association. The results of such examination shall be reported
in writing to the board at the next regular meeting thereafter.
SECTION 3.3. COMMUNITY REINVESTMENT COMMITTEE. There shall be a community
reinvestment committee of the board composed of not less than three directors,
at least one of whom shall not be an active officer of the association,
appointed by the board annually or more often. It shall be the duty of this
committee to
<PAGE>
review the community reinvestment activities of the association. The community
reinvestment committee shall perform such other functions as may be assigned by
the full board. When the community reinvestment committee is not in session the
executive committee shall perform all of the duties of the community
reinvestment committee.
SECTION 3.4. OTHER COMMITTEE. The board may appoint, from time to time,
from its own members, other committees of one or more persons, for such purposes
and with such powers as the board may determine.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRMAN OF THE BOARD. The board shall appoint one of its
members to be the chairman of the board. The chairman of the board shall preside
at all meetings of the board. The chairman of the board shall supervise the
carrying out of the policies adopted or approved by the board, and shall have
general executive powers, as well as the specific powers conferred by these
bylaws. The chairman of the board shall also have and may exercise such further
powers and duties as from time to time may be conferred upon, or assigned by the
board. The chairman of the board shall be ex officio a member of all committees,
except the audit committee and the trust audit committee.
SECTION 4.2. VICE CHAIRMAN OF THE BOARD. The board may appoint one or more
of its members to be vice chairmen of the board. The vice chairmen shall perform
such duties as may from time to time be assigned by the Board.
SECTION 4.3. PRESIDENT. The board shall appoint one of its members to be
the president of the association. The president shall be the chief executive
officer of the association and, in the absence of the chairman, the president
shall preside at any meeting of the board. The president shall have general
executive powers, and shall have and may exercise any and all other powers and
duties pertaining by law, regulation, or practice, to the office of president,
or imposed by these bylaws. The president shall have general supervision of the
business, affairs and personnel of the association and, in the absence of the
chairman, shall exercise the powers and perform the duties of the chairman of
the board. The president shall be ex officio a member of all committees, except
the audit committee and the trust audit committee. The president shall also have
and may exercise such further powers and duties as from time to time may be
conferred, or assigned by the board.
SECTION 4.4. CHIEF OPERATING OFFICER. The board may appoint a chief
operating officer. The chief operating officer shall perform such duties as may
from time to time be assigned by the board, the chairman of the board or the
president.
SECTION 4.5. SENIOR OFFICERS. The board may appoint one or more executive
vice presidents and one or more senior vice presidents. Each such senior officer
<PAGE>
shall have such powers and duties as may be assigned to such person by the
board, the chairman of the board, or the president.
SECTION 4.6. VICE PRESIDENT. The board may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned to such person by the board, the chairman of the board, or the
president.
SECTION 4.7. SECRETARY. The board shall appoint a secretary who shall be
secretary of the association, shall keep accurate minutes of all meetings and
shall have such powers and perform such other duties as may be assigned to such
person from time to time, by the board, the chairman of the board, or the
president.
SECTION 4.8. CASHIER. The board may appoint a cashier who shall have such
powers and perform such duties as may be assigned to such person from time to
time by the board, the chairman of the board, or the president.
SECTION 4.9. OTHER OFFICERS. The board may appoint one or more assistant
vice presidents, one or more trust officers, one or more assistant secretaries,
one or more assistant cashiers, one or more managers and assistant managers of
branches and Such other officers and attorneys in fact as from time to time may
appear to the board to be required or desirable to transact the business of the
association. Such officers, respectively, shall exercise such powers and perform
such duties as pertain to their several offices or as may be conferred upon, or
assigned to them by the board, the chairman of the board, or the president. The
board may authorize an officer to appoint one or more officers or assistant
officers.
SECTION 4.10. CLERKS AND AGENTS. The chairman of the board, the president
or any other active officer of the association authorized by the chairman of the
board, or the president, may appoint and dismiss all or any paying tellers,
receiving tellers, note tellers, vault custodians, bookkeepers and other clerks,
agents and employees as they may deem advisable for the prompt and orderly
transaction of the business of the association, define their duties, fix the
salaries to be paid them and the conditions of their employment.
SECTION 4.11. RESPONSIBILITY FOR MONEYS, ETC. Each of the active officers
and clerks of this association shall be responsible for all the moneys, funds,
valuables and property of every kind and description that may from time to time
be entrusted to his care or placed in such person's hands by the board or
others, or that otherwise may come into their possession as an active officer or
clerk of this association.
SECTION 4.12. SURETY BONDS. All the active officers and clerks of this
association may be covered by one of the blanket form bonds customarily written
by the surety companies, drawn for such an amount, and executed by such surety
company, as the board may from time to time require and duly approve; or, at the
discretion of the board, all such active officers and clerks shall,
respectively, give such bond, with such security, and in such denominations as
the board may from time to time require and direct. All bonds approved by the
board shall assure the faithful and honest discharge of
<PAGE>
the respective duties of such active officer or clerk and shall provide that
such active officer or clerk shall faithfully apply and account for all moneys,
funds, valuables and property of every kind and description that may from time
to time come into such person's hands or be entrusted to such person's care, and
pay over and deliver the same to the order of the board or to such other person
or persons as may be authorized to demand and receive the same.
SECTION 4.13. TERM OF OFFICE - OFFICER DIRECTOR. The chairman of the board,
the vice chairmen of the board and the president, together with any other active
officers who may be duly elected members of the board, shall hold their
respective offices for the current year for which the board (of which they shall
be members) was elected and until their successors are appointed, unless they
shall resign, be disqualified, or be removed; and any vacancy occurring in the
office of the chairman of the board, the vice chairmen of the board, the
president, or in the board, shall, if required by these bylaws, be filled by the
remaining members.
SECTION 4.14. TENURE OF OFFICE. The executive vice presidents, the senior
vice presidents, the secretary, the cashier and all other officers shall be
appointed to hold their offices during the pleasure of the board, unless they
shall resign, become disqualified, or be removed.
ARTICLE V
FIDUCIARY SERVICES
SECTION 5.1. TRUST OFFICER. There shall be a trust officer of this
association whose duties shall be to manage, supervise and direct all the
fiduciary activities of the association. Such person shall do or cause to be
done all things necessary or proper in carrying on the fiduciary business of the
association according to provisions of law and applicable regulations; and shall
act pursuant to opinion of counsel where such opinion is deemed necessary.
Opinions of counsel shall be retained on file in connection within all important
matters pertaining to fiduciary activities. The trust officer shall be
responsible for all assets and documents held by the association in connections
with fiduciary matters.
SECTION 5.2. TRUST COMMITTEE. There shall be a trust committee of this
association composed of not less than three directors including active officers
of the association. The duty of the trust committee shall be to review the
fiduciary activities of the association. The trust committee shall perform such
other functions as may be assigned by the board.
SECTION 5.3. TRUST AUDIT COMMITTEE. The board shall appoint a committee of
not less than two directors, including members ex officio provided for in other
sections of these bylaws, exclusive of any active officers of the association,
or cause suitable audits to be made, by auditors responsible only to the board,
and at such time shall ascertain whether the association has administered
fiduciary accounts in
<PAGE>
accordance with law, Regulation 9, and sound fiduciary principles.
Notwithstanding the provisions of this Section, the board at any time may assign
to the Audit Committee, in addition to the duties of the Audit Committee set
forth in Section 3.3 of these bylaws, all of the duties of the Trust Audit
Committee and, during such time as the Audit Committee is performing the duties
of both committees, the Trust Audit Committee shall cease to function as a
committee of this board. The board at any time may reassess the duties provided
for in this Section to the Trust Audit Committee.
SECTION 5.4. FIDUCIARY FILES. There shall be maintained in the association
files all fiduciary records necessary to assure that its fiduciary
responsibilities have been properly undertaken and discharged.
SECTION 5.5. TRUST INVESTMENTS. Funds held in a fiduciary capacity shall be
invested according to the instrument established, the fiduciary relationship and
local law. Where such instrument does not specify the character and class of
investments to be made and does not vest in the association a discretion in the
matter, funds held pursuant to such instrument shall be invested in investments
in which corporate fiduciaries may invest under local law.
ARTICLE VI
STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of stock shall be transferable on the books
of the association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his shares, succeed to all rights of the prior holder of
such shares.
SECTION 6.2. STOCK CERTIFICATES. Certificates of stock shall bear the
signature of the president (which may be engraved, printed or impressed), and
shall be signed manually or by facsimile process by the secretary, assistant
secretary, cashier, or any other officer appointed by the board for that
purpose, to be known as an authorized officer, and the seal of the association
shall be engraved thereon. Each certificate shall recite on its face that the
stock represented thereby is transferable only upon the books of the association
properly endorsed.
ARTICLE VII
CORPORATE SEAL
The president, the cashier, the secretary or any assistant cashier or
assistant secretary, or other officer thereunto designated by the board, shall
have authority to affix the corporate seal to any document requiring such seal,
and to attest the same. Such seal shall be substantially in the form set forth
herein.
<PAGE>
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 8.1. INDEMNIFICATION OF ASSOCIATION'S OFFICERS, DIRECTORS, AGENTS
AND EMPLOYEES. To the full extent permitted by the General Corporation Law of
the State of Delaware or by any other applicable laws presently or hereafter in
effect and subject to the provisions of this Article VIII, the association may
indemnify any person who was or is a party or 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 association) by reason of the fact that he or she is or was a
director, officer, employee or agent of the association, or is or was serving at
the request of the association as a director, officer, employee or agent of
another company, partnership, joint venture, trust or other enterprise, against
expenses, including attorney fees, fines and amounts paid in settlement actually
and reasonably incurred by the person in connection with such action, suit or
proceeding, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
association, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful, provided no
director, officer, employee or agent of the association shall be indemnified
against any expenses, penalties or other payments incurred in an administrative
proceeding or action instituted by an appropriate bank regulatory agency
resulting in a final order assessing, civil money penalties or requiring
affirmative action by all individual or individuals in the form of payments to
this association. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of no contest 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 or she reasonably believed to be in or not
opposed to the best interests of the association, and with respect to any
criminal action or proceeding, did not have reasonable cause to believe that his
or her conduct was unlawful.
SECTION 8.2. INDEMNIFICATION OF ASSOCIATION'S OFFICERS, DIRECTORS, AGENTS
AND EMPLOYEES FOR SUIT BY OR IN RIGHT OF ASSOCIATION. To the full extent
permitted by the General Corporation Law of the State of Delaware or by any
other applicable laws presently or hereafter in effect and subject to the
provisions of this Article VIII, the association shall 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 association to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the association, or is or was serving at the
request of the association 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 or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the association 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 for negligence or
misconduct in the performance of this duty
<PAGE>
to the association unless and only to the extent that 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 circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper, provided no director, officer, employee or agent
of the association shall be indemnified against any expenses, penalties or other
payments incurred in an administrative proceeding or action instituted by an
appropriate bank regulatory agency resulting in a final order assessing civil
money penalties or requiring affirmative action by an individual or individuals
in the form of payments to this association, and under circumstances in which he
or she would be entitled to indemnification under this Article VIII, no director
of the association shall be personally liable to the association or its
stockholders for or with respect to any acts or omissions in the performance of
his or her duties as a director of the association.
SECTION 8.3. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification under this Article VIII unless ordered by a court shall be made
by the association only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in this Article VIII. Such determination shall be made: (a) by the
board by a majority vote of a quorum consisting of Directors who were not
parties to such action, suit or proceeding; (b) if such a quorum is not
obtainable, or even if obtainable, a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion; or (c) by the
shareholders.
SECTION 8.4. REIMBURSEMENT OF EXPENSES. Expenses, including attorneys'
fees, incurred in defending a civil or criminal action, suit or proceeding shall
be paid by the association in advance of the final disposition of such action,
suit or proceeding as authorized in the manner provided in SECTION 8.3 herein
upon receipt of all undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it shall ultimately be determined
that he or she is entitled to be indemnified by the association as authorized in
this Article VIII.
SECTION 8.5. BYLAWS NOT EXCLUSIVE. The indemnification provided by this
Article VIII shall not be deemed exclusive of any other rights to which any
person may be entitled to under any bylaw, agreement vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
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.
SECTION 8.6. INSURANCE. The association 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 association, or is or was serving at the request of the
association as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or another 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 association would have the power to
indemnify him against such liability under the provisions of this Article VIII,
provided, the power of the association to purchase and
<PAGE>
maintain insurance provided shall not include insurance with respect to
expenses, penalties or other payments of a director, officer, employee or agent
of the association incurred in an administrative proceeding or action instituted
by an appropriate bank regulatory agency resulting in a final order assessing
civil money penalties or requiring affirmative action by such individual or
individuals in the form of payments to this association.
SECTION 8.7. MERGED AND REORGANIZED ASSOCIATIONS. For purposes of this
Article, references to "the association" shall include, in addition to the
surviving association or corporation, any merging or consolidating association
or corporation (including any association or corporation having merged or
consolidated with a merging, or consolidating association or corporation)
absorbed in a merger or consolidation which, if its separate existence had
continued, would have had the power and authority to indemnify its directors,
officers, employees and agents, so that any person who was a director, officer,
employee or agent of such merging or consolidating association or corporation as
a director, officer, employee or agent of another association, corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the surviving
association or corporation as such person would have with respect to such
merging association or corporation if its separate existence had continued.
SECTION 8.8. EMPLOYEE BENEFIT PLANS. For purposes of this Article,
references to "other enterprises" shall include employee benefit plans,
references to "fines" shall include any excise taxes, assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the association" shall include any service as a director, officer, employee
or agent of the association 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.
SECTION 8.9. SEVERABILITY. The invalidity or unenforceability of any
provision of this Article VIII shall not affect the validity or enforceability
of the remaining provisions of this Article VIII.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. FISCAL YEAR. The fiscal year of the association shall be the
calendar year.
SECTION 9.2. EXECUTIVE EXECUTION OF INSTRUMENTS. All agreements,
indentures, mortgages, deeds, conveyances, transfers, certificates,
declarations, receipts, discharges, releases, satisfactions, settlements,
petitions, schedules, accounts, affidavits, bonds, undertakings, proxies and
other instruments or documents may be signed, executed, acknowledged, verified,
delivered or accepted on behalf of the association by the chairman of the board,
or any vice chairman, or the president, or the
<PAGE>
chief operating officer, or any executive vice president, or any first vice
president or any vice president, or the secretary, or the cashier, or, if in
connection with the exercise of fiduciary powers of the association, by any of
those officers or by any trust officer. Any such instruments many also be
executed, acknowledged, verified, delivered or accepted on behalf of the
association in such manner and by such other officers as the board, the chairman
of the board or the president may from time to time direct. The provisions of
this Article are supplementary to any provision of these bylaws.
SECTION 9.3. RECORDS. The articles of association, the bylaws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for that purpose. The minutes of each meeting shall be signed by the secretary
or other officer appointed to act as secretary of the meeting.
ARTICLE X
EMERGENCIES
SECTION 10.1. CONTINUATION OF BUSINESS. In the event of a state of
emergency of sufficient severity to interfere with the conduct and management of
the affairs of this association, the officers and employees will continue to
conduct the affairs of the association under such guidance from the directors as
may be available except as to matters which by statute require specific approval
of the board and subject to conformance with any governmental directives during
the emergency.
SECTION 10.2. DESIGNATION OF PLACE OF BUSINESS. The offices of the
association at which its business shall be conducted shall be the main office
thereof located at 135 South LaSalle Street, Chicago, Illinois, and any other
legally authorized location which may be leased or acquired by this association
to carry on its business. During an emergency resulting in any authorized place
of business of this association being unable to function, the business
ordinarily conducted at such location shall be relocated elsewhere in suitable
quarters, in addition to or in lieu of the locations heretofore mentioned, as
may be designated by the board or by the executive committee or by such persons
as are then, in accordance with resolutions adopted from time to time by the
board dealing with the exercise of authority in the time of such emergency,
conducting the affairs of this association. Any temporarily relocated place of
business of this association shall be returned to its legally authorized
location as soon as practicable and such temporary place of business shall then
be discontinued.
ARTICLE XI
BYLAWS
SECTION 11.1. INSPECTION. A copy of the bylaws, with all amendments, shall
at all times be kept in a convenient place at the main office of the
association, and shall be open for inspection to all shareholders during banking
hours.
<PAGE>
SECTION 11.2. AMENDMENTS. The bylaws may be amended, altered or repealed,
at any regular meeting of the board, by a vote of a majority of the total number
of the directors except as provided below. The association's shareholders may
amend or repeal the bylaws even though the bylaws also may be amended or
repealed by its board.
* * *
I, __________________________________, certify that I am the duly
constituted secretary of LaSalle Bank National Association and as such officer
am the official custodian of its records; the foregoing bylaws are the bylaws of
the association, and all of them are now lawfully in force and effect.
I have hereunto affixed my official signature and the seal of the
association, in the City of Chicago, on this _______ day of ________________,
19__.
___________________________
Secretary
April, 1999 (SEAL)
<PAGE>
EXHIBIT 5
NOT APPLICABLE
<PAGE>
EXHIBIT 6
LaSalle Bank National Associationhereby consents in accordance with the
provisions of Section 321(b) of the Trust Indenture Act of 1939, that reports of
examinations by Federal, State, Territorial and District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon its
request therefor.
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ Cynthia Reis
-------------------------------
Cynthia Reis
Vice President
<PAGE>
EXHIBIT 7
Latest Report of Condition of
Trustee published pursuant to
law or the requirement of its
surviving or examining authority.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LaSalle National Bank Call Date: 3/31/99 ST-BK. 17-1520 FFIEC 031
135 South LaSalle Street Page RC-1
Chicago, IL 60603 Vendor ID: D CERT: 15407 11
</TABLE>
Transit Number: 71000505
Consolidated Report of Condition for Insured Commercial and State-Chartered
Savings Banks for March 31, 1999
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC - Balance Sheet
<TABLE>
<CAPTION>
Dollar Amounts in
Thousands
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS ----
1. Cash and balances due from depository institutions (from Schedule RCFD
RC-A): ----
a. Noninterest-bearing balances and currency and coin (1) 0081 863,314 l.a
b. Interest-bearing balances (2) 0071 1,489 l.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 614,879 2.a
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 5,097,77 2.b
3. Federal funds sold and securities purchased under agreements to 1350 193,797 3.
resell
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCFD
(from Schedule RC-C) ----
2122 15,673,262 4.a
b. LESS: Allowance for loan and lease losses 3123 282,772 4.b
c. LESS: Allocated transfer risk reserve 3128 0 4.c
d. Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b and 4.c) 2125 15,390,490 4.d
5 Trading assets (from Schedule RC-D) 3545 245,355 5.
6. Premises and fixed assets (including capitalized leases) 2145 119,518 6.
7. Other real estate owned (from Schedule RC-M) 2150 1,883 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding 2155 7,746 9.
10. Intangible assets (from Schedule RC-M) 2143 17,959 10.
11. Other assets (from Schedule RC-F) 2160 1,193,545 11.
12. Total assets (sum of items 1 through 11) 2170. 23,747,750 12.
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LaSalle National Bank Call Date: 3/31/99 ST-BK. 17-1520 FFIEC 031
135 South LaSalle Street Page RC-2
Chicago, IL 60603 Vendor ID: D CERT: 15407 12
</TABLE>
Transit Number: 71000505
Schedule RC - Continued
<TABLE>
<CAPTION>
Dollar Amounts in
Thousands
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES
13. Deposits: RCON
----
a. In domestic offices (sum of totals of columns A and C from 2200 10,252,425 13.a.
Schedule RC-E, part 1) RCON
----
(1)Non-interest bearing (1) 6631 2,189,266 13.a.1.
(2)Interest bearing 6636 8,063,139 13.a.2.
RCFN
b. In foreign offices, Edge and Agreement subsidiaries, and IBF's ----
(from Schedule RC-E, part II) 2200 2,799,465 13.b
RCFN
----
(1)Non-interest bearing (1) 6631 0 13.b.1.
(2)Interest bearing 6636 2,799,465 13.b.2.
RCFD
----
14. Federal funds purchased and securities sold under agreements to 2800 4,576,533 14.
repurchase
RCON
----
15. a. Demand notes issued to the U.S. Treasury 2840 279,104 15.a.
RCFD
----
b. Trading liabilities (from Schedule RC-D) 3548 151,324 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations
under capitalized leases):
a. With a remaining maturity of one year or less 2332 2,909,250 16.a
b. With a remaining maturity of more than one year through three A547 12,618 16.b
years
c. With a remaining maturity of more than three years A548 48,441 16.c
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 2920 7,746 18.
19. Subordinated notes and debentures (2) 3200 541,000 19.
20. Other liabilities (from Schedule RC-G) 2930 697,331 20.
21. Total liabilities (sum of items 13 through 20) 2948 22,275,237 21.
22. Not applicable
EQUITY CAPITAL RCFD
----
23. Perpetual preferred stock and related surplus 3838 0 23.
24. Common stock 3230 26,911 24.
25. Surplus (exclude all surplus related to preferred stock) 3839 351,756 25.
26. a. Undivided profits and capital reserves 3632 1,032,962 26.a
b. Net unrealized holding gains (losses) on available-for-sale 8434 60,684 26.b
securities
27. Cumulative foreign currency translation adjustments 3284 0 27.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LaSalle National Bank Call Date: 3/31/99 ST-BK. 17-1520 FFIEC 031
135 South LaSalle Street Page RC-3
Chicago, IL 60603 Vendor ID: D CERT: 15407 13
</TABLE>
Transit Number: 71000505
<TABLE>
<CAPTION>
<S> <C> <C> <C>
28. Total equity capital (sum of items 23 through 27) 3210 1,472,513 28.
29. Total liabilities and equity capital (sum of items 21 and 28) 3300 23,747,750 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below
that best describes the most comprehensive level of auditing work
performed for the bank by independent external auditors as of any RCFD Number
date during 1998 ---- ------
6724 N/A M.1
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
1 = Independent audit of the bank conducted in 4 = Directors' examination of the bank performed
accordance with generally accepted auditing by other external auditors (may re required by
standards by a certified public accounting firm state chartering authority
which submits a report on the bank. 5 = Review of the bank's financial statements by
2 = Independent audit of the bank's parent holding external auditors
company conducted in accordance with generally 6 = Compilation of the bank's financial statements by
accepted auditing standards by a certified external auditors
public accounting firm which submits a 7 = Other audit procedures (excluding tax preparation work)
report on the consolidated holding company 8 = No external audit work
(but not on the bank separately)
3 = Directors' examination of the bank conducted
in accordance with generally accepted
auditing standards by a certified public
accounting firm (may be required by state
chartering authority)
</TABLE>
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE>
EXHIBIT 8
NOT APPLICABLE
<PAGE>
EXHIBIT 9
NOT APPLICABLE
